SaaS Vendor Management in 2021: The Definitive Guide

An obese SaaS stack leads to SaaS wastage. It's a disease! It not only causes financial issues but also gives you security and compliance problems.

That's why you must keep tight control on your SaaS stack. And it begins with managing your SaaS vendors. 


What is SaaS Vendor Management?

Simply put, it means finding and managing SaaS vendors that best suit the needs of your business. These vendors should offer the best solution for your business problems. 

It also includes negotiating contract agreements with vendors, mitigating vendors' risk, and building healthy relationships that result in favorable terms for your business during application renewal.

Responsibilities of a SaaS Vendor Manager

SaaS vendor managers, usually IT,  provide their organization the tools required to work in the modern business environment. 

Their core responsibilities are:

  • Selecting Vendors: Today, the market is flooded with similar SaaS apps. It can overwhelm you. As a result, IT teams must do the hard work of selecting few vendors that suit their organizational needs among hundreds of thousands that all claim to be the best fit for your use case.

  • Price Negotiations: As a vendor manager, you work within a budget. To keep the costs in check, you'll be required to negotiate the costs actively. If the spending overshoots the allocated budget, you need to explain.

  • Vendor Onboarding: Once the contract is signed with a vendor, onboarding them is also your responsibility.

  • Ongoing Relationship Management: One of your jobs dealing with these third-party vendors is to regularly communicate with them for requirements change, for support if you're stuck, and to arrange training for your employees to get the maximum value for their products.

  • Invoicing and Payments: With vendor management, you're responsible for renewing these software services. You may need to coordinate with finance and human resources departments to make timely payments to ensure there are no service disruptions. 

Why do You Need to Manage SaaS Vendors & How Vendor Management Solution Can Help?

SaaS vendor management is a requirement for SaaS governance. Let's see why CIOs and IT leaders must think of SaaS vendor management as an important part of their IT plan.

1. For Greater Visibility 

One of the reasons companies invest in SaaS apps is to smoothen their processes.

A SaaS vendor management software makes sure all these applications are managed well. It also increases your visibility into who purchases what. With these insights, you can decide to keep or cut back certain applications which you feel are unused/underutilized.

The software stands as a centralized location to manage all the employee expenses, contracts, and upcoming expenses. This way, you can get rid of all redundant applications and stick to one application with the best functionality. 

You can save money as well as get a positive ROI

With live insights on what's going on with your SaaS stack, you can be informed about shadow IT apps that proliferate and be proactive. 

2. To Reduce Third-Party Vendor Risks

When employees sign up for an application with a work email, they share the company's (sensitive) information online. With growing shadow IT, you never know whom to trust, and trusting the wrong vendors might lead you to phishing and DDoS attacks. 

If you have strong vendor management in place, you can have a bird's eye view of all the applications from one place and see who makes most of the purchases. 

You can train the app owners and employees on best practices to keep sensitive data secure.

3. 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 is using Slack for communication, whereas your finance team is using Teams. 

With vendor management software like Zluri, you can find all the overlapping functionalities and consolidate them to save money. 

4. For Effective Application Rationalization

With vendor management software onboard, you can streamline your existing SaaS stack with the prime goal of improving efficiency, reducing complexity, and cutting down unnecessary costs. 

5. Proactive Renewal Management

A SaaS vendor management tool will notify you of any changes on an application, including renewals. Based on how much you used the app, you can decide to renew or cancel the contract. 

Also, when you get to know the cost of renewal for the application, you get to assess whether that fits within your budget or you need to suspend it.

Instead of being anxious and surprised about renewal dues, you can stay on top of them with vendor management software. 

6. Reduces the IT Admin Burden

The burden of managing the SaaS stack always falls on the head of the IT admin. If the organization is still using spreadsheets to manage the SaaS stack, the admin must keep updating the sheet when new applications are onboarded.

With a vendor management tool, you can do real-time analysis of transactions done for each application, saving time and money. 

For example, you can segregate the unused and underutilized applications and decide whether you still need to pay for them.

SaaS Vendor Management Best Practices

You can use vendor relationships to get better deals during renewals. So, it makes sense to build and maintain relationships with your SaaS vendors.

Now, let's see some best practices for managing SaaS vendors.

Keep track of SaaS spend across business units, teams, and individuals. Record and report spending by departments and categories. 

Identify users and train them. After having a solid understanding of the departments and individuals using an application, you can train them to get the maximum value out of these apps

Understand which individuals or teams are wasting licenses and eliminate this waste.

