Vendor management best practices have changed rapidly over the past decade, especially as organisations use SaaS for 75% of their enterprise software.
As we all know, the increase in SaaS applications has led to higher costs and security risks—and we must address these issues head-on.
One example of this increase is that per-employee spending on SaaS applications has increased by 55% since 2021, averaging $1,370.
Gartner estimates that up to 25% of provisioned licenses are not used regularly. Without proper vendor management, organisations risk overspending on SaaS by 25%.
Vendor management best practices have evolved significantly, especially as organisations increasingly adopt SaaS solutions.
If you’re questioning whether your SaaS is helping or hurting, it’s time to reassess your SaaS vendor management strategy.
However, the vendor management shift isn’t just about cost management; it’s about fostering innovation and digital transformation through strategic vendor partnerships.
Management strategies for vendor relationships have become more sophisticated, moving from simple cost control to driving collective success.
Gartner predicts that through 2027, organisations without centralised SaaS lifecycle management will remain five times more vulnerable to cyber incidents and data loss.
This vulnerability stems from incomplete visibility into SaaS usage and configuration, highlighting the security risks associated with a decentralised approach to SaaS management.
Looking ahead through 2027, over 50% of organisations are expected to centralise vendor management using specialised platforms—up from just 10% in 2024.
So, let’s get the best practices now.
Best Practices for SaaS Vendor Management
Centralizing SaaS Procurement
Centralising SaaS procurement simplifies vendor relations by streamlining management strategies across departments.
A centralised approach reduces SaaS overspending by up to 25% by eliminating redundant tools and optimising unused licenses.
With an integrated procurement model, businesses gain better visibility into their SaaS portfolio, ensuring all tools align with organisational goals.
Centralised procurement also reduces cybersecurity risks by addressing shadow IT—applications purchased without IT oversight.
Organisations that fail to centralise their SaaS life cycle management are five times more likely to face security breaches.
Advanced SaaS management platforms, like Octobits, offer centralised dashboards to give you real-time monitoring of licenses, costs, and usage data.
Yes, these kinds of tools allow IT managers or MSPs to oversee vendor performance, identify cost-saving opportunities, and make data-driven decisions.
For insights into these foundational strategies, you can explore “Fundamental Vendor Management: Your Key to Efficient, Cost-Effective IT.”
Conducting Thorough Vendor Assessments
Conducting thorough vendor assessments is essential for building resilient vendor relations and effective management strategies.
Thorough vendor assessments start with the data-driven evaluation of a provider’s financial health, operational capabilities, and service track record.
The good news is companies using structured assessment frameworks are more likely to achieve positive vendor outcomes.
Evaluating vendor capabilities involves examining scalability and integration features, especially for SaaS platforms offering multi-department use.
For example, platforms that automate onboarding processes can reduce administrative workloads while ensuring compliance across teams.
Additionally, assessing security protocols minimises risks associated with data breaches, which cost businesses millions annually.
Metrics like renewal rates, downtime history, and service delivery records provide insight into a vendor’s reliability.
Pairing these metrics with market benchmarks helps identify vendors offering the best value for money.
To learn more about evaluating SaaS vendors effectively, kindly check “Evaluating SaaS Vendors for Cost-Efficiency: How to Find the Right Balance.”
Negotiating Clear Service Level Agreements (SLAs)
Negotiating clear SLAs defines the foundation of vendor management best practices by aligning expectations and delivering measurable outcomes.
A well-defined SLA leads to higher customer lifetime value through reduced churn and increased upselling opportunities.
Key SLA components include uptime guarantees, response times, and penalty clauses for non-compliance.
Businesses should use historical data during negotiations to forecast requirements and align SLAs with realistic performance goals.
Including metrics for user satisfaction and service innovation ensures SLAs adapt to future needs.
For instance, specifying innovation benchmarks can motivate SaaS providers to deliver regular updates.
Clear SLAs also strengthen accountability. Vendors with well-defined obligations often demonstrate higher service quality, leading to a 15-20% reduction in churn rates.
