Smooth and strategic: Master the vendor management lifecycle

Vendor management spans a software’s lifecycle, from initial sourcing to a contract end. And you need a holistic vendor strategy.

Value is a key objective when researching a new SaaS vendor. But, research is just one part of vendor management. 

Whether it’s pre or post-contract, each stage promises value, and positive vendor relationships underpin the process. 

Businesses succeed most when vendor lifecycles are managed early, comprehensively and regularly. The outcome? A strong foundation for growth, expansion and high ROI. 

It’s time to move beyond static vendor lists and prioritize dynamic management. Here’s why managing your SaaS vendors is such a critical investment for long-term gain. 

The importance of strategic vendor lifecycle management 

It’s only natural that your vendor lifecycle timelines are… all over the place. 

You need to cancel Evernote, you’re researching four different accounting tools, and you’ve got a vendor negotiation meeting with Slack…and that’s just today.

Your quantity of vendors is likely to increase as you grow. Timelines will be scattered, but your process can’t. A scattered process puts your business at risk.

Perhaps you’re currently dealing with:

• Lengthy manual processes
• Missing elements in your vendor process 
• Inefficient communication between departments
• Insufficient record-keeping
• Sporadic monitoring

Without structured vendor management, at best, you will end up with an bunch of licences you pay for but nobody uses. At worst, you could have cybersecurity incidents. 

Effective vendor management establishes a transparent, systematic structure with strategic decision-making for mutually beneficial vendor relationships. 

Vendor lifecycle management is a process, not a tick-box exercise, and every stage of the process can be utilized to:

• Reduce risk
• Maximize efficiency
• Improve compliance
• Create value
• Save on cost
• Nurture vendor relationships

What are the stages of managing a vendor?

Now let’s explore how best practices can optimize vendor efficiency, security and cost.

1. Identify and engage

You’ve identified a software need in your company. It might be that a department has grown quickly, and a communication tool is now needed to ensure smooth operations. You probably just want to dive in and start researching different vendors. 

But before you do, have you considered what elements you’ll use to compare vendors? 

First, create a brief rationale. This should include:

• Why your business needs the software.
• Operational requirements from ‘must have’ to ‘nice to have’.
• Importance ranking of requirements. 
• Budget limits and estimated implementation goals.

It is essential that any new software aligns with your company’s goals and values. After all, you will hopefully have a long and mutually profitable relationship with your vendor.

Now – what qualifications and costs should your vendor have? Consider:

• Their reputation within the industry.
• Number of years of experience.
• Certifications or licenses.
• Pricing.

This clarity makes research more focused, resulting in fewer but more qualified potential vendors.

Communication early and assign a representative from legal, finance and procurement teams to ensure a holistic and efficient process.

Once you’ve gathered enough research, you can issue an RFQ (request for quote) to vendors who meet your standards. Now, you can begin a closer assessment. 

2. Risk assess 

With your quotes in, you can shortlist two or three vendors for analysis. 

Remember, selecting a vendor is all about maximizing the overall value for your company from both a financial and productivity perspective. Using quantitative data and qualitative feedback gives a more detailed picture. For example, you want information on the number of integrations each offer, but you also want to see references and reviews from actual customers. 

Your procurement team should take great care in assessing the legitimacy and reliability of vendors. 

For example, the vendor that meets your requirements and has a much lower cost than competitors could be financially irresponsible. 

Here’s some key information to request from vendors:

• HQ address
• Legal business name
• Business License
• Articles of incorporation
• Tax ID
• Ownership structure and number of employees
• List of subcontractors
• Compliance history
• Ongoing litigation

A final yet critical risk consideration is security. 61% of companies experienced a third-party or cybersecurity data breach in 2023, affecting company operations, finances and reputation. How vulnerable is the potential vendor to a data breach? What procedures are there to mitigate this risk and respond if an incident does occur? 

Now, you can select one vendor to move forward with. Make a timely purchase approval request and roll your sleeves up for the biggest cost optimization opportunity of the process.  

3. Negotiate and onboard

There’s more than just the price to negotiate with vendors. These are some of the items that you’ll need to detail:

• Scope of work
• Timeline
• Pricing
• Deliverables
• Payment terms
• SLAs (service-level agreements)

SLAs are particularly important for SaaS purchases, helping to ensure service quality and manage risks like service outages or performance issues. 

Being firm but fair in the negotiation creates a foundation of trust. Agree on contract terms that are mutually beneficial, and that clearly state your expectations, leaving no wiggle room for surprise costs. Later in the vendor management lifecycle, you can review these terms against your evolving needs. 

If you lack time and personnel for negotiations, an effective vendor management solution is your lifeline. Expert negotiators identify every opportunity to optimize on cost and get discounts and deals. They can save you an average of 39% on your software.

Next, you’ll begin to share information in the onboarding of your new vendor. 

Sharing your company overview, missions, and project details, as well as a vendor code of conduct at this stage, paves the way for future personalisation, development and innovation.

