In 2022, there are more than 4,000 app-to-person connections per company, and overall SaaS spend is up by 50 percent per organization. SaaS integrations have been growing by at least 18 percent per year for at least three years, and that growth is expected to continue through 2030.

While this highly connected landscape comes with almost infinite upside, it also comes with significant risks — like key vendor performance issues leaving you with a broken supply chain that puts your business at risk.

So what does this mean for companies that rely on SaaS integrations and suppliers to run their operations?

For starters: the adversarial vendor approach of the past won't work anymore, and will only result in strained vendor relations that cause unreliable supply chains. Understanding vendor relationship management is crucial in this scenario.

Efficient and effective vendor relationship management is absolutely necessary if you want to:

• Save on software spend.
• Optimize efficiency.
• Remove waste.
• Get the most out of your products and solutions.

Vendor relationship management strategies should be geared towards fostering positive long-term personal relationships.

Now let's dig into strategic vendor or supplier relationship management and break down what modern supply chains looks like and how vendors can become long-term, strategic partners.

What is SaaS vendor relationship management?

Vendor relationship management is a part of the greater procurement strategy that aims to increase overall vendor value by leveraging good relationships to reduce costs and mitigate risks.

According to Gartner, vendor relationship management is a "discipline that enables organizations to control costs, drive service excellence and mitigate risks to gain increased value from their vendors throughout the deal lifecycle."

It's also about tracking SaaS renewal dates, negotiating for better vendor contracts, limiting redundant solutions, ensuring a high SaaS user rate, eliminating waste when possible, and forming mutually beneficial long-term relationships with your vendors.

Why are SaaS vendor relationships so important?

With so many solutions and integrations that companies take on, it's easy to lose sight of your vendor relationships and SaaS procurement strategy. But it's important to maintain your vendor relationships in order to: 

• Keep your vendors happy. 
• Maintain the quality of your goods and services. 
• Have a reliable supplier you can build on for the future. 
• Leverage high vendor satisfaction to run successful vendor collaboration initiatives.
• Negotiate future contracts that are mutually beneficial to both you and your vendor. 
• Hit all of your KPIs and avoid sub-par supplier performance.
• Build brand equity by forming healthy business relationships and partnerships. 
• Improve your customer, vendor, and stakeholder satisfaction. 

How do you manage SaaS vendor relationships and how do relationships differ between organizations?

Effective relationship management with vendors is not an easy task. You have to keep track of your deadlines, renewal dates, system updates, new integrations, contracts, and more. 

Like all business processes, vendor relationship management takes a unique shape in every company. Some teams rely on instant communication channels while others may require frequent touchpoints with specific team members. 

Other considerations include your internal buying process, who's involved to what extent, plus your standard timelines and non-negotiable contract terms.

1. Vendor relationship management process

The vendor management process is an overview of your strategies for vendor relationships and relations from start to finish.

The first step is understanding your business goals and needs.

Then, when you have an idea of what you need from your procurement partners, you can begin looking for the right vendors to meet those needs.

Next, develop or outsource a vendor management team. This team's primary responsibilities will be to define SaaS goals, establish KPIs and benchmarks, select vendors, negotiate contracts and costs, and assess/mitigate SaaS risk.

Finally, you need to maintain the health of your SaaS landscape and pipeline. Your team will be responsible for keeping an eye on contract deadlines and renegotiations, user rates, SaaS redundancies, and other key metrics that ensure your supplier relationships and SaaS ecosystem are well-maintained.

2. Vendor relationship management checklist

You can break down your relationship management process in the following checklist:

• Define business goals
• Develop a vendor management team
• Use a scorecard for the annual appraisals of vendors
• Integrate SaaS management/procurement software
• Create a list of SaaS needs and vendors to fill those needs
• Select vendors and negotiate contracts
• Optimize stack by eliminating redundancies over time
• Integrate a risk mitigation process 
• Maintain open communication with vendors 
• Work with vendors to create mutually-beneficial strategies with realistic deadlines

How can I improve my vendor relationships? (Best practices)

Managing a range of vendor partners is not an easy task. You have to keep track of your deadlines, renewal dates, system updates, vendor management software, new integrations, contracts, costs, and more.

Like all business processes, vendor relationship management takes a unique shape in every company. Depending on your business model, some teams rely on instant communication channels while others may require frequent touchpoints with specific team members.

