Everything you need to know about SaaS vendor management

SaaS Management

Vendr | Buy with peace of mind
Written by
Perin Adams
Published on
February 20, 2022
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Key takeaways:

  • The need for SaaS vendor management continues to increase as SaaS adoption skyrockets. 
  • Vendor management is the process of managing suppliers from the selection stage and purchasing process up until the contract closure or termination.
  • Vendor selection, price negotiation, vendor onboarding, ongoing relationship management, invoicing and payments, and closure and offboarding are the seven steps in the vendor management process.
  • Benefits of an effective vendor management process include identifying and eliminating inherent vendor risks, managing vendor contracts, assessing vendor performance properly, and more.
  • Defining the company's buying process, setting clear expectations with vendors, analyzing cost-benefits, and implementing a vendor management platform are some of the best practices in vendor management.

As SaaS adoption continues to increase, the often-overlooked SaaS vendor management is getting some much-needed traction. Contrary to popular opinion, effective vendor management doesn't end with a purchase. In SaaS vendor management, subscription is merely the beginning of a long win-win partnership.

The state of SaaS vendor management

On average, an employee uses eight SaaS products in the course of their work. Companies with fewer than 50 employees have about 40 SaaS products in their stack. Organizations with more than 1,000 employees pay for over 200 SaaS vendors. All of that adds up to an investment of $343,000 per year on SaaS.

SaaS products vary in both specialty and price, and not all businesses have a central SaaS vendor management system. For many teams, this makes wrangling SaaS vendors a moving target.

What is vendor management?

Vendor management is the process of managing suppliers from the sourcing stage to the contract closure phase.

Vendor management comprises various aspects like vendor risk assessment, vendor performance management, contract negotiation, and contract management. Effective vendor management is all about collaborating with suppliers every step of the procurement process to build a healthy long-term relationship that outlives short-term gains.

The 7-step vendor management process

While businesses usually structure their vendor management lifecycle to meet their unique business goals, this process has a few common stages. 

The primary stages of a vendor management process are:

1. Vendor selection

SaaS buying is typically more complex than purchasing a product or service because organizations must trust vendors with critical business operations like security and product uptime. As a result, SaaS vendor selection is much more comprehensive, with steps like research, pricing, competitor comparison, and compliance investigation. When selecting vendors, many companies also require requests-for-proposals (RFPs) or competitive quotes. 

2. Price negotiation

Once you select a supplier, it’s essential to negotiate and complete the pricing conversation. Instead of battling out the negotiation phase on your own, it’s better to leave it to an expert like Vendr. Vendr is a SaaS buying and negotiation platform that knows the ins and outs of the negotiation process, ranging from pricing to user base and contract types. Backed with the data and learnings from 3,000+ deals that amount to $300 million worth of SaaS transactions, Vendr ensures that its customers get the best price in the shortest amount of time. 

3. Signing Contracts

When the negotiation part is over, it’s time to sign vendor contracts. These SaaS contracts list the terms and conditions on which the organization and its end-users may access, use, and pay for the software. Businesses must set up fair and mutually beneficial contract terms to ensure a lasting vendor relationship. Long-term vendor relationships are more important than short-term gains like cost savings.

Before signing SaaS contracts, stakeholders need to read through master service agreements and SLA agreements to understand the service offering terms. Even small and medium businesses (SMBs) that opt for a pay-as-you-use pricing model can negotiate SaaS contracts

4. Vendor onboarding

This stage helps vendors get up to speed on a company's processes, and delivery timelines, performance expectations. 

In SaaS vendor management, vendor onboarding helps businesses prevent overspending, stay clear of security vulnerabilities, and ensure adequate visibility over an organization’s SaaS stack. To get started, a simple SaaS stack spreadsheet template can help businesses manage existing SaaS apps and plan for upcoming renewals by documenting important information like the renewal date, subscription fee, stakeholders, and more. 

This phase also acts as the product onboarding stage, where end-users onboard to the SaaS platform. It’s essential to give end-users a clean and user-friendly onboarding experience, because that will help ensure a good digital adoption rate. 

5. Ongoing relationship management

Ongoing vendor relationship management is where an organization's key account holder communicates regularly with the vendor or service provider — not always about grievances, but frequently collaborating with the supplier to improve the relationship in the long run.

When it comes to SaaS, this is the ongoing risk-management phase. SaaS purchases shouldn’t be approached with a once-and-done mindset. It’s crucial to make frequent checks on a SaaS vendor's performance, certifications, and compliance standards. 

