Tech Supply Chains: Rethinking Risk and Resilience
Behind every digital system sits a network of commercial commitments – invisible when things go right, impossible to ignore when they do not. As businesses modernise and scale, many are increasingly relying on a small set of technology providers to deliver critical functions and meet rising compliance expectations.
At the outset, supplier relationships often reflect a shared priority: delivering results that work for both sides. But over time, decisions such as long-term contracts or interconnected systems can reduce a business’ ability to pivot.
“Most buyers and suppliers want the same thing: a project that works on time and on budget, ideally to achieve first mover advantages. The challenge is making sure that the shared goal doesn’t unravel over time and under pressure.”
Ulrich Bäumer, Partner, Osborne Clarke Germany
What makes these types of concentration risk so difficult to manage is that they often stem from choices made early in system design or supplier selection – long before the consequences are visible. Even minor changes can become difficult to execute if contract terms are rigid or systems are not easily reconfigured. To mitigate those risks, many businesses are redesigning their infrastructure with flexibility in mind. Hybrid and multi-cloud models, portable systems and stronger governance protocols are becoming core safeguards.
But recognising these risks is not always straightforward. Many dependencies stay hidden, buried in overlooked contract terms or untested assumptions that only surface when failure hits.
Identifying Risks Early
What looks simple on paper often masks complex realities beneath, especially when services are layered across teams and technologies.
Some larger suppliers offer steep discounts on multi-year deals, but the trade-off is often reduced flexibility. These contracts may include volume thresholds or narrow exit terms that are difficult to unwind once systems are embedded. At the other end of the spectrum, smaller vendors can carry more risk than they appear to. A low-value contract might support a critical application, but fall beneath legal or commercial review simply because of its price tag. If that supplier fails, the disruption can force costly, improvised workarounds.
“Some buyers don’t realise that the €500,000 supplier is the linchpin for a €20 million service.”
Nina Lazic, Partner, Osborne Clarke UK
These structural risks are not always commercial, and technology design can embed rigidity just as easily as contract terms. Systems built around a single cloud provider – or using proprietary tooling that cannot easily be transferred – can seem stable until there is a change in cost or service levels. Moving workloads or reconfiguring complex architecture mid-contract is rarely simple and often expensive.
These risks do not live in isolation, and may not always be fully visible to any one team. Legal may review terms, but miss architectural fragilities. Procurement may focus on cost, but be unaware of operational interdependencies. IT understands systems, but may not see the legal exposure if those systems fail. Without shared visibility – legal, commercial and technical – exposure remains hidden until something breaks.
“The CIO knows where the practical points of technical failure are. Licence managers know the intricacies of technical licence models. Purchasing knows the commercial pitfalls. The lawyer usually doesn’t know all this that well, focusing instead on the legal intricacies. Until they all talk, the business is exposed.”
Ulrich Bäumer, Partner, Osborne Clarke Germany
Concentration risk is not simply a legal or a design issue, it is an organisational blind spot that needs to be addressed early to avoid being discovered when failure occurs and responsibilities are less visible.
Beyond the Fine Print
Contracts remain a core tool for managing supplier relationships, but their strength lies in how they are used. When contracts are drafted early, tailored to operational realities and supported by strong internal coordination, they help organisations act quickly under pressure. When they are approached too late or relied on too heavily, they are much more likely to disappoint.
“Clear terms can support resilience, but they cannot create it in isolation.”
Gianluigi Marino, Partner, Osborne Clarke Italy
While large providers frequently insist on more standardised templates that limit room for negotiation, that does not mean terms are set in stone. Buyers that engage early – with cross-functional backing and a clear view of their priorities – are more likely to negotiate meaningful changes, such as service levels, termination rights or liability limits. This is particularly true as regulatory scrutiny of supplier lock-in and switching barriers continues to grow. (See: Regulatory Awareness as Strategy.) These moves may not be easy, but with the right internal support and clearer expectations emerging across jurisdictions, the possibilities can be worth exploring.
Multi-year deals offer different challenges, as discounts often come with volume commitments or exit restrictions. These can reduce flexibility just when it is needed most, such as when systems need to evolve or supplier performance dips. The value of a long-term agreement must be weighed against its constraints.
On the other hand, smaller or mid-tier suppliers may offer greater flexibility, but that flexibility does not guarantee resilience. If a vendor lacks the resources to fulfil contractual promises, even the best terms may offer limited recourse. In these cases, a strong legal position must be backed by the ability to pivot quickly, whether by rerouting services or activating internal fallback plans.
