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SaaS Vendor Management: 101 Guide

Sethu Meenakshisundaram

4th January, 2024

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With the ever-expanding availability of SaaS offerings, the significance of efficient SaaS vendor management cannot be emphasized enough. As an IT manager, the challenges and complexities of maintaining a lean and efficient SaaS stack have grown even more significant.

To safeguard against these potential pitfalls, it is imperative to exert strict control over your SaaS stack, commencing with the diligent management of your SaaS vendors.

Imagine you're the IT manager of a medium-sized enterprise that relies on various SaaS applications to support your daily operations. Over time, you've noticed that your SaaS expenditures have steadily increased, impacting your IT budget significantly.

Without a robust SaaS vendor management strategy in place, you might find it challenging to control these rising costs. Some of the common issues you could face include:

1. Unused or Underutilized Subscriptions: Employees within different departments may have subscribed to SaaS applications that they no longer use or need, but the organization still pays for these licenses.

2. Lack of Negotiation Leverage: Without an organized approach to contract negotiations, you may miss opportunities to secure better pricing or more favorable terms with your SaaS vendors.

3. Overlapping Tools: Different departments or teams might use similar SaaS applications from different vendors, resulting in duplicate functionality and additional costs.

4. Unmonitored Growth: As your organization expands, SaaS subscriptions might be added haphazardly, leading to a lack of visibility and control over your overall SaaS portfolio.

But what exactly is SaaS vendor management? Let's explore:

What is SaaS Vendor Management?

In concise terms, SaaS vendor management refers to the process of identifying, selecting, and effectively overseeing SaaS providers to meet your organization's specific needs.

SaaS vendor management revolves around making informed decisions when selecting SaaS providers, optimizing vendor relationships to drive value and efficiency, and mitigating risks to ensure the smooth operation of your organization's software applications.

Responsibilities of a SaaS Vendor Manager

SaaS vendor managers are crucial in providing their organization with the necessary tools to thrive in the modern business environment.

Their core responsibilities are:

• Vendor Selection: In today's saturated SaaS application market, vendor managers are tasked with the challenging duty of sifting through numerous options to identify a select few that align with their organization's specific needs. This process involves careful evaluation and assessment among the multitude of vendors, all of whom claim to offer the ideal solution for the intended use case.

• Price Negotiations: As a vendor manager, you are tasked with managing your organization's budget effectively. This entails active negotiation to secure favorable pricing terms with chosen vendors. Should expenditures exceed the allocated budget, you must provide an explanation and justification.

• Vendor Onboarding Process: Upon completing the vendor contract with your selected provider, you must oversee the onboarding process into your organization's ecosystem. This encompasses the seamless integration of their software solutions and services throughout the entire vendor lifecycle.

• Ongoing Relationship Management: Maintaining productive relationships with third-party vendors is a fundamental aspect of your role. This involves regular communication with vendors to address any changes in requirements, seek assistance when facing challenges, and coordinate employee training sessions to maximize the value derived from their products.

• Invoicing and Payments: Vendor managers are responsible for the timely renewal of software services. This may necessitate collaboration with the finance and human resources departments to ensure any upcoming renewals and prompt payments, thereby preventing any disruptions in service delivery.

  

  

Why You Need to Manage SaaS Vendors & How Vendor Management Solutions Can Help

SaaS vendor management is a crucial component of SaaS governance. It is essential for CIOs and you to recognize the significance of incorporating SaaS vendor management into their overall IT strategy.

• For Greater Visibility

Companies often adopt SaaS applications to streamline their operations. Effective SaaS vendor management ensures the efficient oversight of these applications while concurrently providing enhanced transparency into procurement activities. This visibility empowers you to make informed decisions regarding the retention or reduction of specific applications that may be considered redundant or underutilized.

Robust vendor management simplifies the process by serving as a centralized repository for managing vendor relationships, contracts, and forthcoming expenditures. Consequently, you can eliminate unnecessary applications, opting to retain those with optimal functionality. This prudent approach results in cost savings and yields a positive return on investment.

