SaaS Vendor Management

Introduction

The world of cloud-based software applications is expanding, each with different costs, contracts, and values. With more competing SaaS providers on the market, SaaS vendor management has become a vital part of SaaS operations, under the broader IT asset management discipline.

With the right strategy in place, you can actively help IT procurement, optimize SaaS applications spend, and find the best solutions to fix business problems. Learn about the benefits of SaaS vendor management and best practices.

What is SaaS vendor management?

SaaS vendor management is a process or strategy to manage a business's SaaS vendor and supplier relationships. Its goal is to find the best IT solution for every business need, manage those solutions, track their usage, report on value, and ultimately, optimize spend.

Vendors are evaluated and managed from approval to onboarding, renewal, or termination— SaaS vendor management means that you manage and have complete control over the entire vendor lifecycle. 

The most important stages of the SaaS vendor lifecycle are outlined below.

SaaS vendor evaluation

In order to evaluate a SaaS vendor, there has to be a new vendor request or business need first. Once you’ve identified and defined a specific need, you should start checking your existing SaaS portfolio to see if your company is already paying for a tool that could satisfy this need.

If not, you can start looking into new solutions by comparing your findings on Google or SaaS marketplaces like Gartner, G2, Capterra, and similar.

SaaS vendor procurement and approval

Once you’ve compared all of your options and settled on the best vendor for your needs, you can start with the SaaS procurement and approval process. In this stage, it’s important to consult other departments including procurement, information security, and your IT teams which can perform a detailed assessment of a vendor.

Together, you can review the terms and conditions, ask the right questions for selected services as well as their renewal date before a binding contract is signed.

SaaS implementation and vendor onboarding

In the SaaS onboarding or SaaS implementation stage, you as the client have to make sure that the vendor is brought up to speed about your company’s processes, expectations, goals, and timelines. And likewise, you need to learn about all the vendor processes and see how IT can integrate the new app with existing tools.

Onboarding also involves establishing an application owner, tracking the initial vendor adoption, and communicating any important changes to end-users.

Ongoing management and tracking

Typically, this is the longest stage and will vary from company to company. It involves everything from storing vendor details to tracking SaaS usage, security policies, managing contracts & agreements, and optimizing communication flows with the SaaS vendor.

Proper SaaS management and a good relationship with your supplier will save you from major headaches and prepare your company for the next stage — renewal or termination.

SaaS vendor renewal

As part of your software renewal strategy and before your SaaS contract terms out, you need to decide whether you want to renew the contract or migrate to a different vendor (refer to the first stage). SaaS spend optimization can facilitate this decision process as it will help you assess your SaaS landscape as a whole and discover unused or overlapping apps.

If you opt for a SaaS renewal, you get to re-negotiate your contract, rightsize the number of licenses and also ask your vendor for loyalty discounts.

5 reasons you need SaaS vendor management

According to recent studies, 73% of organizations will have migrated to cloud SaaS for their daily operations by the end of 2021. This number alone builds a strong case for the need for SaaS vendor management within your company.

If done right, it can help you tackle the challenges that come with cloud-first environments and manage the growing number of SaaS subscriptions and providers.

Below are 5 reasons why your enterprise is much better off with SaaS vendor management.

1. Lack of visibility into SaaS purchases

With increased digital literacy, even non-IT employees feel comfortable procuring SaaS solutions that suit their needs. This leads to shadow IT and bloated SaaS portfolios that contain overlapping applications and vendors.

SaaS vendor management creates SaaS visibility and encourages SaaS discovery within the enterprise, especially during the vendor evaluation process. This increased visibility leads to better decisions when it comes to IT solutions which in return will drive growth and lower costs.

2. Unmanaged security risks

With an increase in shadow IT, you’ll also experience an increase in unmanaged SaaS security risks. While your employees’ intentions are good, they might not be able to assess the dangers that come with sharing a company or personal information online. Hacking and phishing attempts pose a real threat to an enterprise’s overall health and reputation.

However, with a strong vendor management process in place, you can find out who makes the majority of SaaS purchases, train employees on risk mitigation practices, and thus increase SaaS security.

