SaaS Vendor Management - What You Need to Know
The importance of effective vendor management cannot be overstated in SaaS management. As the number of SaaS offerings grows, IT managers face increasing challenges in maintaining a streamlined and cost-efficient SaaS stack. To navigate this complex landscape, it is crucial to establish rigorous control over your SaaS vendors.
With the number of SaaS vendors constantly expanding, each with unique costs, contracts, and value propositions, SaaS vendor management is a critical component of SaaS operations, falling under the broader umbrella of IT asset management.
In this blog post, we'll explore the world of software vendor management, offering insights into the fundamental aspects of working with SaaS vendors. We'll delve into vendor management, discuss effective vendor management strategies, and shed light on the valuable role of vendor monitoring tools within your organization.
The State of SaaS Vendor Management
SaaS solutions have become essential to organizations irrespective of industry or business type. Even if your company's primary business is not centered around SaaS, your business operations likely rely on several SaaS solutions to operate smoothly.
In most organizations, departments use 40-60 different applications. A company with 200-500 employees typically uses 123 SaaS applications. Companies with over 1,000 employees use more than 150 SaaS applications on average.
As per Brex, approximately 30% of company spending goes to "stuff" without a heartbeat.
By managing SaaS products effectively, businesses can increase their efficiency and optimize costs. With each product offering a unique specialty, price, and package size, managing SaaS vendors can be challenging, but it's worth the effort. It can be challenging to manage SaaS vendors, but businesses can succeed by taking the right approach to do so.
What is SaaS Vendor Management
SaaS vendor management is the process of overseeing SaaS providers to meet your organization's specific needs. It involves making informed decisions, optimizing vendor relationships, and mitigating risks.
In the enterprise, only 20% of SaaS is formally managed. The 'Shadow IT' portion of credit cards and expense reports is too easily hidden.
Vendor management includes various aspects such as vendor risk assessment, performance management, and contract management. Effective vendor management requires building a healthy long-term relationship with SaaS vendors.
SaaS vendor management aims to find the best IT solution for every business need, track usage, report on value, and optimize spend. SaaS vendors are managed from approval to termination, providing complete control over the entire vendor lifecycle.
What does a SaaS Vendor Manager do? 6-Step Guide to SaaS Vendor Management
SaaS vendor managers are crucial in supporting modern businesses by providing them with the necessary tools to succeed. This process typically involves several common stages that cater to the specific business objectives of each company.
In terms of this common structure, the core responsibilities of SaaS vendor managers include the following:
1. SaaS Vendor Evaluation
SaaS vendor evaluation can be a complex and challenging process for vendor managers. They have to sift through numerous options to identify and select a few that align with their organization's specific needs. This involves careful evaluation and assessment among many vendors claiming to offer the ideal solution for the intended use case.
Purchasing a SaaS product or service is typically more complex than buying a physical product, as organizations must trust vendors with critical business operations such as security and product uptime. Therefore, SaaS vendor selection is much more comprehensive, involving research, pricing, competitor comparison, and compliance investigation. Many companies also require requests-for-proposals (RFPs) or competitive quotes when selecting vendors. A Gartner study conducted in 2020 revealed that over 25% of companies' software goes unused.
To evaluate a SaaS vendor, the SaaS vendor manager must first have a new vendor request or business need. Once they have identified and defined a specific need, they should check the existing SaaS portfolio to see if the company is already paying for a tool that could satisfy this need to avoid having redundant tools.
A redundant SaaS app fulfills the same business function as another app subscribed to.
2. SaaS Vendor Procurement and Approval
When it comes to procuring a SaaS vendor, negotiating the pricing after selecting a suitable supplier is of paramount importance. It is crucial to manage the budget effectively, and any budget overages should be explained clearly. Once the negotiations conclude, signing the vendor contract with fair terms prioritizing long-term relationships over short-term cost savings is recommended. Even small or medium-sized businesses can negotiate these contracts successfully.
After choosing the vendor, the SaaS Vendor Manager has to collaborate with other departments, such as procurement, information security, and IT, to thoroughly assess the vendor. They must review the terms, ask critical questions, and confirm renewal dates together before finalizing the binding contract. This process ensures that the vendor is reliable and efficiently meets the organization's requirements.
3. SaaS Implementation and Vendor Onboarding
Ensuring that the vendor aligns with the company's processes, delivery timelines, and performance expectations is essential during onboarding.
In SaaS vendor management, effective vendor onboarding is crucial in preventing overspending, security vulnerabilities, and maintaining visibility over the SaaS stack. To ensure a smooth onboarding process, the SaaS Vendor Manager should ensure that the vendor comprehends the company's operations, expectations, goals, and timelines. It is also necessary to assess how to integrate the new app with existing tools.
Moreover, designating an application owner, monitoring initial vendor adoption, and communicating important changes to end-users are critical practices that should be followed.
4. Ongoing Management and Tracking
As a SaaS Vendor Manager, your role entails managing vendor relationships on an ongoing basis, a crucial aspect of the job. This involves regular communication with third-party vendors to address changing requirements, seek assistance during challenges, and coordinate employee training to maximize the value from their products. The focus is not just on resolving grievances but also on building a strong long-term relationship through collaboration.
In the SaaS context, ongoing management serves as the risk-management phase. Therefore, it is important to avoid treating SaaS purchases as one-time transactions. Instead, the SaaS Vendor Manager should maintain a proactive approach by regularly assessing the SaaS vendor's performance, certifications, and compliance standards. This ensures the continued success and security of the technology environment.