Moreover, by offering real-time insights into the state of your SaaS ecosystem, effective vendor management enables proactive measures against the proliferation of shadow IT applications, thus ensuring better governance and cost control.

• Mitigating Third-Party Vendor Risks

When employees utilize company email addresses to subscribe to applications, they inadvertently expose sensitive corporate information online. Given the increasing prevalence of shadow IT, it becomes challenging to discern trustworthy vendors, potentially exposing the organization to phishing and Distributed Denial of Service (DDoS) attacks.

By implementing strong vendor management protocols, you can gain a comprehensive overview of all subscribed applications from a centralized platform, enabling them to identify the primary contributors to these subscriptions.

This centralized oversight facilitates the implementation of training programs for app owners and employees, imparting best practices for safeguarding sensitive data.

• To Improve Your Return on SaaS Stack (ROSS)

If your organization purchases SaaS apps from multiple vendors, you are most likely to purchase technologies with similar features.

For example, two different departments using different tools for the same functionality. Your marketing department uses Slack for communication, whereas your finance team uses Teams.

Vendor management software serves as a strategic compass in identifying these overlapping functionalities. This invaluable feature allows organizations to strategically consolidate redundant applications, leading to substantial cost savings and an optimized SaaS ecosystem.

• For Effective Application Rationalization

Vendor management software is a powerful catalyst for streamlining the existing SaaS stack. Its primary aim is to enhance operational efficiency, reduce complexity, and curtail unnecessary expenditures. It empowers organizations to make informed decisions about their software investments.

In doing so, they can harness the full potential of their SaaS stack while minimizing risks and maximizing returns. Effective application rationalization through vendor management software is not just a cost-saving measure; it's a strategic imperative for modern businesses.

• Proactive Renewal Management

A SaaS vendor management tool extends its value by providing timely notifications concerning application changes, including upcoming renewal dates. With comprehensive usage metrics, organizations can make informed decisions, choosing to renew or gracefully retire contracts.

Furthermore, your teams can ascertain the cost implications of renewing an application, thereby evaluating its alignment with budgetary constraints. This proactive renewal management strategy empowers you to avoid last-minute budget surprises, fostering financial prudence and stability, all thanks to the robust capabilities of vendor management software.

• Reduces the IT Admin Burden

Traditionally, the onus of managing the SaaS stack has rested on the shoulders of IT administrators, who often rely on laborious spreadsheets for tracking applications. Vendor management tools usher in a transformative paradigm shift. These tools unlock tremendous time and cost-saving potentials by facilitating real-time analysis of transaction data for each application.

For instance, you can systematically segregate unused or underutilized applications and make data-driven decisions regarding their continued relevance and subscription. This efficient and data-backed approach lightens the administrative load on IT teams and enhances operational efficiency and fiscal responsibility.

SaaS Vendor Management Best Practices

Building and maintaining relationships with your SaaS vendors can be instrumental in securing better deals during renewals and optimizing your software portfolio. Here are some best practices for SaaS vendor management:

• Keep track of SaaS spending: A comprehensive record of SaaS expenditures across different business units, teams, and individual users. Categorize and report spending by departments and specific categories to gain better insights into your SaaS expenses. 

• Keep track of SLAs & contracts/agreements in one place: Ensure all documentation related to SLAs and contracts is kept in one place.
  
  When breaches in the vendor agreement terms are identified, consult with your CIO or IT head to determine the appropriate course of action, which may include seeking compensation as per the terms, terminating the current contract, or negotiating discounts for the next renewal.

• Assign owners for every app: In light of the decentralized acquisition and utilization of SaaS applications, it becomes impractical to manage everything independently. A practical approach is to delegate ownership responsibilities to department or business unit heads.

• Keep track of all renewals: Keeping an eye on all renewals is crucial. If auto-renewal is enabled, renewals can occur without the app owner's awareness.
  
  In some cases, the app owner may unknowingly continue to incur charges for a tool they no longer utilize. Alternatively, they might be billed for a formerly free tool that has transitioned to a paid subscription after a trial period. This results in unnecessary expenditure.
  