3. Wasted SaaS spend

Most enterprises who rely on various SaaS applications across business units and departments also know the pain of SaaS overspending. This ties into the last stage of the SaaS vendor management lifecycle that addresses SaaS renewal and SaaS spend optimization.

By analyzing their annual SaaS spend and vendors with an appropriate management tool, companies can save a significant amount of money and thus maximize the value they get out of using cloud-based applications.

4. Unreviewed SaaS vendor renewals

Many SaaS providers will not notify you early enough to catch the negotiation window before renewal and will increase their price automatically with each upcoming renewal. This is because autorenewals are an easy way to keep customers on board. As part of their SaaS spend optimization efforts, SaaS vendor managers keep track of any upcoming SaaS renewal and are able to predict future spending.

Knowing when to expect a subscription renewal doesn’t take too much effort – the right SaaS management tools come with features like renewal calendars that send out reminders for review. Besides the renewal calendar, promoting purchase accountability within employees proves to be one of the best practices around SaaS renewals.

5. Decreased operational efficiency

Even though SaaS applications come with many great advantages, you also have to be aware of their downsides. As your organization accumulates SaaS subscriptions, your IT infrastructure becomes more complex which increases the burden on IT departments.

SaaS vendor management aims to release this burden by uncovering time and cost-saving opportunities through the rationalization or consolidation of apps. That way, the operational efficiency of IT teams is drastically improved as they deal with fewer support tickets from employees who are struggling with different kinds of SaaS applications.

SaaS vendor management best practices

Now that you know why SaaS vendor management is an important part of IT management, we’ll look at some best practices for scaling your own SaaS vendor management system. Coupled with a vendor management platform that offers automated tools, these best practices make procuring and managing vendors a whole lot easier and help your organization thrive in a cloud-first environment.

Keep consistent ownership and inventory of all vendors

The fact that almost any employee can procure a SaaS application without prior approval from IT departments means that anyone can be a software owner. Even though it’s always better to have as a few owners as possible, this isn’t the reality at most companies.

That’s why keeping ownership consistency plays an important part in vendor and SaaS management. Next to the right owner, it’s also vital to keeping inventory of all your vendors’ details. When you can quickly retrieve all information pertaining to specific software, you promote accountability and save time in case of future vendor details changes.

Become proactive with renewals

As mentioned earlier in this guide, unreviewed SaaS renewals are a big reason for SaaS overspending and bloated SaaS portfolios. And this doesn’t come as a surprise – with the amount of SaaS contracts and the moving parts within SaaS vendor management, it can be tricky to nail down when renewals are scheduled to take place.

That’s why it’s best to create a renewal strategy, follow the best practices, and use a comprehensive renewal calendar that will send you reminders and thus give you enough time to look into SaaS usage patterns, unused licenses and prepare for new negotiations.

Implement governance - Perform SaaS audits

A SaaS subscription management platform not only helps you in SaaS discovery and creating SaaS visibility, but also allows you to implement SaaS governance. IT governance is vital for establishing authority and permissions contributors have within the vendor management cycle.

Apart from setting up a good governance plan, you should also perform regular SaaS audits (on a quarterly or twice a year basis). By talking to the actual end-users, you’ll find out which apps are used daily, which are redundant, and if employees are already using free tools to replace paid versions.

Track usage

This best practice is often overlooked as it is an ongoing activity that is never truly completed. However, tracking SaaS usage within your organization offers important insight into existing SaaS applications and how much value or unnecessary costs they create for the business.

Knowing how many licenses you need, and which additional software features are superfluous will give you the upper hand in vendor negotiations and ultimately lets you get a better deal or find a better vendor. In fact, you can say that SaaS spend optimization is only possible through tracking usage through SaaS management platforms.

Conclusion

Establishing a SaaS vendor management system at your enterprise will help you stay on top of your SaaS procurements and allow for continuous improvements in the form of SaaS optimization.

If you already have a vendor management system in place, think about how application portfolio management platforms can facilitate ongoing tasks and help you adopt SaaS vendor management best practices.