SaaS vendor management services: A know-it-all’s guide

SaaS Management

Vendr | Transparent vendor management
Written by
Emily Regenold
Published on
October 27, 2021
Read Time

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Key takeaways:

  • Vendor management services (VMS) are all about working effectively with SaaS vendors to derive more value out of that business relationship.
  • Vendor management offers a ton of benefits, such as improved risk management, enhanced contract management, reduced redundancy, increased operational efficiency, and informed renewals.
  • Five steps involved in an ideal SaaS vendor management program are vendor management team establishment, qualification of vendors, vendor onboarding, vendor performance management, and vendor renewals and offboarding.
  • Best practices for vendor management are categorizing and cataloging vendors, performing robust risk governance, establishing a SaaS security checklist, and more.

When businesses hear "vendor management," they typically associate it with product or services procurement. Unfortunately, when it comes to SaaS procurement, not many people take the effort to build vendor relationships. As a result, they miss out on many benefits like contractual savings, improved vendor performance, and more. 

SaaS adoption continues to skyrocket, and research suggests that it grows by 17.5% each year. What's more, by the end of 2021, 73% of businesses expect to adopt SaaS applications for their everyday operations. These numbers build a strong case for implementing vendor management services for SaaS stacks. 

If the concept of implementing a supplier management strategy for your SaaS vendors sounds new, don't panic. We are here to help you understand what vendor management is, what value it can offer a business, what an ideal VMS process must include, and some tips and best practices for successful vendor management.

What are vendor management services?

Vendor management services are the processes involved in managing an organization’s SaaS service providers. VMS help improve relationship management through frequent collaboration and ongoing tracking throughout the vendor lifecycle, from the sourcing stage to the onboarding and performance evaluation phase until the end of a supplier relationship. 

Understanding the value points of vendor management services

Vendor management services: entrepreneur working and using his laptop

SaaS vendor management is no longer a competitive advantage. As SaaS ecosystems continue to grow, it has become a strategic necessity. When implemented correctly, a solid SaaS vendor management strategy can offer a ton of indispensable benefits like:

1. Improved risk management

The SaaS procurement process is rife with third-party risks. The democratization of the purchasing power adds to the problem by fostering shadow IT. Implementing a vendor management process will streamline the SaaS buying process and help in risk mitigation efforts. 

You can identify the list of employees who use their purchasing power by just taking a closer look at their business credit card statement. Then, later on, you can use this list to provide special training to top purchasers to make proper due diligence before purchase.

2. Enhanced contract management

Most stakeholders think contract negotiations are all about getting a lower price than what is quoted. What's even worse is that some stakeholders are not even aware that SaaS contracts can be negotiated. They simply sign up for a SaaS product, e-sign the master services agreement without reading through it, and start using the product.

An ideal vendor management process will help buy SaaS for less and enable the creation of a mutually beneficial contract that focuses more on long-term savings than short-term gains.

3. Reduced redundancy

SaaS redundancy has become a common occurrence. The major cause of SaaS redundancy is departmental silos in SaaS requisition and purchase. For instance, your departments may be using different SaaS applications for fulfilling the same purpose. 

Your engineering team may be using Jira for project management while your marketing team subscribes to Notion for the same purpose. An ideal vendor management process will not only break these silos but also ensure spend transparency across departments, thus reducing redundancy effectively. 

4. Increased operational efficiency

Growing SaaS supply chains pave the path for operational issues. As a result, the already overworked IT team is forced to intervene and correct any issues that arise in SaaS apps. Instead, if there was a vendor management process in place, the tickets could be directly sent to the vendor's team to be resolved. 

In an unmanaged SaaS ecosystem, business processes and workflows depend a lot on frequent manual intervention, which impacts overall operational efficiency. A vendor management solution can resolve all these challenges with intuitive features like workflow automation, seamless collaboration, and more.

5. Informed renewals

Most SaaS service providers don't send renewal notifications before a contract ends. However, in cases where recurring payment is enabled, the subscription fee is debited automatically, and other things like the invoicing happen later. 

