VOL. XCIV, NO. 247

MOAT TYPE BREAKDOWN

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Tuesday, December 30, 2025

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Demand moat

Procurement Inertia Moat

15 companies · 17 segments

A demand-side moat where approved vendor lists, internal controls, and procurement bureaucracy protect incumbents. Switching vendors requires security reviews, legal redlines, budget approvals, onboarding workflows, and stakeholder alignment, which slows adoption of challengers and increases renewal stickiness.

Domain

Demand moat

Advantages

5 strengths

Disadvantages

5 tradeoffs

Coverage

15 companies · 17 segments

Advantages

  • Lower churn: incumbents benefit from “renew by default” because switching is painful.
  • Pricing resilience: modest price increases are often tolerated to avoid re-onboarding costs.
  • Barrier to entry: challengers face long sales cycles and high proof requirements.
  • Expansion leverage: once approved, adding departments, sites, or modules is easier.
  • Efficient selling: renewals and expansions can be cheaper than acquiring net-new logos.

Disadvantages

  • Not permanent: major events (budget resets, leadership change, incidents) can trigger vendor replacement.
  • Complacency risk: incumbents can underinvest until a consolidation or re-bid wipes them out.
  • Procurement squeeze: large buyers can use renewal leverage to extract concessions.
  • Standard shifts: new procurement frameworks or platform consolidation can reduce vendor count abruptly.
  • Requires ongoing investment: security posture, documentation, and customer success must stay strong.

Why it exists

  • Risk management: enterprises prioritize vendor reliability, security, and continuity over marginal improvements.
  • Process overhead: onboarding new vendors triggers legal, finance, IT, and compliance work.
  • Stakeholder coordination: multiple teams must agree, making change costly in time and politics.
  • Standardization: companies prefer fewer vendors to reduce complexity and audit burden.
  • Budgeting cycles: purchasing is tied to annual plans, limiting mid-year switching.

Where it shows up

  • Enterprise software and IT services (security questionnaires, SOC reports, DPAs, MSAs)
  • Regulated industries (finance, healthcare, defense, critical infrastructure)
  • Large industrial procurement (approved supplier lists, QA audits, plant-level approvals)
  • Government and public sector purchasing (frameworks, tender cycles, vendor registration)
  • Outsourced operations (facilities, logistics, managed services with SLAs)
  • Any category with vendor consolidation programs and central procurement

Durability drivers

  • Strong vendor hygiene (security, privacy, compliance, documentation always ready)
  • Low-risk operational track record (few incidents, good support, strong SLAs)
  • Broad internal adoption (many teams depend on it, increasing switching friction)
  • Contract structures that align with procurement cycles (multi-year, predictable renewals, clear pricing)
  • Continuous value proof (ROI reporting, executive sponsorship, periodic business reviews)

Common red flags

  • High renewal rates but low usage and low satisfaction (inertia masking weakness)
  • Frequent security or reliability issues that increase scrutiny and invite replacement
  • Renewals increasingly require steep discounts or concessions to avoid re-bid
  • Product is siloed to one team, making procurement replacement easier
  • A platform consolidation wave makes the category a checkbox inside a larger suite

How to evaluate

Key questions

  • Is the product truly embedded and approved, or can procurement swap it with little disruption?
  • How long is the onboarding process (security, legal, vendor master), and who owns it?
  • Do customers renew because they love it, or because switching is bureaucratically painful?
  • What events trigger re-evaluation (incidents, price hikes, consolidation mandates)?
  • Does being 'approved' translate into expansions across departments or geographies?

Metrics & signals

  • Sales cycle length and the share of time spent in procurement/security stages
  • Renewal rates and price realization at renewal (uplift vs discounting)
  • Net revenue retention (NRR) and expansion rates within approved accounts
  • Incidence of vendor consolidation events and competitive losses during re-bids
  • Security/compliance posture (SOC reports, audits, incident history) and customer trust
  • Customer concentration and decision-maker concentration (single champion risk)
  • Implementation depth and number of internal stakeholders using the product

Examples & patterns

Patterns

  • Approved vendor status that unlocks faster expansions once the first deal is done
  • Security and compliance paperwork that blocks smaller entrants from even being considered
  • Vendor consolidation programs that favor incumbents with broad footprints
  • Renewals that happen 'by default' unless a major event triggers re-evaluation

Notes

  • Procurement inertia is a time-based shield, not permanent differentiation. The real test is renewal pricing power and expansion inside accounts.
  • The fastest way to lose this moat is an incident: trust breaks, and procurement friction flips from protection to rejection.

Examples in the moat database

Curation & Accuracy

This directory blends AI‑assisted discovery with human curation. Entries are reviewed, edited, and organized with the goal of expanding coverage and sharpening quality over time. Your feedback helps steer improvements (because no single human can capture everything all at once).

Details change. Pricing, features, and availability may be incomplete or out of date. Treat listings as a starting point and verify on the provider’s site before making decisions. If you spot an error or a gap, send a quick note and I’ll adjust.