How To Create a SaaS Vendor Management Process?

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min read time
February 13, 2023
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Managing vendor relationships can be complex and challenging, but an effective vendor management process can significantly improve these relationships. 

With the growing use of SaaS applications for various business operations, the SaaS vendor management process has become crucial for ensuring smooth operations and strong vendor relationships.

Yes, a vendor management tool can offer numerous benefits, such as increased efficiency, cost savings, improved vendor relations, and compliance management. However, to fully leverage the capabilities of such a system, it's essential to have a well-defined and efficient SaaS vendor management process.

Ultimately, every aspect of vendor management boils down to having an effective process in place. This guide will provide a comprehensive overview of the SaaS vendor management process and the steps involved in creating an effective process.

What is the vendor management process?

It is a series of strategic tasks taken to effectively manage SaaS vendors and improve buyer-vendor relations. 

It encompasses a range of essential tasks, including defining objectives, researching and selecting vendors, negotiating contracts, controlling costs and delivery, establishing selection criteria, and minimizing risk.

Why do you need an effective SaaS vendor management process?

Managing SaaS vendors is critical, as their products and services play a vital role in ensuring smooth business operations. Most companies overlook vendor management, leading to vendor churn and poor relationships.

SaaS applications are easier to purchase, encouraging employees to buy SaaS subscriptions using company credit cards, often without the approval of IT.

This unverified spending, or "shadow IT," makes it difficult for the procurement and finance teams to manage SaaS vendors and optimize company costs. Fortunately, an effective process can prevent it. 

Let us list down the importance of building an ideal process,

  • Get complete visibility on SaaS vendors
  • Easy communication and collaboration with vendors
  • Track and mitigate third party vendor related risks
  • Improve vendor relationships 
  • Cut down costs on unused licenses 
  • Better negotiation and vendor discounts
  • Prevent shadow IT and maverick spending. 

Don't sit idle; vendors are revising their pricing and policies due to current market inflation; now is the time to take control and build a process for managing your SaaS vendors.

Check out this interesting customer story from Edge and how their team streamlined vendor management.

Steps to create a SaaS vendor management process

The vendor management lifecycle is designed to monitor suppliers to achieve optimal performance, transparency, and compliance throughout their longevity in the company’s supply chain. 

Here are the steps that lead to a successful vendor lifecycle management process,

Identify the requirements and set spend goals

Vendor management begins with selecting the right vendor, but before you go guns blazing in your selection process, you must identify your team's requirements. Identify their pain points, why they need an application, and how they plan on using it. 

Ensure you don’t have an app with similar functionality in your stack. This can lead to duplications and needless hassles with vendors. 

Before you start looking for vendors that meet your requirements, set your SaaS budget, budgeting will keep your spending in check and help you not exceed the threshold.

Select the right SaaS vendors

Have small, multiple milestones and timelines for your vendor selection process. This will make it easier for the selection team to communicate the progress to top management. 

The selection criteria agreed upon should also be communicated to the top management. Ensure the vendor or vendors chosen can provide substantial proof of their capabilities and credentials.

Do not settle for the first vendor you see; perform detailed vendor research and consider all possibilities. Talk to your peers and cross-verify the vendor's capabilities with their existing customers.

Shortlist a list of vendors, submit a request for quotation, and then double down on the vendor of your choice.

Negotiate terms and SLAs

This is the stage where business value and terms of agreements are captured in a contract and service level agreement. This contract and SLA are used for onboarding, evaluating performance, and relationship management. 

In the SLA, the agreed-upon expectations for the delivery of products should be established. Make sure that protections and recourse against vendor risks are also provided. 

SLAs play a vital role in SaaS agreements; they increase accountability and keep you (the buyer) in control of the agreement. So never miss out on SLAs, and never sign the contract if the vendor is not open to signing an SLA.

Implement and onboard the SaaS solution

Once the contract is signed, ensure that the vendor provides a complete walkthrough of the application to your teams; this clause must be stated in the SLAs.

In this stage, the complex coordination system, process, and workforce are simplified by developing and implementing a startup integration plan that focuses on setting up the performance monitoring system. 

Setting up key performance indicators, KPIs, and a tracking mechanism promotes vendor compliance. It ensures that your team can react quickly during a crisis and prevent disruptions to the supply chain or risk of third-party exposure.

Monitor vendor performance (KPIs)

With the KPIs in place, it’s easier to monitor vendor performance. Short-term and long-term goals should also be established for performance evaluation. 

Evaluation parameters can be classified into quality, satisfaction, coverage, time, and availability. The data collection processes should also be automated, and reports should be regularly generated to track vendor performance. 

This is also where the SLA metrics are used to measure compliance and generate actionable reports based on the presented data to resolve any issues that may arise. Here are some crucial vendor performance metrics to track,

  • Order completion time
  • Service quality
  • Call answer time
  • ASN accuracy
  • Shipping time

Ensure that your vendor management system tracks these metrics to evaluate vendor performance and that the data can be leveraged during renewals. 