There is better visibility over key metrics like renewal date, usage levels, contract terms, features used, and more when there is a vendor management system in place.

Steps involved in vendor management services

Team in a meeting

While vendor management may be a new concept to some, it is a simple yet effective strategy that helps extract a lot more value from a vendor relationship. Listed below are five major phases in vendor management:

1. Vendor management team set up

Before you implement your vendor management plan, you need to have a team in place. The vendor management team is a critical business function that helps companies consolidate and manage SaaS applications, make SaaS spending transparent, and help stakeholders make the right buying decision.

Whenever a need is discovered, this team can help stakeholders identify any existing applications in the SaaS stack that can fulfill this need. This habit will help reduce redundant apps and control maverick spending. 

2. SaaS vendor qualification

When you have looked through your SaaS stack and found that none of the existing applications can fulfill a specific need, you need to start looking at a vendor. In this phase, you will evaluate potential vendors to see if they can fulfill the current need. This is also the phase where you perform necessary due diligence on your shortlisted vendors. 

When you choose a custom subscription plan, you can request your potential SaaS vendors to fill out a questionnaire that captures details like regulatory compliance and healthcare frameworks adoption. However, such information will also be publicly listed on a vendor's website, so you can cross-check as required and pick the right vendor.

3. Vendor onboarding

Once the vendor selection is done, the contract needs to be finalized. Contractual terms like service level agreements and add-on features can be negotiated before it is signed. Once the contract is signed, the vendor onboarding phase starts.

During this phase, the vendor management team officially adds the SaaS vendor into the SaaS stack and captures all critical information about the app, such as renewal data, stakeholder name, contract type, and total contract value in the vendor information management module or SaaS stack template

4. Vendor performance management

Just like you would evaluate the performance of a product vendor, you will need to regularly assess the performance of a SaaS vendor. During this phase, the vendor management team will get in touch with the end-users and key stakeholders of the SaaS app to see if they are satisfied with the app's performance. 

In addition to this, vendor managers also need to perform vendor risk management exercises to uncover potential risks. If a vendor's performance is not up to mark, it is better to talk to the vendor and rectify existing problems. If the problem persists, it is better to cancel the subscription and migrate to the next best vendor.

5. Vendor renewal and offboarding

It’s crucial to have a solid vendor renewal strategy in place. Before a SaaS contract ends, you need to discuss with the key stakeholders and understand whether they want to renew the subscription or move to a different vendor. These discussions will help weed out unused apps from the SaaS stack.

The offboarding process is pretty straightforward for SaaS service providers. To offboard a vendor properly, the SaaS contract must be terminated, the recurring subscription needs to be canceled, the app must be removed from the SaaS stack, and a formal notification needs to be sent to all users.

Best practices for vendor management services

Vendor management services continue to evolve at a rapid pace. However, some SaaS vendor management best practices persist over the years and serve as a framework for vendor managers. Listed below are five vendor management best practices that have withstood the test of time:

  1. Categorize and consolidate all vendors consistently. 
  2. Have a solid SaaS security checklist to assist in vendor onboarding.
  3. Establish robust risk governance and performance evaluation plans.
  4. Track and monitor vendor renewals proactively.
  5. Collaborate often with vendors to develop long-term relationships.

Get more value out of your vendor relationships

Vendor management is much more than managing vendor information in a database. It is an indispensable part of the vendor lifecycle. An ideal vendor management process helps mitigate risk, eliminate app redundancy, and improve overall operational efficiency. Having a designated vendor management team makes a ton of difference. 

If you don't have an internal vendor management team in place to manage your SaaS service providers, try outsourcing the responsibilities to Vendr. Vendr can offer you best-in-class SaaS procurement services to reduce your SaaS management burden and optimize spend while doing that. Sign up for Vendr today and see how effortless it is to manage your SaaS stack.

Emily Regenold
Chief of Staff
Emily is the Vendr's Chief of Staff, leading the company's brand and external communications.

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