If you find the teams are not leveraging a very critical application for your business, you can partner with leaders in that field to create engagement and training for users to drive value. 

Keep track of SLA and contracts/agreements. Make sure to attach all the documentation to your vendor management software. 

When you find any of the terms of their agreement are breached, make sure to take the necessary steps after discussing with your CIO/IT head. 

The next step may be getting compensated as per the terms, canceling the ongoing contract, or getting discounts in the next renewal.

Ownership. With the decentralized purchase and use of SaaS apps, it's impossible to do everything by yourself. You can distribute the ownerships to department or business unit heads. 

Keep track of all renewals. If auto-renewal is turned on, the renewal can happen without the app owner noticing. 

The app owner might not even know they are being billed for a tool they no longer use. Or it could be a free tool whose trial version has ended and is being billed. You are wasting money either way! 

It is best to manage all your contracts and renewals from a single place to not miss out on anything.

Audit for effectiveness: When there are plenty of tools in your SaaS inventory, IT leaders should do an audit every six months to ensure they are being used effectively. 

Collaborate with the end-users and app owners. 

You can create a survey with questions like:

  • Which apps are used daily?

  • Are there any unused paid subscriptions?

  • Are there redundant apps?

  • Are there any free tools that can replace the paid ones?

With these audits, you'll get an idea of the health of your SaaS stack.

Stay Compliant. When it comes to managing SaaS applications, there is always a risk of compliance violations. 

On the vendor end, the apps you procure must meet industry standards. 

If you are dealing with multiple vendors, it's best to manage all the records and documentation in one place. So it's available during an audit. Your team doesn't need to search for the documentation when it is neatly stored in a vendor management system.

Whether you need to keep track of the GDPR statements or the SOC 2 certification or Privacy shield, you can streamline the entire process from one place with a secure vendor management system.

Formulate a well-defined buying process. Most organizations don't have a well-defined buying process for acquiring SaaS apps. 

When employees need new technology for a use case, they swipe the company credit card without prior research on a vendor. This is a problem!

A documented SaaS procurement process will not only help your employees get the best solution for their problem, but it'll also help you manage to Shadow IT

This procurement process should define how employees can request new software, how to vet for security and legal issues, who'll be the owner, and who'll negotiate price and contract terms. 

It will save your business a lot of money and avoid rushed purchases.

Convey your expectations to vendors. Explain to the vendors what problems you are trying to solve with the product. Discuss payment plans and a way out if your expectations are not met. You shouldn't get locked in with SaaS vendors in any case.

Analyze the cost-benefit of your vendors. Since there are many promising SaaS applications and vendors out there in the market, you need to check whether you are getting value from your SaaS vendor. 

Sit with your finance team and streamline your vendor relationships. This will save costs.

Use a vendor management platform. Get the most out of your vendor management process sorted through a vendor management platform, right from negotiating pricing to managing renewals.

It's difficult to manage licenses using Spreadsheets. But many organizations still rely on spreadsheets to track their contracts and manage SaaS licenses. 

Though spreadsheets are not a bad option on a small scale, we've realized it becomes unmanageable for companies that have more than 25 users.

There is always a need to update the number of licenses and omit the expired ones. This is very time-consuming. And you can't keep track of stakeholders, approvals, signatures, and legal compliance in spreadsheets. 

With auto-renewals turned on, it would be difficult to trace the change in the price of a particular application as there are too many ongoing ones. You need robust technology coupled with automation to stay proactive on renewals and licenses. 

Checklist for Managing SaaS Vendors

  • Know your needs. While subscribing for a solution, it is highly recommended to discuss the pain points with your teams and know what features they need, who will use them, and the problems they are trying to solve. 

  • Re-check with your current vendors. It is common for SaaS tools to get updated with new features now and then. So, before subscribing to a new tool, check whether your old ones have updated features that you would need to solve a problem. This process will help you save money.

  • Evaluate every option. Since implementing a SaaS tool is not as tricky as on-prem software, organizations procure it without evaluating the options available in the market. 

    There are plenty of tools in the market, so you need to choose the one that is cost-friendly, reliable, and safe. Just because a vendor is offering a product at a low price doesn't mean you should blindly trust them. 

  • Compare before swiping your corporate card. Before selecting a vendor, look at what the competitors are offering. 

    Make sure you also check analyst reports by Gartner and Forrester. When you know the ranking of the software, you can be confident with your decision. 