  To prevent such scenarios, it is advisable to centralize contract and vendor renewals in one location. This ensures that no renewals are overlooked, helping you to maintain cost efficiency and transparency in your operations.

• Conduct a SaaS Stack Audit to Enhance Return on Software Spending (ROSS): In environments boasting a plethora of SaaS tools within their inventory, IT leaders should institute biannual audits to optimize utilization. You can forge partnerships with end-users and application owners to facilitate this audit process effectively.

Consider deploying a structured survey featuring inquiries such as:

• Which applications see daily usage?

• Are there any paid subscriptions that remain unused?

• Do redundant applications exist?

• Are there free alternatives that can replace paid tools?

Through these audits, you can gain valuable insights into your SaaS stack's overall health and efficiency, contributing to the enhancement of your Return on Software Spending (ROSS).

• Formulate SaaS procurement policy:  Many organizations lack a well-defined procedure for acquiring SaaS applications. Often, employees acquire new technology solutions without conducting prior vendor research simply by using the company credit card. This lack of a structured approach poses significant challenges.
  
  A documented SaaS procurement process not only enables employees to choose the most suitable solution for their needs but also aids in mitigating Shadow IT issues. This procurement process should outline how employees can request new software, establish security and legal assessments criteria, designate responsible ownership, and specify individuals responsible for negotiating prices and contract terms.
  
  Implementing such a policy can result in substantial cost savings and prevent hasty and ill-advised purchases, ultimately benefiting your business.

• Clearly convey your expectations to vendors: Articulate your objectives and the specific challenges you intend to address through their product or service. Engage in a comprehensive discussion regarding payment arrangements and establish contingency plans in the event your expectations are not fulfilled. It is imperative to avoid vendor lock-in scenarios when dealing with SaaS providers under any circumstances.

• Utilize a SaaS management platform: When dealing with a multitude of ongoing auto-renewals, tracking price changes for specific applications can become cumbersome. To effectively stay on top of renewals and license management, you require robust technology integrated with automation to ensure proactive management. Embracing a SaaS management platform is essential for streamlining vendor management processes.

  

  

Checklist for Managing SaaS Vendors

Now, let's discuss the effective checklist for SaaS vendor management.

• Assess Your Needs: Before subscribing to a SaaS solution, engaging with your teams and identifying their specific pain points is crucial. Determine the features required, who will utilize them, and the problems to be addressed.

• Review Current Vendors: Regularly review your existing SaaS tools. These platforms often receive updates and new features. Before considering a new solution, check if your current vendors have incorporated the features you need. This approach can lead to cost savings.

• Evaluate All Options: The SaaS market offers a multitude of choices. When selecting a SaaS vendor, prioritize factors such as cost-effectiveness, reliability, and security. Be cautious not to blindly trust vendors solely based on lower prices.

• Compare before swiping your corporate card: Take the time to compare different vendors' offerings. Analyze reports from reputable sources like Gartner and Forrester for insights into software rankings and software costs. Seek advice from peers in similar industries who are already using comparable software. Additionally, consult review sites like G2, Capterra, and Product Hunt for user feedback.

• Trial period: Before committing, narrow down your options and conduct trials of the selected SaaS solutions. This step allows you to assess whether the software aligns with your business goals and requirements.

• Vendor Approval: Approving a vendor can be time-consuming, but efficiency can be improved with established processes. Key considerations during vendor approval should encompass privacy terms and conditions, pricing and contract terms, security risk assessments, annual budget impact, regulatory compliance, and final contract signing.

• Application Rollout: After contract signing, designate an internal owner responsible for managing any issues related to the application or the vendor relationship. Collaborate closely with the IT department to identify users who will utilize the software and ensure seamless integration with your existing SaaS stack. Implement a secure onboarding process and address any vulnerabilities.

• Vendor Documentation: The assigned owner should maintain and manage all vendor details. This includes tracking contract agreements, responsibilities, and any associated communication.