Other considerations include your internal buying process, who's involved to what extent, plus your standard timelines and non-negotiable contract terms.

1. Communicate frequently and proactively

KPIs aren't the only way to measure performance and the progress of your partnership. Constant open and transparent communication is the foundation of any vendor partnership, and collaborating for improvement will help both you and your vendor gain the results you seek. 

2. Leverage KPIs

With the right data and technologies, KPIs can be a good measure of the performance of your partnership. Leveraging KPIs in team meetings can help give objective, concrete metrics to direct your conversation and negotiations with vendors. 

3. Enable risk-sharing

When you share risk with your vendors, you're setting yourself to mitigate the possibility of operational inconsistencies, compliance and regulatory risks, data/information-related risk, and more. 

4. Negotiate with confidence

Negotiating for contract extensions and new services is an opportunity to save, grow, and build lasting relationships. Negotiations can take hours of preparation and require expert negotiation skills, but the benefits can help you generate the services you need for long-term growth. 

6. Set clear expectations

Everyone's happier and more productive when they know exactly what's expected from them. Removing ambiguity from your vendor relationships will save your business and its vendors countless hours of time and stress.

Examples of managing vendor relationships (Good and bad)

Not sure what good and bad vendor management relationship practices look like? Let's take a look at a few examples and see how these vendor relationships go right and wrong. 

Bad – Avoiding risk assessment

All of your vendors, without exception, need to be assessed for risk mitigation. Without proper risk assessments, you are putting yourself, your customers, and your stakeholders at risk. It also allows you to rank each vendor by the level of risk, allowing you to allocate your time and resources more efficiently to vendors who pose the greatest risk.

Good – Transparency in risk sharing

Although it's impossible to avoid all risks, you can limit the amount of risk that your vendor relationships pose by sharing open and transparent communication pipelines with your vendors. 

Bad – Poor negotiation skills

A lot of companies do not provide adequate training to their vendor management teams. When the time comes to start a contract or renegotiate a renewal, your representatives don't have the tools or skills to represent your best interests.

Good – Hire experts to negotiate for you

There are dedicated SaaS procurement teams, like Sastrify, that will manage your renewals and negotiations for you. You no longer need to waste hours of time watching demos, parsing through your SaaS stack, or mismanaging your negotiations.

If you want to manage negotiations yourself, you can also check out our free guides and reports for insights on SaaS procurement strategies.

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Vendor relationship management tools

If you're still using a manual approach to vendor relationship management like spreadsheets and forms, it might be time you adopted a modern SaaS procurement platform and process.

Efficient vendor relationship management is about more than just getting the best discounts — it's about building the strongest vendor relationships possible and leveraging them for years of cumulative benefits.

And to do that, you need to throw away traditional vendor management practices and say hello to modern and collaborative SaaS procurement

“Too many organizations are overwhelmed by the fast pace of technology development. The solution we’re seeing is the adoption of an ecosystem that better embeds the available technology; an environment in terms of value-driven processes and people, meaning that solutions are going to be deployed with a clear link to real opportunities, business challenges and capability requirements, ultimately optimizing SaaS license usage and costs.” — Alex Dussurgey, Procurement Lead at Sastrify.

All-in-one platforms like Sastrify offer a self-service vendor portal to help you manage everything from efficient vendor onboarding and record keeping to transparent vendor performance reviews and smooth vendor offboarding — all from a real-time vendor management system.

How to use SaaS vendor relationship management tools 

Modern SaaS procurement solutions help teams build and maintain great long-term relationships on autopilot through 4 key benefits:

1. Centralize your communications

Instead of referencing separate resources across multiple communication channels, a SaaS procurement solution brings all the relevant information and decision-makers together.

2. Create a single source of truth and system of record

Consolidate and aggregate your team's data for instant access to information and to accurately track your contracts, negotiations, and tool managers.

3. Screen SaaS vendors faster

Cut your SaaS solution discovery time in half by speaking to other tool managers & accessing an extensive database of benchmarked enterprise pricing. 

4. Initiate corrective action plans

All-in-one SaaS procurement platforms like Sastrify make it easier than ever to initiate corrective action plans or off-board SaaS tools. You can get started with a single click from your dashboard.

Want to see Sastrify in action?

Stop overpending on SaaS. Upgrade your SaaS procurement process today and join hundreds of companies around the world turning vendor relationships into goldmines. Watch this video to see how it all works.