The Cost of Staying Stuck: Why Businesses Stay with Bad Vendors

Unfortunately, it seems more and more common that companies are continuing to work with vendors and partners they are deeply unhappy with. Whether it’s poor service, inconsistent quality, or misaligned incentives, businesses now more than ever seem reluctant—or outright unable—to make a change. But why? Is it simply the cost and effort of switching, or is there something more systemic at play?

The Escape Velocity Required

One of the most cited reasons organizations stay with an underperforming vendor is the concept of “escape velocity.” Just like breaking free from Earth’s gravitational pull requires significant energy, transitioning to a new partner requires time, resources, and effort that make many businesses hesitate to commit to change.

• Switching Costs – There’s the financial cost of changing vendors—termination fees, new setup expenses, retraining staff, and even potential downtime.
• Operational Disruptions – The transition process can bring inefficiencies. Even if the new partner is better in the long run, short-term disruptions can be painful.
• Uncertainty and Risk – A company may fear that a new vendor will turn out to be just as bad, or worse, than the current one. The devil you know…

Systemic Issues That Reinforce the Status Quo

While escape velocity can be a major factor, deeper systemic issues often keep businesses tethered to vendors they dislike:

• Contractual Lock-in – Long-term contracts with heavy penalties for early termination create barriers to switching. Some companies feel trapped by agreements that were once favorable but have since become outdated or misaligned.
• Sunk Cost Fallacy – Organizations often rationalize staying with a subpar vendor because they’ve already invested so much—whether it’s money, integration efforts, or relationships.
• Internal Resistance – Changing a vendor means internal stakeholders must advocate for, approve, and manage the transition. If decision-makers are risk-averse, change-resistant, or personally invested in the current relationship, change can be an uphill battle.
• Fear, Uncertainty, Doubt – Many companies worry about the ripple effects of switching vendors—will customers notice? Will there be service disruptions? Will employees struggle to adapt? These fears, often exaggerated, can keep businesses locked in engagements they know aren’t working.

How to Break Free and Make a Change

First, follow these best practices to determine if change is necessary:

• Regular Vendor Evaluations – Establish periodic reviews to assess performance and ensure alignment with business needs. Ensure every vendor is aligned with the goals of your organization and sufficiently improving their service delivery over time.
• Utilize Voice of the Customer (VOC) – Establish feedback loops and utilize a Voice of the Customer (VOC) process to continuously capture, review, and act upon user feedback. This will provide a realistic view of the current state and avoid a “watermelon effect” where metrics appear healthy (green) but there are underlying problems (red) when you look deeper.
• Accept Reality – Be honest with the current situation and accept when it is not working out. Do not delay or deny the reality of the situation. The challenges associated with switching vendors/partners/services will not get easier with time. The quicker you acknowledge the situation, the sooner you can begin to address it. Treat vendors/partners just like hiring a full-time team member – hire slow, fire fast.
• Transparency – To be unclear is to be unkind—be direct and upfront with current providers. Clearly communicate where they are lacking and give them the opportunity to course correct quickly. Be transparent as you begin exploring alternatives. Providing honest feedback and sufficient runway for existing providers will ultimately aid in the transition.

When you are ready to make a change:

• Utilize Phased Transitions – Where possible, pilot new vendors before a full transition. This not only mitigates risk and impact to the business but can often act as a wake-up call to current vendors, prompting them to step up their game.
• Ensure Cultural Alignment – Choosing partners that share your values and work ethic can prevent dissatisfaction down the road.
• Define Selection Criteria – Take time to reflect on why your organization is unhappy with the current provider. Develop clear selection criteria for your new vendor selection process.
• Focus on More Than Cost – If cost is a concern, organizations can make the mistake of focusing too much on this one factor. As an analogy – rather than going from a Ferrari to a Ford Fiesta, land somewhere in the middle that optimizes features and price. This will prevent the need to upgrade quickly when the features don’t align with the business.

It’s not just escape velocity that keeps businesses tied to disappointing vendors—it’s a mix of financial, operational, contractual, and psychological factors. But staying in a bad partnership comes with its own costs: inefficiency, frustration, and lost opportunities. Organizations that recognize the barriers and strategically address them will be in the best position to make bold, necessary changes when the time comes.

The bottom line: change takes effort, and the longer you wait, the harder it gets. Start now—develop a plan, make small changes over time, and before you know it, you’ll be thrilled you made the change.

Remember: time doesn’t change things—only your decision to act. The longer you wait, the more you’ll regret not acting sooner.