5. SaaS Vendor Renewal - Invoicing and Payments
The role of a SaaS Vendor Manager includes ensuring timely software service renewals. The renewal process involves collaborating with finance and HR to ensure on-time payments, which helps prevent disruptions. Opting for renewal allows companies to renegotiate the contract, rightsize licenses, and secure loyalty discounts.
Before a SaaS contract expires, assessing whether you should renew or switch vendors is critical. Before making a decision, it is important to identify unused or overlapping applications, so a vendor management system can help streamline the process.
6. Closure & Offboarding
Managing vendor relationships can be challenging, especially when it comes to offboarding. When a vendor decides to sunset their service offering or an organization no longer needs them, it is necessary to terminate the vendor contract. This process of vendor offboarding involves removing the SaaS vendor from financial and administrative records.
In a SaaS environment, the primary user terminates the subscription and turns off auto-debit payments. Failing to complete offboarding formalities can lead to unnecessary subscription payments, which can impact the business's profitability and cause excessive spending over time. Therefore, it is essential to ensure that vendors are properly offboarded to avoid any financial losses.
4 Reasons Why You Need SaaS Vendor Management
1. Cost Optimization
Many businesses that use various SaaS applications across different units and departments also struggle with overspending on these applications. The last stage of the SaaS vendor management cycle deals with renewals and optimizing SaaS spending.
By using an appropriate management tool to analyze the annual SaaS expenditure and vendors, companies can save a significant amount of money and increase the value they obtain from SaaS applications. Based on real-time information about how the tools are being used, SaaS Vendor Management tools like Resmo help companies make smarter decisions.
2. Better Visibility & Security
SaaS vendor management enhances visibility within an organization, reducing shadow IT and overlapping applications.
Misconfigurations are one of the most common SaaS security risks, and lack of visibility is the culprit in 34% of security misconfigurations.
As a result of this improved visibility, IT decisions become smarter, resulting in cost reductions as well. As well as addressing security concerns associated with shadow IT, it identifies risks in a timely and organized manner.
3. Elimination of Unintended Renewals
Forgetting to cancel a free subscription and unknowingly upgrading to a premium subscription is a common story.
In the case of vendor management SaaS, subscriptions can be renewed without the company's knowledge, sometimes at a higher price. This is where SaaS Vendor Management comes in to play, by tracking upcoming renewals and predicting future spending to prevent unexpected renewals or price increases through auto-renewals. SaaS management tools such as Resmo provide renewal calendars and encourage employees to take responsibility for managing renewals effectively.
4. Operational Efficiency
SaaS Vendor Management simplifies IT infrastructure by consolidating apps, reducing complexity, and support tickets, ensuring seamless tool performance, operational efficiency, and productivity.
SaaS Vendor Management Best Practices
Without a doubt, SaaS vendor management is a crucial aspect of IT management. To ensure optimal performance, it's important to scale your vendor management system by following some of the best practices:
- Consistent Ownership & Inventory: Maintain consistent ownership and inventory of all SaaS applications, even if multiple employees are able to access them. As a result, accountability is ensured and future vendor management is simplified.
- Proactive Renewals: Create a renewal strategy and utilize a renewal calendar to avoid unexpected costs. Review SaaS usage patterns, identify unused licenses, and prepare for negotiations.
- Governance and Audits: Implement IT Governance and conduct regular SaaS audits to identify redundant or underutilized apps. Engage with end-users to optimize your software portfolio.
- Track Usage: Continuously track SaaS usage to gain insights into application value and cost-effectiveness. This data helps in vendor negotiations and optimizing software spending.
- Centralize Documentation: Keep all SLAs, contracts, and agreements in one place for easy reference and compliance monitoring.
- Assign App Owners: Delegate ownership responsibilities to department or business unit heads to manage decentralized SaaS acquisitions effectively.
- Renewal Monitoring: Keep a close eye on all renewals, centralizing them to prevent oversights and ensure cost efficiency.
- Conduct Regular SaaS Stack Audits: Regularly audit your SaaS stack to optimize utilization, eliminate redundant applications, and identify free alternatives where possible.
- Formulate SaaS Procurement Policy: Establish a structured process for acquiring SaaS applications, including vendor research, security assessments, ownership designation, and negotiation guidelines.
- Clearly Communicate Expectations: Articulate your objectives and payment arrangements with vendors, establishing contingency plans if expectations aren't met to avoid vendor lock-in.
- Utilize SaaS Management Platforms: Embrace technology and automation through SaaS management platforms to streamline vendor management, track renewals, and manage licenses effectively. Sign up for Resmo today to streamline your SaaS vendor management!
FAQ
1. Who is a SaaS vendor?
The term SaaS vendor refers to a company that provides a subscription service by offering customers an Internet-based service that lets them access fully-supported software applications.
2. What is a typical example of a SaaS vendor?
A typical example of a SaaS vendor is Salesforce, which offers cloud-based customer relationship management (CRM) software for businesses.
3. What is vendor management in cloud computing?
Cloud computing vendor management involves overseeing and coordinating relationships with third-party cloud service providers so that they meet performance, security, and compliance requirements, effectively delivering the desired cloud services while managing costs and mitigating risks.
4. What are the responsibilities of a SaaS vendor?
SaaS vendors are primarily responsible for the security of their platforms, which includes physical, infrastructure, and application security, but they don't own customer data or take responsibility for how customers use the applications, which ensures a clear separation of responsibilities.
Keep on learning:
