Outsourcing Vendor Management

What is vendor management outsourcing?

In-house vendor management vs outsourcing vendor management

How to effectively outsource vendor management

Outsource vendor management with Vertice

Outsourcing vendor management FAQs

Vendor management is the broad ongoing process of strategically overseeing and evaluating how your organization’s cloud or SaaS providers are performing. Effective vendor management encompasses a range of areas — from procurement and contract negotiation, to tracking performance metrics against service level agreements (SLAs), to maintaining strong relationships with the third-party vendors themselves. 

Within the cloud ecosystem, many companies offer outsourced services where they assume the burden of certain business processes on behalf of other organizations. Outsourced vendor management is one example, which involves offloading aspects of this essential activity to a partner company. 

Outsourcing vendor management can bring about a number of benefits to your organization, including:

• Subject matter expertise – Vendor management partners hold a strong degree of subject matter expertise when it comes to the vendor management process. They’re aware of best practices and methods for unlocking the best vendor performance throughout your supply chain, which becomes especially valuable in highly complex stacks. Many vendor management outsourcing partners can help with contract management when onboarding new vendors or during renewal, leveraging their own market intelligence to negotiate a more favorable agreement.
• Improved efficiency – One of the most significant incentives to outsource vendor management is the reduction of administrative overhead. By delegating day-to-day tasks to a partner company, staffing and skillset requirements can be minimized, freeing up your team and budget for core competencies. Furthermore, a strong outsourced vendor management partner can more quickly optimize your cloud and SaaS stack, helping you realize cost savings on a reduced timescale.  
• Risk mitigation – Watertight cybersecurity is a must if you want to eliminate the chances of data loss, malicious attacks, or service outages. Outsourcing vendor management can form an integral part of your risk management strategy, as management partners can support your organization through rigorous risk assessments, expansive regulatory knowledge, and additional due diligence processes.
• Cost reduction – Outsourced vendor management can reduce your organization’s overheads in a number of ways. Opting for an outsourced vendor management program may be more cost-effective than employing the necessary IT staff to do the job in-house, giving you access to the relevant expertise at a lower expense. Management partners can also negotiate more competitive pricing across your vendor contracts, and ensure you’re getting the maximum value at every point of service delivery.

Not sure whether to manage your cloud and SaaS vendors internally or outsource the function? There are pros and cons to both approaches — ultimately, the decision depends on your company’s specific needs and resources. Here’s a round-up of the advantages and drawbacks of both in-house and outsourced vendor management.

In-house vendor management

Pros:

• Direct communication – Internal vendor management makes it easier to foster close relationships with your service providers, potentially leading to faster issue resolution and improved collaboration. 

• In-depth knowledge of needs – Your internal staff have an acute understanding of your organization’s requirements and objectives, and can ensure your approach to vendor management aligns with these aspects of your business. 

• Greater control – By managing your vendors internally, you have full control over the process, which may be crucial for strategic partnerships. 

• Security – By keeping vendor management within your organization, sensitive data may be better protected. 

Cons:

• Higher costs – Maintaining an internal vendor management team can be expensive, especially for complex stacks requiring significant expertise and training. 

• Less scalability – If your organization is growing at significant speed, it may be hard to scale your vendor management team accordingly in order to match an expanding vendor network. 

• Higher workload – Routine day-to-day tasks associated with vendor management can divert staff and resources away from more strategic business activities.

• Expertise – Building a team with expertise in all aspects of vendor management can be a challenge, especially for SMEs and startups. 

Outsourced vendor management

Pros:

• More cost-effective – Outsourcing your vendor management may be cheaper than maintaining an internal team. 

• Greater scalability – Outsourced vendor management partners can more easily scale to meet the needs of your business as it grows.

• Expertise – Third-party vendor management gives you access to subject experts with specialized knowledge, who know how to employ best practices to get the most out of your providers.  

• Greater efficiency – By eliminating the administrative overhead of vendor management, your staff and budget can be directed towards driving innovation or growing your business. 

• Risk mitigation – Experienced vendor management partners can help identify and mitigate risks by leveraging industry knowledge and enforcing security policies.

Cons:

• Less control – Delegating your vendor management to an outsourcing partner inherently involves relinquishing some of your control over the process.

• More limited knowledge of needs – Vendor management partners have a less intimate understanding of your business’s goals and needs than an in-house team.

• Security concerns – Sharing sensitive information with outsourced vendor management firms may increase the attack surface for cybersecurity threats.
• Communication challenges – A clear and open dialog with your vendor management outsourcing partner is crucial for a successful relationship.

Vendor management outsourcing can increase efficiency within your organization, lowering costs and reducing the burden on your staff — but only if it’s done right. 

Here are some best practices to keep in mind when outsourcing vendor management:

• Define your needs – Before you begin your search for a vendor management outsourcing partner, liaise with stakeholders to establish your business requirements. Clearly set out what you want to achieve from outsourced vendor management so you know what to look for in a potential partner.

• Evaluate vendors – Once you’ve drawn up a shortlist of potentials, carefully research and select a vendor management partner with a proven track record and experience in your industry. Make sure the outsourcing partner meets your security and compliance needs as well. 

• Communicate openly – Fostering open communication and collaboration throughout your vendor relationship is vital if you want to get the most from your outsourcing partner. They’ll often be in contact with your cloud and SaaS providers, so make sure they fully understand your organization’s needs and objectives. 

• Maintain control – Don’t completely cede control of your vendor management process. Although your partner will be handling day-to-day tasks, you should maintain oversight of the process through regular reporting and performance reviews.
• Monitor performance – Set clear KPIs which can be used to assess your partner throughout the duration of the contract. This way, you can ensure you’re reaping the benefits of outsourced vendor management and negotiating renewals based on historic performance.

Another way to manage your IT service providers is through a vendor management system (VMS) such as Vertice. Our SaaS Purchasing Platform offers a range of tools to streamline sourcing of new solutions, track utilization and wasted seats, and centralize your contracts under a unified interface. 

When you outsource vendor management to the Vertice platform, you can also realize cost savings by letting us handle your IT procurement and license renewals. Using our market intel about what other companies are paying specific vendors, we can leverage more favorable contracts and SLAs. To find out more, simply get in touch using the form below.