Manage vendor relationships

An agreeable, long-term relationship with the vendor can only be achieved when time, effort, and resources are appropriately devoted. This is when meetings with the vendor are regularly conducted to build a sense of integration and a collaborative relationship

Risk assessment and mitigation

Effective performance monitoring then allows for practical risk assessment and mitigation. Some common types of risks that may be encountered are related to information and security, operations, finances, and credit, reputation, compliance, regulations, etc.

Your employees will be using your organization's email to access the applications; it holds sensitive information, which is why proper risk assessment is crucial when dealing with third-party vendors. 

Payment and renewals

The contract is reevaluated to ensure that the vendor fulfilled all obligations and the subsequent payments were made. However, in the case of long-term vendors, contract renewal is essential.

The process of renewing contracts requires clear communication since significant changes might be made to the contracts. Any issues faced during the expiring contract are addressed and resolved during the contract renewal process. 

This way, both parties are satisfied with the benefits they gain and can continue in an agreeable and mutually beneficial relationship.

Update and improve

This stage is where more business owners fail. Why go through all the hardships of tracking KPIs, assessing risks, and so on when you don’t use the data to improve the process?

Ensure that you use the results of your evaluations and reviews to continually update and improve your SaaS vendor relationship management process to ensure that it remains effective and meets the changing needs of your business.

By following these steps, you can create a vendor management process that will help you achieve your business goals and maximize the value of your vendor relationships.

Benefits of SaaS vendor management process

You can get several benefits from having effective SaaS vendor management software. Not only does it make it easier to keep track of the company’s vendors, but it also includes other benefits such as:

  • Software cost reduction
  • Better vendor negotiations and discounts
  • More visibility into every SaaS solution you own
  • More accurate predictions and estimations of your future costs
  • Enhanced vendor relations
  • Better risk assessment and management 
  • Increased compliance 
  • Vendor retention and increased ROI
  • Zero shadow IT.

Vendor lifecycle management process: who benefits from it?

The procurement and finance teams are the ones who benefit the most from a vendor lifecycle management process. This is because a transparent and structured system makes selecting, tracking, and managing SaaS vendors a lot easier for them. 

As the vendor management process will empower both the procurement and finance teams, it will make the overall workflow of the business a lot smoother and more efficient.

Why do you need software to manage SaaS vendors??

Implementing vendor management software lets you track and manage your vendors a lot easier. It is key to the success of a company’s procurement team. An effective vendor management system can achieve the following:

  • Enable minimal expenditure of resources, both financial and personnel
  • Improvement of vendor relationships
  • Analyze vendor performance with KPIs and custom reports using zero manual effort
  • On-time delivery of services and goods
  • Consistent and efficient end-to-end processes
  • Optimal procurement process 

One such recommendation is CloudEagle, which allows you to make the most of your supplier relationship. 

CloudEagle is a SaaS management platform capable of managing your SaaS vendors effectively. With CloudEagle, you can

  • Get a bird’s eye view of your SaaS vendors from a single dashboard. 
  • Store all your contract and sensitive documents in a centralized location.
  • Perform detailed vendor research, and connect with vendors and their customers.
  • See relevant reviews from other customers. 
  • See who’s using the applications and who’s not, identify app usage, and renegotiate with vendors.
  • Get department-level vendor spending and detailed spending data on each application of vendors.
  • Get detailed vendor spend reports 
  • See your entire SaaS stack from a single dashboard 
  • Assisted buying and price benchmarking data for effective vendor negotiations. 
  • Pre-negotiated vendor discounts. 


Maintaining a well-balanced relationship with SaaS vendors is essential for your business, and that’s why we listed the steps to help you build an effective SaaS vendor management process. 

Remember, a vendor management system is obsolete if you don’t have an ideal process, and vice versa. This is where you’ll need expert assistance. Get in touch with us; our experts will help you streamline SaaS procurement and enhance vendor relations.

CloudEagle is one of the most sophisticated vendor management systems for managing software vendors. So, what are you waiting for?

Frequently Asked Questions 

Why is vendor relationship management necessary?

Vendor relationship management is necessary simply because vendors enable you to keep providing goods and services to your customers. An organization that does not know how to manage its vendors or suppliers the same way it manages its customers will be left with empty shelves. 

Vendor management is a crucial link between the supplier and the profitability and success of your organization. Simply put, a business without proper vendor management is unsustainable. 

Is there a framework for effectively managing vendors?

Vendor management is essential to any organization’s procurement and vendor management strategy. The vendor management framework, or VMF, comprises processes and tools organizations need to manage their relationships with vendors effectively. 

The VMF’s goal is optimal performance and reduced risk across the entire vendor base of the organization. A well-designed VMF can achieve the following:

  • Develop clear criteria for monitoring and evaluating vendor performance
  • Streamline collaboration and communication between procurement, supply chain, and other departments that are relevant and necessary to the process
  • Quickly and efficiently identify and address issues
  • Establish standardized processes for the management of vendor contracts
  • Continuously monitor and track the performance of vendors in the organization

A VMS can adapt to any specific need of the business. However, it should always be rooted in a clear understanding of the goals and objectives of the organization. 

Developing a comprehensive vendor management framework allows organizations to create a powerful tool to drive efficiency and effectiveness throughout their supply chain and procurement operations. 

Written by
Anju Mary Peter
SaaS Buyer, CloudEagle
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