    You can also rely on the opinion of peers from other companies who are using similar software to what you plan to buy. 

    With their insights and recommendations, you are another step closer to a clear decision. Finally, look for review sites like G2, Capterra, Product hunt for product reviews.

    Now you can narrow down your options from the list and then try them before committing to it. 

    Vendor Approval. Approving vendors is usually time-consuming, but you can get it done faster if you have the processes in place. 

    The main things you should look: privacy terms and conditions, pricing & terms, security assessment, annual budget, compliance, and then you can sign your agreement. 

    Roll out the application: After the contract is signed, you need to assign an internal owner who would be responsible for handling any kind of issues that arise within the application or with the vendor. 

    The owner should work closely with the IT department and list the users who will use it. They should also integrate the app with the current SaaS stack. 

    Make sure the application is gone through a safe onboarding process and is cleared from any vulnerabilities.

  • Look at the vendor details. The one who has been appointed as the owner should preserve and manage the vendor details. They are accountable for tracking the documentation and responsibilities.

  • Renew or Remove: When the renewal date is arriving, you can decide whether to cancel or continue the contract based on the consumption and ROI generated. 

    Many vendors notify you very few days before the due date so that you don't have time to decide. We recommend setting a renewal notification 2-3 months in advance. 

Using a SaaS Management Platform for Vendor Management

To have an effective SaaS vendor management system in place, you can sign up for a SaaS management platform (SMP) like Zluri, which helps you maintain a SaaS system of record. 

SaaS Vendor Management Software Serves Three Main Functions

  1. Better Engagement With SaaS Vendors: You already know the challenge of managing multiple vendors.

    Vendor management software makes a quick and easy interaction between app owners and vendors possible. 

    They act as communication channels that facilitate real-time vendor communication and strengthen your vendor relationships. 

  2. Task Management: With vendor management software, you can easily assign tasks and track the process. It also acts as a platform for collaboration. 

  3. Spend Management: Not all vendors have payment terms that adhere to industry standards. 

A vendor management system will help you figure out those terms and ensure all your payments are made on time. When you are dealing with multiple vendors, that is the most helpful.

Zluri (that's us) automates the whole vendor management process and informs you on these standpoints below:

  • Gaps present in using a specific feature in an application. 

    For example, Zoom is a video-conferencing application, and the central selling point for the platform is group video conferencing. 

    Employees tend to switch off their videos in group calls. Zluri alerts you on the number of people using the Zoom video conferencing features effectively.

  • Organizations are utterly dependent on collaborative platforms to discuss work with the ongoing COVID wave and shift to the remote workspace. 

    Zluri tracks the usage of collaborative platforms and tells you which application drives the greatest collaboration.

  • A SaaS management tool like Zluri helps you discover, manage, and optimize your SaaS stack. You can compare apps and their functionalities that overlap.

You can downsize SaaS apps by standardizing specific tools rather than merely investing in many apps that do the same job. 

How to Select a SaaS Management Platform for Managing Vendors?

The number of seats per app: Some applications bill based on the number of seats or users every month.

A SaaS management platform should help you recognize how many active users there are for a particular app. It'll help you verify that your vendors charge you correctly. This way, you can rest assured that you are paying for what you are using.

Cost per subscription: Knowing how much you pay for a subscription is an important metric. If you find a vendor who offers more efficacy and a comparatively lower price, you can switch. Having these metrics in a centralized dashboard like an SMP is very useful.

Renewal Dates: If you're still using a spreadsheet to manage SaaS, tracking the renewal dates can be an arduous task—especially, if you deal with more than 50 SaaS applications. 

In an SMP, you can switch on alerts for your applications way before the due date and look at the usage insights to decide whether you still want to renew.

Owner of the application: Knowing who owns an app is very important as you can directly communicate with them in case of discrepancies.

App's compliance status:  Before procuring a tool, it is necessary to know it's compliance status. Since it is a third-party application in which you would be sharing all official information and client data, you should make sure that it adheres to industry standards. 

Onboarding, offboarding, and security & privacy: When a new employee joins the organization, the new tools must be given access on day one. 

An ideal SaaS management platform should enable this and keep the number of licenses updated as and when employees get onboarded.

Similarly, when an employee exits, their access must be terminated immediately for security and privacy purposes. Also, their licenses must be suspended to avoid unnecessary spending.

Zluri is a SaaS management platform with an inbuilt automated vendor management system with all the features needed to manage your SaaS stack. It helps your organization get visibility and control of 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.