Regularly reviewing and renegotiating SLAs ensures they remain aligned with evolving business priorities, fostering stronger vendor relations and promoting effective management strategies.
To help you understand and manage these risks, “Vendor Risk Management: Definition & How to Determine“ offers actionable advice.
Implementing Ongoing Performance Monitoring
Implementing ongoing performance monitoring ensures vendors consistently meet service expectations and align with management strategies.
Real-time dashboards and automated alerts allow IT teams to address issues proactively.
Monitoring tools evaluate metrics like uptime, license utilisation, and customer support responsiveness.
These insights provide a comprehensive view of vendor performance, enabling companies to compare against SLA benchmarks.
Automated performance reviews save time and offer actionable insights for vendor evaluations without manual intervention.
Proactive performance monitoring also strengthens vendor relations by collaboratively identifying areas for improvement.
Sharing transparent performance data fosters accountability and helps vendors tailor their services to meet business needs.
Establishing Strong Vendor Relationships
Strong vendor relationships are non-negotiable for long-term operational success. But how?
Transparent communication and aligned goals are the cornerstones of successful partnerships.
Creating an integrated platform for information sharing enhances collaboration.
Platforms that allow joint visibility into project timelines, performance metrics, and compliance requirements ensure vendors and businesses stay aligned.
Regular feedback loops improve mutual understanding, ensuring service delivery meets expectations.
Strong vendor relations also reduce churn rates and operational inefficiencies.
Long-term partners often prioritise client needs, offering tailored solutions and proactive support.
These relationships evolve into strategic alliances, enabling companies to adapt faster to changing markets while maintaining operational stability.
If you love the benefits of SaaS but hate the bills, learning how to build lasting relationships with SaaS vendors can transform your outcomes.
How Octobits Can Help Your Vendor Management Best Practices
Octobits helps streamline vendor management because we believe every IT team deserves a simplified way to manage their software ecosystem.
Our platform tackles organisations’ core challenge—disjointed SaaS user management that leads to 25% overspending on unused licences.
Here’s how we do it: Through our centralised SaaS vendor management dashboard, you can track all your IT services, from AWS to Microsoft 365, in one place.
This reduces the time spent switching between multiple systems and helps identify unused licenses quickly.
Third-party integrations with major vendors enable automated billing reconciliation and usage monitoring.
What makes us different is our focus on both efficiency and security.
Our platform consolidates alerts from all your IT systems and provides comprehensive reporting to help you make informed decisions.
During our free trial period until December 2024, you’ll see how this integrated approach can help reduce costs while maintaining strong vendor relationships.
In Closing
As organisations face rising SaaS spending, unused licenses, and heightened cybersecurity risks, adopting centralised and strategic approaches becomes essential.
By integrating procurement, assessments, SLAs, performance monitoring, and relationship-building, businesses can build resilient systems that support their long-term goals.
Tools like Octobits demonstrate how technology can simplify vendor management best practices, streamlining processes, and enhancing vendor relations.
References:
- Curiskis, S., Dong, X., Jiang, F., & Scarr, M. (2023). A novel approach to predicting customer lifetime value in B2B SaaS companies. Journal of Marketing Analytics, 11, 587–601. https://doi.org/10.1057/s41270-023-00234-6
- Cipolla, T., Harris, Y., & Others. (2024). Magic Quadrant for SaaS Management Platforms. Gartner. Retrieved from https://www.gartner.com/en/documents/5605991
- Roche, P., Schneider, J., & Shah, T. (2020, June). The next software disruption: how vendors must adapt to a new era. McKinsey & Company. https://www.mckinsey.com/industries/technology-media-and-telecommunications/our-insights/the-next-software-disruption-how-vendors-must-adapt-to-a-new-era
- Deloitte. (n.d.). Next generation vendor management. White Paper. https://www2.deloitte.com/content/dam/Deloitte/dk/Documents/technology/Next-Generation-Vendor-Management.pdf
