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A Complete Guide to Vendor Relationship Management 

Whether you run a large or smaller company, managing everything independently is too big of a task. So, what’s the solution? That’s where vendors come in, who can bring you SaaS services critical to your business’s success. 

Statistics suggest that around 47% of vendor collaborations fail, a significant number that should concern you. Encountering failure in vendor relationship management means missed deadlines and cost overruns, which can be deadly for the future of any SaaS business. It’s not just about signing a contract with a vendor but having an elaborate vendor management plan. 

This guide will help you develop a comprehensive and effective vendor relationship management plan to optimize your operations and find the best solutions for your business at optimal prices. As a result, you can earn your fair share in a booming SaaS market, which is expected to hit $232 billion in 2024

What is Vendor Relationship Management? 

Before jumping to any plans, let’s first understand vendor relationship management, specifically in the SaaS context. It is an arrangement in which a business partners with a third-party vendor to get software or IT infrastructure to keep the business running. Vendor management has several aspects, such as extensive research, negotiating optimal terms, monitoring vendor performance, and conducting evaluations to ensure everything goes according to the plan.

It won’t be an overstatement that effective vendor relationship management can make all the difference for a business that relies on IT services. Vendor management gets you the best value for money while reducing the risk that comes along with vendor partnerships.

Are Vendors and Suppliers the Same? 

Most people think vendors and suppliers are the same, but that’s untrue. There is an important distinction between them that should never be overlooked. The simplest difference is that vendors resell a product by someone else, while a supplier is the proprietor of that particular application. A vendor relationship requires a business-level partnership, while a supplier relationship is more like a customer and someone supplying it with a service. 

Why Vendor Management is Important

Effective vendor management can do wonders for your business by tackling issues of cloud-based environments and efficiently managing SaaS subscriptions.

Here are some of the primary reasons why you need vendor relationship management:

1. SaaS Visibility 

The main reason why companies adopt SaaS applications is to streamline their operations and reduce glut. When a company has effective vendor management, it ensures quality oversight of these applications and the procurement procedure. As a result, it can decide whether to keep or drop an application based on its utility.

Managing vendor relationships effectively provides a robust repository for previous and upcoming contracts, potential expenditures, and more. Similarly, by removing unnecessary applications, you can save costs and boost yields. Moreover, proactive vendor management prevents the usage of shadow IT applications, ensuring better control and governance.

2. Minimizing Third-party Vendor Risks 

Many organizations overlook the fact that employees use the official company emails to subscribe to applications, exposing the company data online. Shadow IT is on the rise, making it challenging to discern trustworthy vendors. As a result, your company can experience phishing attempts and Distributed Denial of Service (DDoS) attacks.

When you have a centralized platform for vendor relationship management, you get a thorough overview of all the subscriptions and see their primary contributors. Another benefit of this centralized system is that it helps you implement training programs and protect confidential information.

3. Improving Returns 

This issue arises when you purchase SaaS from multiple vendors, leading to an overlap of similar applications. For instance, your marketing and finance departments might be using different software with similar features. Effective vendor relationship management ensures the identification of these overlaps and consolidates redundant applications, leading to significant savings.

4. Renewal Management 

Vendor relationship management ensures you’re notified promptly about required application changes and upcoming renewals. With these crucial metrics, your company can decide whether to retire the contracts or renew them. Similarly, you can check the budgetary constraints and determine whether a renewal aligns with them. As a result, your company walks a path of financial prudence.

The Vendor Management Process 

Although different companies use customized vendor relationship management processes to meet their unique goals, they still share some stages, as described below.

1. Choosing the Vendor 

Usually, selecting a SaaS vendor is much more complex than buying a simple product because of security concerns and upkeep times. Therefore, it involves multiple steps, such as research, pricing comparisons, regulatory compliance, etc.

2. Getting the Optimal Price 

After selecting a vendor, it’s time to negotiate pricing with them. Instead of having prolonged conversations on this issue, hiring an expert who can handle it for you is better. Usually, these companies have strong linkages with SaaS vendors and can get you excellent prices quickly.

3. Signing Contracts 

Once you have finalized the price, you must sign a contract with the vendor. It contains all the terms and conditions that define your relationship with the vendor, including accessing, using, and paying for the services. Signing a contract with fair and mutually beneficial terms is important to ensure a long-term partnership with the vendors.

4. The Onboarding 

Now comes the state where the vendor is on board and starts providing its product to the company while meeting the deadlines and performance expectations. When you have effective vendor relationship management, this stage helps with security vulnerabilities, avoiding overspending and maintaining required visibility. This stage also includes customers and end users onboarding to the SaaS platform. A company needs to keep the onboarding process as swift and clean as possible to boost the digital adoption rate.

5. Continuous Relationship Management 

This part is especially important because it determines how well the vendor partnership continues. It involves regular communication on different aspects between the company’s key account holder and the vendor. These conversations aren’t just about complaints but also about cementing further collaborations. 

Continuous conversations are especially important in the SaaS world, as it isn’t the traditional one-time product. You must monitor it continuously for compliance, security, performance, certifications, etc.