You should also collect additional information, such as regulatory compliance certification, insurance policies, confidentiality agreements and appropriate use policies. 

Ensure that information is documented, processes are accounted for, and areas of accountability are defined for the departments involved. This will make it easier to address any areas of contention, if they do arise, and create models of good practice. 

Now, your employees can enjoy their onboarding training and begin reaping the rewards of a more efficient tool. 

4. Monitor performance

Vendor management doesn’t end there. Throughout an app’s lifespan with your company, regular evaluations of the SaaS should be scheduled. 

There are two aspects to consider when monitoring performance – your vendor and the app itself. Setting clear assessment criteria for each is key to uncovering and resolving issues. 

Evaluate your vendor. Are they delivering on the quality promised? Are the SLAs being met? Is the payment process as smooth as promised? Consider the service that you receive, issue resolution timelines and their responsiveness to feedback. 

SaaS performance audits are essential insights into how profitable your software is for your company. These reveal patterns of behavior rather than focusing on individual instances and give a fair and accurate overview. With many metrics to cover, including speed, usage and ROI, audits can be lengthy. Successful businesses utilize automated SaaS management platforms to gain complete visibility and insightful reports on their software’s performance. One less time-consuming manual task.

Now, you can use your performance evidence as leverage in your ongoing vendor partnership.

5. Manage vendor relationships

There are some crucial points within the lifecycle to nurture vendor relationships. Negotiating is a prime opportunity, but payment deadlines, renewals, and disputes are equally important. 

Vendors may thank you for on-time payments by sharing deals and discounts before renewals, helping you get the edge over competitors. Regular communication with vendors makes renewal negotiation meetings smoother and quicker without any surprises. 

Likewise, when you need support or wish to raise a dispute, it can be done in a collaborative, efficient way that gets you back on track quickly. 

Prioritizing relationships at these key points will make the process much smoother, but a vendor relationship must be cultivated throughout the software product lifecycle management. Feedback doesn’t always have to be negative. In fact, positive feedback could lead to innovative collaboration. 

Managing vendor relationships is an ongoing effort right up to and including the time that the contract ends. 

6. Offboard vendors

An end is a natural part of any lifecycle. Successful offboarding is just as important as starting a new contract. 

There are several essential administrative responsibilities in this final stage that should be completed with professional respect to maintain your company’s reputation.

Here’s a list of your vendor offboarding duties:

• Disseminate contract termination information to all involved personnel.
• Check you’ve received all the requirements of the contract.
• Settle outstanding invoices.
• Suspend all further payments. 
• Record details of after-sales. 
• Ensure termination clauses are adhered to.

Documentation of this process is vital. Be sure to record the reasons for exit, laws and industry standards that you complied with, and an evaluation of the vendor and offboarding process itself. This gives you a reference point to learn from, tweak and re-use as your company grows. 

Finally, you can remove the vendor from your internal systems to protect sensitive data or IP.

You’ve now mastered a holistic approach to vendor lifecycle management! However, the next challenge is to ensure all employees can access and utilize this best practice.

Vendor management process flow

A workflow is an effective visual tool to ensure company-wide adoption of your optimized vendor management process. 

Your SaaS vendor management workflow will present a clear, step-by-step process for employees. The benefits of such a transparent procedure are: 

• Elimination of errors. 
• Risk reduction. 
• Time gained. 
• More time and opportunities for vendor relationship nurturing.
• More chances for value optimization.
• Increase in productivity. 
• Easier tracking and record-keeping.

The example below displays an effective vendor management workflow to implement in your business for a smoother process.

With a clear path to follow, you can achieve company-wide excellence in vendor management. But if it still feels overwhelming, automating your process is a smart way to save you time, energy and cost. 

How can vendor management software help? 

Vendor management software is the smart option for growing businesses. These dynamic tools use automation, which reduces the need for lengthy, manual tasks in key areas of the vendor lifecycle, such as audits, documentation and renewals. 

Automated processes eliminate errors, save time and enable you to track performance metrics and budget information in real-time. Timely updates and notifications mean that employees can focus on high-value, strategic tasks that prioritize company growth. 

Spendbase offers a holistic SaaS management system that delivers high-quality vendor lifecycle management for your business. 

Instantly gain intelligence with software pricing guides to support your SaaS purchasing decisions. You’re no longer in the dark with Spendbase’s wisdom. 

Full visibility of your SaaS with Spendbase’s management platform puts you in control and makes it simple to spot cost optimization opportunities well before your next vendor negotiation. 

Enjoy a smooth process with automated approval and renewal systems and real-time budget updates and reminders. 

The Spendbase experience goes beyond vendor management. They’ve got negotiations covered, too. Their expert negotiators have an 86% success rate to win you the very best deals for your company. Take advantage of their exclusive SaaS discounts, enjoy smarter vendor management and invest the savings you make into business growth.