Contracts matter, but businesses cannot afford to bank on them as their sole contingency. Their effectiveness depends not just on the terms themselves, but on how well the organisation is prepared to act when disruption hits.
Organising for Resilience: A Toolkit
Strong supplier relationships depend not just on terms, but on clear planning and coordinated execution. The steps here outline practical ways to incorporate that capability into day-to-day operations.
Break down silos early
Early coordination between procurement, IT and legal helps teams spot issues that might otherwise slip through review. Create shared checkpoints before key decisions and ensure strategically important suppliers are visible across the business.
“Resilience isn’t just about what’s in the contract, it’s about driving multi-disciplinary engagement across your teams.”
Nina Lazic, Partner, Osborne Clarke UK
Secure senior sponsorship
When teams are backed by leadership, they are better positioned to engage early, weigh trade-offs and pursue terms that support long-term resilience. A defined mandate ensures risk management is prioritised alongside delivery and cost goals, not sidelined by them.
Understand the trade-offs
Choosing a supplier requires understanding internal priorities and potential compromises. While larger providers offer scale and stability, smaller vendors may be more flexible but harder to assess for resilience. Businesses must consider their current needs and future challenges as well as ensuring providers can adapt to evolving requirements and withstand disruptions.
Own the Business Continuity Plan (BCP)
A supplier’s business continuity plan (BCP) outlines their recovery, but it may not align with how their clients need to respond. Develop an internal BCP that sets clear expectations for fallback processes, escalation roles and service levels during disruption. Test the plan under realistic conditions and work with suppliers to ensure alignment, both operationally and contractually where appropriate.
Continually reassess supplier risk
A supplier’s risk profile can shift quickly – through regulatory change, technology updates or ownership transitions – weakening contracts that once offered solid protection. Do not wait for renewal cycles. Review whether terms still reflect how services are used and whether they offer practical support when disruption hits.
Engage early with regulators
Digital supply chains are being reshaped by emerging regulation, whether that is on cloud portability or AI oversight. Rather than waiting for final laws that could leave businesses looking to retrofit compliance, companies should monitor early policy signals and take part in consultations where possible. This will help them anticipate new obligations and shape regulations in ways that reflect operational realities.
“Regulation is evolving faster and earlier input matters. Businesses that engage now will shape the standards everyone else has to live with.”
Katherine Kirrage, Partner, Osborne Clarke UK
Planning for Macro Unknowns
Even the best-structured supplier relationship can be tested by global shifts.
Supplier relationships are not insulated from geopolitics. Tariffs, digital taxes, cross-border investment restrictions and regulatory initiatives such as the EU Data Act can all reshape commercial viability mid-contract. Long-term agreements should be structured to accommodate change, allowing businesses to revisit pricing or renegotiate terms when external conditions shift.
Regulatory Awareness as Strategy
Staying ahead means watching where regulators are looking.
Regulators are looking more closely at supplier lock-in, exclusivity and switching barriers. Laws such as the EU Data Act, the UK’s Digital Markets, Competition and Consumers Act 2024 (DMCCA) and the proposed Data (Use and Access) Bill are reshaping expectations – pushing for portability, flexibility and fairer terms.
Regulatory signals give buyers a basis to push back against any rigid terms, while giving sellers a preview of where scrutiny may land next. Engaging early is more than just compliance. It is a chance to set expectations before they become obligations.
“Regulators are pushing for multi-homing, easier exits and more flexible terms. Whether you’re buying or selling, this changes how you negotiate.”
Katherine Kirrage, Partner, Osborne Clarke UK
Where Risk Meets Readiness
As systems become more interconnected and reliant on external platforms, even well-managed supplier relationships can become points of vulnerability if dependencies are not fully understood or planned for.
While strong contracts can help, resilience is not achieved through documentation alone. It depends on how well businesses anticipate change: in their needs, in their suppliers and in the regulatory environment shaping digital infrastructure. That means assessing how contracts align with operational realities, how supplier decisions are made and escalated, and how fast teams can respond when a change or failure occurs. This requires strong cross-functional coordination and a clear method for testing fallback plans before they are needed.
Businesses that treat supplier strategy as an ongoing discipline – rather than a one-off transaction – are more likely to scale effectively and withstand disruption.
Contributors
We would like to thank these individuals for having shared their insight and experience on this topic.
