Complete guide to SaaS vendor management

Vendor management refers to the process of overseeing and evaluating the performance of your organization’s cloud or SaaS providers.

You might have already heard of vendor relationship management — but it’s important to note that vendor management differs from VRM. It focuses specifically on strategic management of service providers to ensure they’re meeting business objectives through optimal performance, cost control, security, and compliance.

VRM, on the other hand, places more emphasis on nurturing positive vendor relationships throughout the entire lifecycle in order to get the best value, typically focusing on the communication and contract management side of doing business.

If you’re looking to get the best from your providers, strategic vendor management is essential. Keep reading and we’ll run through the benefits and best practices, along with how implementing a SaaS vendor management system (VMS) can improve performance metrics and drive cost savings.

The challenges and opportunities of vendor management

For all the benefits it brings, leveraging SaaS within your organization also presents a number of challenges. However, by embracing a strategic vendor management framework, these risks can be mitigated — and even turned into opportunities to drive improvements across your business. Here are some examples.

• Challenge: Your vendors may be underperforming or do not fully align with your business objectives.
• Opportunity: By working collaboratively with your vendors, you can clearly establish key performance indicators (KPIs) and metrics. Continuous performance management can highlight any shortcomings, presenting a chance to renegotiate contracts or SLAs, or explore new vendor partnerships entirely.

• Challenge: Cloud and SaaS spending within your organization is too high but you’re unsure where savings can be made.
• Opportunity: Implementing a vendor management framework gives you greater clarity and insight into your tech spend. By identifying underutilized subscriptions or redundant services, you can eliminate unnecessary costs and improve profitability.

• Challenge: Your organization is growing and you need to scale accordingly.
• Opportunity: Effective vendor management makes it easy to adjust your cloud or SaaS services as and when you need to. By aligning vendor management with enterprise resource planning (ERP), procurement teams can quickly acquire new services or leverage existing supplier relationships to meet business requirements.

• Challenge: With multiple cloud vendors, it’s hard to keep track of security and compliance across your business.
• Opportunity: Developing a central security and compliance framework for all your service providers can simplify vendor risk management. And, by unifying your providers under a single vendor management solution, you can uncover and eliminate shadow IT.

• Challenge: Your organization is over-reliant on a single vendor, leading to risks around dependency and lock-in.
• Opportunity: Implementing a robust vendor management strategy can help with risk mitigation. By sourcing additional providers for a more diversified SaaS or cloud stack, you’re less likely to be affected by outages and can simultaneously leverage the respective strengths of each vendor.

The vendor management process

What does an effective vendor management process look like? It can be broken down into the following steps:

Defining your needs

Before anything else, you need to establish clear guidelines around what you require from a vendor — things like the specific services, particular business objectives, and any budget constraints. This will inform your entire vendor management strategy.

Sourcing and evaluating vendors

To set up your vendor management strategy for success, it needs to be front of mind during your procurement process. Market research will help you identify the right vendors for the service required before inviting them to submit proposals for thorough evaluation.

Contract negotiation and vendor onboarding

Negotiate mutually beneficial vendor contracts, including considerations around service levels, pricing, payment schedules, and termination clauses. Once the terms are finalized, you can onboard the service provider.

Performance management and monitoring

By establishing clear metrics and KPIs, you can track the effectiveness of your vendors. Regular performance reviews can help ensure each provider is meeting the terms of your contract and provide an opportunity to address any concerns.

Security and compliance auditing

It’s vital that your vendors are meeting any security or compliance requirements within your industry or geography, and regular audits are an important part of your vendor management framework.

Continuous improvement

Effective vendor management isn’t just about keeping things ticking over, but constantly identifying areas for improvement. Frequent evaluation of your vendors leads to opportunities for greater efficiency, cost savings, and employee satisfaction.

Best practices for vendor management

Effective vendor management keeps things running smoothly between your business and service providers. Here are some best practices you should employ throughout the management lifecycle in order to optimize your stack and get the most value from your suppliers.

• Develop a clear vendor management policy – This policy should outline your organization’s approach to vendor selection and performance management.
• Negotiate favorable contracts – Whether at the time of procurement or when renewals come around, it’s worthwhile negotiating vendor agreements to get the best value for money.
• Implement vendor management software – Automation of tasks like spend tracking and performance monitoring can lead to cost and time savings. By centralizing your vendor information, it’s simpler to identify redundant tech or unused licenses.
• Maintain open communication – Regular communication with vendors is crucial for building trust and fostering collaboration, and makes it easier to fix things where they do go wrong.
• Regularly monitor performance – Tracking metrics and KPIs lets you make sure vendors are meeting your expectations. Performance data can be used to leverage discounts at renewal, or fine-tune SLAs to your organization’s needs.
• Proactively manage risk – Staying informed will help you mitigate potential risks associated with your vendors, such as security vulnerabilities or financial instability. Diversifying your vendor portfolio reduces dependency risks while providing a broader range of services capabilities.

How the Vertice SaaS Purchasing Platform simplifies vendor management

Vendor management doesn’t need to be difficult. In fact, there are many tools available to simplify the process.

The Vertice SaaS Purchasing Platform is one such tool, providing a range of vendor management capabilities that save its users 20–30% annually on average. Other benefits include:

• Streamlining procurement and renewals by letting Vertice negotiate the lowest pricing on your behalf;
• Quickly identifying key negotiating points within your vendor contracts using Diligence Insights;
• Monitoring license and seat usage to ensure your money isn’t going to waste on tools or services you don’t need;
• Eliminating shadow IT to improve security and compliance across your organization.

By leveraging a VMS such as the Vertice Saas Purchasing Platform, you can take the pain out of vendor management and get the most out of your providers. To get started, simply get in touch.