• Renew or Terminate: As the renewal date approaches, carefully evaluate the contract based on consumption and return on investment (ROI). Setting renewal notifications 2-3 months in advance is advisable to allow sufficient time for decision-making. Determine whether to continue with the contract or consider termination based on your organization's evolving needs.
  By following this comprehensive checklist, you can effectively manage your SaaS vendor relationships and optimize your software investments.

Implement a SaaS Management Platform for Effective Vendor Management

Implementing a SaaS management platform for effective vendor management is essential in today's technology-driven business landscape. It simplifies the management of vendor contracts, enhances access control, provides timely notifications, optimizes your SaaS portfolio, automates routine tasks, supports data-driven decision-making, and helps with compliance and risk mitigation.

These benefits collectively contribute to cost savings, improved efficiency, and better overall vendor relationship management. When implementing a vendor management system (VMS), certain tips will help to achieve successful VMS implementation. 

But how do you choose a SaaS management platform that resonates with your business goals? Let's explore: 

How to Select a SaaS Management Platform for Managing Vendors?

Here are the key factors to consider when selecting an SMP for effectively managing vendors and their associated SaaS apps: 

1. Number of Seats per App: Some SaaS apps charge based on the monthly number of users (seats).

An SMP helps you keep track of active users for each app, ensuring accurate billing.

For example, if you've licensed a project management tool for 50 users, the SMP ensures you're not paying for unused seats.

2. Cost per Subscription: Understanding subscription costs is vital for cost optimization.

Your SMP consolidates subscription cost data, allowing you to spot cost-effective alternatives.

For instance, it can highlight if Vendor A offers similar services as Vendor B but at a lower cost, helping you make informed decisions.

3. Renewal Dates: Manually tracking renewal dates for numerous SaaS applications is tedious.

An SMP provides automated renewal alerts, giving you time to assess whether you still need specific applications based on usage.

For instance, if a rarely used analytics tool is up for renewal, the SMP helps you decide whether it's worth keeping to save costs.

4. Application Owners: Knowing who's responsible for each application streamlines communication and issue resolution. Your SMP makes it easy to identify the application owner, ensuring quick access when you need to resolve problems or seek support.

5. Compliance Status: Ensuring SaaS applications comply with industry standards is essential for data security. The SMP should display compliance information, helping you verify if an app meets your organization's security and regulatory requirements.

For instance, it ensures healthcare data management tools adhere to HIPAA regulations for healthcare organizations.

6. Onboarding, Offboarding, Security, and Privacy: Efficiently managing user access during onboarding and offboarding is crucial for security and cost control. An ideal SMP streamlines the process. It ensures new employees access necessary tools immediately while keeping license counts accurate.

When employees leave, the SMP automates access termination and license suspension, reducing security risks and unnecessary spending on unused licenses.

One such platform that is a go-to solution for all your vendor management needs is Zluri. It is a comprehensive platform designed to simplify and enhance the vendor management process by automating key tasks related to SaaS vendor management. Here's how Zluri helps you achieve effective vendor management:

Revolutionize SaaS Vendor Management with Zluri

Zluri is designed to simplify and enhance the entire SaaS vendor management process, bringing automation and efficiency to the forefront of your vendor management strategy. Here's how Zluri empowers you to achieve top-notch vendor management:

• Centralized Contract and Metadata Repository: Zluri centralizes all vendor contracts and associated metadata into a single, easily accessible location. This feature greatly simplifies the process of retrieving contract information, making it particularly valuable during contract renewals or audits. For instance, during a contract renewal, Zluri allows you to quickly review agreement terms and identify areas needing renegotiation, saving time and effort.

• Vendor Access Management: Zluri's automation engine revolutionizes vendor access management. It provides CIOs and IT administrators with a streamlined approach to granting or revoking vendor access to systems and applications. You can efficiently manage and monitor each vendor's access privileges with just a few clicks. This capability reduces the risk of security breaches by ensuring that only authorized individuals have access to sensitive systems and data. 

Additionally, Zluri offers timely alerts for upcoming payments and contract renewals, allowing you to prioritize high-value contracts crucial to your organization.