6. Payments 

Usually, vendor partnerships require industry-standard payment schedules, which can sometimes become hard to manage. One reason is that you might juggle various vendors and manage their invoices. The best way to get out of it is to have a robust vendor relationship management system in place that not only takes care of the payments but also helps you get discounts if available. Instead of putting the subscriptions on auto-renewal, an efficient vendor management system has a proactive renewal policy that helps your business enjoy lucrative renewal benefits.

7. Offboarding 

There is no guarantee that vendor relationship management will always work. As mentioned in the beginning, 47% of such partnerships fail. There can be multiple reasons behind it, such as the vendor sunsetting the service, the organization no longer needing it, pricing issues, and much more. Vendor offboarding means removing the vendor from all financial and administrative records.

The business is responsible for terminating this partnership and canceling auto debit payments. These formalities are crucial. Otherwise, the business might end up paying a subscription even when it’s not using a service. 

Vendor Relationship Management Best Practices 

Vendor management is a complex process that can make or break a business. Therefore, adopting the best practices is crucial to ensure a smooth relationship between your business and the vendor. As a result, you can provide the best possible services to your customers and take your business to the next level.

1. Define the Process 

One aspect of a SaaS buying process is that it must be clear. Otherwise, you can expect a lot of shadow IT. A business requires various SaaS tools, and acquiring them might involve tiresome negotiations.

For instance, a marketing business doesn’t have all the technical software information or the time to plan proactively. Instead, it buys at the last minute and might get a bad deal. It’s better to hire someone who knows the ins and outs of these processes, including legal reviews, contract agreements, pricing negotiations, and more, to avoid paying more for a product than it should cost.

2. Clear Expectations 

One major sign of a professional vendor is that it doesn’t flop on its promises. Similarly, a professional vendor doesn’t like a business that doesn’t fulfill its promises either. A business needs to be straightforward with its expectations of the vendor, such as application quality, payment schedule, and more. If you expect anything different from the vendor in the coming days, putting it in the KPIs and contract terms is essential to keep everything transparent.

3. A Comprehensive Cost Benefit Analysis 

It’s unsurprising to lose track of the price-to-performance ratio for a vendor in an ongoing partnership. Therefore, it’s important to keep asking this important question and determine whether you’re getting the value for what you’re paying. Is the vendor you’re working with the best, or are there others that can do a much better job for the same money?

It’s important to collaborate with your finance team to understand the financial aspects of this partnership. A comprehensive quarterly assessment can help you streamline the partnership and save costs.

4. Prioritize Vendor Management 

Given how important vendor relationship management is, it should be on the top of your list and not an afterthought. It is not just about saving the vendor’s information with you and sifting through it repeatedly. It’s much more than that, involving a deep analysis of different aspects of the partnership. As a business with customer commitments, keeping track of your vendor partnership is easy, but you should try your best to avoid that. 

5. Annual Scoring 

A comprehensive annual review is indispensable if you want the relationship with your vendor to run smoothly and effectively. It’s also crucial to end a partnership if it’s not working in your favor and find something that does.

Working on an annual score helps you provide constructive feedback to the vendor, including praises and complaints regarding its performance throughout the year. Having a VRM application makes your task easier by providing real-time stakeholder feedback. An annual scorecard allows you to discuss that feedback with the vendor alongside KPIs.

However, it’s crucial to mention a caveat: Several critical issues arose during the year that need immediate attention. For them, you shouldn’t wait for the annual report and communicate them to the vendor as soon as possible.

Being a responsible and transparent business, you can ask the vendor to provide you with an annual scorecard. As a result, you can determine your plus points and weaknesses and address them in the short and long run.

6. A Backup Plan 

It’s ideal to have a reliable vendor as your business partner, but unfortunately, we don’t live in an ideal world. You can encounter several issues during your vendor partnership, resulting in premature termination. Such a rapid change can wreak havoc for your organization, especially if you cannot find a suitable replacement quickly.

Therefore, it’s crucial to mark some potential vendors you can collaborate with if the current collaboration fails at any point. Moreover, establish a thorough plan for transitioning from the older vendor to the new one, including price and payment negotiations. As a result, you can minimize disruption to your business and keep providing your services uninterruptedly.

7. Usage Tracking 

An ongoing vendor partnership often makes a business overlook an important aspect of it: the usage. On the other hand, tracking it can offer critical insights into the SaaS applications, their utility, and whether they’re an unnecessary financial burden.

Understanding the usage helps determine the exact number of licenses your company needs, giving you leverage in negotiations. Ultimately, it helps you get an optimal deal or find a vendor that offers one. It won’t be an overstatement that making a prudent financial plan is possible only if you track your SaaS application realm. 


Running a business can be hectic, not least because you need to collaborate with quality vendors at the best possible prices. It’s a long process that might involve long rounds of negotiations, disagreements on pricing mechanisms, payment schedules, and whatnot. During all that, your business suffers, and the damage could be permanent.

However, you can avoid all the headaches by hiring a reliable third party to handle vendor relationship management and bring high-quality SaaS applications from the best vendors. SmartCost is the best example, offering up to 30% savings on vendor purchases, contract renewals, and maintenance fees.

The company has vast experience in the SaaS market and boasts the most extensive network. Moreover, it has a reliable pricing database, ensuring maximum client savings. One of the best things about SmartCost is that you no longer have to be part of tiresome negotiations. Instead, SmartCost will handle them on your behalf and quickly get you an excellent deal.

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