In 2024, there are more than 4,000 app-to-person connections per company and SaaS integrations have been growing by at least 18% per year, with that growth 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 collaborative relationships.
Now let's dig into strategic supplier relationship management and break down what the modern supply chains looks like and how you can build successful relationships with your software vendors.
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 also plays a crucial role regarding:
- Tracking SaaS renewal dates
- Creating efficient payments systems
- Negotiating for better vendor contracts
- Limiting redundant solutions
- Ensuring a high SaaS user rate
- Eliminating waste when possible
- Forming mutually beneficial long-term relationships with 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 just like customer relationship management, it's a important to maintain your relationships with vendors 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 service providers, 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 an efficient 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 you improve your 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 and comes with potential risks. 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 quality standards, buying process, who's involved to what extent, plus your standard timelines and non-negotiable contract terms.
1. Communicate frequently and proactively
KPIs (Key Performance Indicators) aren't the only way to measure performance and the progress of your partnership. Effective communication (including constructive feedback) 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. You can also create contingency plans for an extra layer of security.
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. The importance of a collaborative environment cannot be understated.
Bad – Poor negotiation skills
Poor communication can cost millions, and 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 – Hiring 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.
Vendor relationship management tools
If you're still using a manual approach to vendor relationship or contract management like spreadsheets and forms, it might be time you adopted a modern SaaS procurement platform and process.
Successful 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 vendor relationship management tools for SaaS
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.
4 insights from Sastrify's Tim Hintze on vendor relationship management
1. A healthy vendor relationship requires constant effort and communication
A typical customer will maybe have a touchpoint with their account executive once per year. But a long-term vendor relationship requires more than that.
- Multiple touchpoints – Staying in contact with the vendor throughout the year is a strategic approach. Check-ins should happen at least once per quarter.
- Constant effort – Effort must remain consistent. Many customers get so busy that they only respond to emails from vendors whean there’s a renewal coming up or something urgent to discuss. But ongoing effort is needed to keep the information level equal while building strong relationships over time.
- Ask questions – Questions should be asked regularly to the account exec and/or customer success team: Do we have the right license level? Is there anything else we need? Are there new features we should try?
- Get curious about the vendor – Curiosity can build better vendor relationships. Stay up to date with what’s going on in their business and industry. Ask yourself how you can make the relationship mutually beneficial.
In practice, great vendor relationships are quite rare, especially without a dedicated procurement department that’s actively pursuing them.
2. Time is the key challenge customers face in building vendor relationships
As mentioned above, the main problem buyers usually have is time. A customer might have a touchpoint with a typical vendor once per year or once every two to three years – just when there’s an upcoming renewal.
However, this means the customer doesn’t get to know the vendor very well, making it difficult to know how best to negotiate or work with them throughout the year.
3. Negotiation is better for both sides when the relationship is strong
Negotiation can be a tricky process for both the customer and the vendor, but when the relationship is solid and maintained throughout the year, the process is easier.
Customers should remember to always negotiate with the person – the account exec that they’ve gotten to know over time. Knowing this person and communicating with them often is worth a lot financially and can also speed up the negotiation process. (As an example, Sastrify’s strong vendor relationships allows us to cut negotiation time in half for many customers, in addition to the significant cost savings.)
4. Platforms like Sastrify make relationship management a breeze
After having worked on the customer side, I can see now why Sastrify is so good at managing supplier relationships on behalf of customers.
For starters, Sastrify talks to most vendors at least once per week. (Example: I’ve personally talked to Salesforce 50+ times in the last year). Our procurement experts know the vendor account managers well and know the incentives to leverage for different suppliers. Through our many negotiations we’ve learned which things to say, offer, trigger, or ask for that can actually benefit our customer’s contract.
On top of that, we have complete visibility into the customer’s tool stack – something that organizations without a dedicated procurement department typically won’t have. We can manage all the vendor touchpoints across the entire customer account, avoiding any crossed signals between departments. All of this allows us to focus on the bigger picture, align timelines, and maintain just one contract.
The outcome is better pricing, data-driven decision making, significant time and dollar savings, and optimized contracts.
Having experienced supplier relationships from both sides, I can say without a doubt that better long-term outcomes are achieved with Sastrify.
Want to see Sastrify in action?
Stop overpending on SaaS. Upgrade your SaaS procurement process today and join hundreds of companies around the world reaping the benefits of strong vendor relationships. Watch this video to see how it all works.
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