For example, if a vendor's contract is about to expire, Zluri will notify you well in advance, giving you ample time to decide whether to renew, renegotiate, or terminate the agreement.

• Enhanced Visibility into the SaaS Ecosystem: Zluri offers a comprehensive view of your organization's SaaS ecosystem. This enhanced visibility enables you to identify opportunities to optimize your technology stack and eliminate redundant or unnecessary SaaS subscriptions. By reducing SaaS wastage and optimizing software utilization, Zluri helps lower costs while improving your SaaS investments' return on investment (ROI).
  
  For example, Zluri might reveal that multiple departments within your organization use similar software tools from different vendors. Consolidating these tools under a single vendor can lead to significant cost savings and streamlined management.

• Automation of IT Tasks: Zluri's automation capabilities extend beyond vendor access management. They streamline essential IT tasks, including procurement, onboarding, and offboarding processes. By automating these routine activities, Zluri frees up your IT team to focus on more strategic initiatives that drive innovation and business growth.
  
  For instance, when a new employee joins your organization, Zluri can automate the provisioning of the necessary software licenses and access permissions, ensuring a smooth onboarding experience.

• Data-Driven Decision-Making: Zluri generates valuable insights and reports based on your vendor and software data. These insights empower data-driven decision-making by providing information on usage patterns, costs, and opportunities for optimization. You can use these insights to make informed choices about vendor contracts and software renewals.

• Compliance and Risk Mitigation: Zluri helps ensure compliance with regulatory requirements and industry standards by providing visibility into your vendor relationships. It also helps identify and mitigate risks associated with vendor agreements, reducing the potential for legal and financial liabilities.

• Time and Cost Savings: Zluri's automation and optimization capabilities save time and cost. By automating manual tasks and optimizing software subscriptions, Zluri reduces labor costs, eliminates wastage, and ensures you get the most value from your vendor relationships.
  
  Let's say that during an annual software audit, your organization discovers that several employees have been assigned redundant software licenses from different vendors, resulting in unnecessary expenses. Zluri's automation capabilities can help automatically identify and de-provision these redundant licenses, saving both time and licensing costs.
  
  Additionally, Zluri can streamline the procurement process by automatically renewing essential software subscriptions, eliminating the need for manual intervention and reducing administrative overhead.
  
  Zluri is a SaaS management platform with an inbuilt automated SaaS vendor management system with all the features needed to manage your SaaS stack. It helps your organization gain visibility and control of the changing tech stack. Zluri maintains a SaaS system of record by integrating with your core business system, after which it prepares to maintain your vendor life cycle with your predefined workflows.
  
  By leveraging these capabilities, you and your teams can enhance operational efficiency, reduce costs, and maximize the value derived from your vendor relationships.
  
  So what are you waiting for? Book a Demo now!

FAQs

1. What is a SaaS vendor renewal process?

The SaaS vendor renewal process is crucial in maintaining a seamless and uninterrupted service for businesses. This process involves steps and considerations that ensure the vendor and the client are aligned for continued success.

2. What are the 7 steps of a vendor management process?

Below mentioned are the 7-step vendor management process:

• Assess the vendor.

• Establish goals.

• Negotiate a contract.

• Onboard the vendor.

• Monitor their performance.

• Communicate regularly.

• Reward their performance.

3. Why is SaaS vendor risk management important?

Implementing an advanced SaaS vendor risk management program is pivotal in mitigating the occurrence and impact of data breaches, leaks, and cyber threats originating from third and fourth-party collaborations. Our comprehensive program safeguards sensitive data, personally identifiable information (PII), protected health information (PHI), and intellectual property, guaranteeing uninterrupted business operations.

About the author

Sethu Meenakshisundaram

Sethu is the Co-founder of Zluri. He believes SaaS and APIs will help everyone become a builder. He frequently writes on SaaS management and workplace automation. Before Zluri, he was part of the founding team at KNOLSKAPE, one of the leading corporate learning gamification startups that he helped scale across 30 countries. Other than technology, Sethu is passionate about quizzing, board games, and photography. His retirement plan is to operate a board game bistro in one of the touristy spots of Southeast Asia.