6. Invoicing and payments

Many vendors and suppliers work on industry-specific accounting schedules. It can be complex to manage the invoices, schedules, and processing of various suppliers. When businesses process each and every invoice manually, there are chances of missing out on early payment discounts and may end up subject to late payment penalties. 

A vendor management system organizes and ensures on-time payments for all outside services. In SaaS management, most often the subscriptions are on auto-renewal and as a result, businesses can miss out on an array of lucrative benefits. Eliminating auto-renewals and building a proactive renewal strategy is the best way to manage invoicing and payments of your SaaS service providers. 

7. Closure and offboarding

Not all vendor management relationships are smooth. Sometimes, critical vendors may decide to sunset their service offering, or the organization may no longer have a need. As a result, they have to end a vendor contract. Vendor offboarding is a crucial step where SaaS vendors are removed from financial and administrative records. 

In a SaaS environment, it’s the responsibility of the primary user to terminate a subscription and disable auto-debit payments. By missing out on offboarding formalities, the business may end up paying for a subscription that they no longer need. In the long run, it may impact the profitability of the business and rack up maverick spend.

Vendor management best practices

Finance and procurement leaders have their work cut out for them when it comes to vendor management. The entire organization depends on them to manage and nurture vendor relationships efficiently.

The vendor management process has often gone fully digital with no in-person element. Many finance teams haven’t had a consistent and compliant vendor management process or system, making it a struggle to select, negotiate with, manage, and pay traditional and SaaS vendors.

Listed below are some vendor management best practices that improve the experience for everyone and save your team time.

1. Define your company’s buying process

When the SaaS buying process isn’t set in stone, it gives too much leeway for shadow IT to flourish. With a wide variety of roles negotiating and acquiring new tools, specifically SaaS tools, it’s easy for important steps to fall through the cracks. A marketer handling software negotiation, for example, probably doesn’t have time to plan ahead and instead buys at the last minute.

A formal buying process that outlines how to request new software, who to work with and how early to get those people involved, necessary security and legal reviews, pricing negotiating practices and contract agreements, and more, will avoid last-minute, intractable purchases at high price tags.

2. Set clear expectations with vendors

Organizations don’t want to be left hanging by a vendor that’s skirting promises — and they don’t like to be left hanging either. Vendors and suppliers should have clear expectations for their work and payment schedule. Whenever you make changes to your vendor expectations, make them clear with standard metrics or KPIs and put them all in writing — preferably in a contract. 

3. Analyze the cost-benefit of your vendors

When you’re using dozens of SaaS and traditional vendors, you may forget to measure efficacy. Ask yourself: which vendors are doing work that’s still crucial? And, are there vendors that can do it at a better value? 

Work with your finance team and SaaS stack manager to find ways to streamline your vendor relationships. Perform a thorough assessment at least once per quarter; this will result in saved costs and improved benefits.

4. Use a vendor management platform

Even though you have a vendor management strategy, it’s crucial to implement it with the help of a vendor management solution. You can get the most value out of your vendors by using a comprehensive vendor management system

For instance, Podium, a Utah-based cloud service provider, simplified their vendor management process and kept up with growing pains with the help of a vendor management platform. Some examples of top vendor management tools are Precoro, Procurify, Venminder, and Blissfully.

An ideal vendor management software streamlines price negotiation, optimizes SaaS spend, standardizes contract management, and simplifies the invoicing process. Vendor management platforms relieve a business from manual follow-up and streamline vendor management workflows so everyone can reallocate their time to more important tasks.

Make vendor management a priority, not an afterthought

Supplier management is not merely managing vendor information, it is much more than that. In addition to helping forge better vendor relationships, proper vendor management — following the process and best practices discussed above — offers value-added benefits like making SaaS usage and spend visible, cutting down vendor risks, and more.

While vendor management platforms like Blissfully streamline the operational aspects of vendor management, the strategic aspects like price negotiation are better left to experts like Vendr. Vendr has exhaustive knowledge about SaaS buying, negotiations, and management. Get in touch with Vendr to see how effortless SaaS buying and negotiations can be.

Perin Adams
Perin Adams
LinkedIn icon
GTM Business Systems
Perin is the GTM Business Systems Analyst at Vendr, responsible for analyzing and optimizing the company's go-to-market systems and processes.

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