SaaS vendor management best practices for cost-effective SaaS

In the world of successful SaaS vendor management, you’re constantly minimizing risk and maximizing value. To be effective, software vendor management requires a set of policies, best practices, the right real-time data, and technology designed to help optimize SaaS operations, security, and spending.

For many organizations, there’s more work to be done. And for proof, look no further than some important 2025 BetterCloud Spend Optimization data. It says:

• About 30% of software is abandoned or underutilized
• 25% of tools have overlapping functionality
• About 18% of those tools have low satisfaction ratings, which contributes to license abandonment and underutilization

If this sounds like you, here is your guide to achieving SaaS vendor management success. 

We’ll cut through the jargon and provide practical advice and best practices on everything from discovering and onboarding new vendors to optimizing costs, ensuring security, and surviving vendor audits. Whether you’re a seasoned software license manager or an IT manager just starting to dip your toe into SaaS vendor management, we’ve got you covered.

What is SaaS vendor management?

Sometimes referred to as SaaS or license management, software license management, or even software asset management, SaaS vendor management is the comprehensive process of overseeing and managing SaaS vendor relationships.

Keep in mind that vendor management is distinctive from procurement. That team is primarily involved before a deal is signed. 

In addition to making sure other stakeholders perform their portion of the purchase process (like app security and legal contract reviews), procurement takes the lead on the initial negotiations.

On the other hand, vendor management steps up as the ongoing owner of the software vendor relationship after the contract is signed. This role then ensures the organization:benefits from long-term value nor suffers the consequences of excessive risk 

What does SaaS vendor management do?

Think of it like being the relationship manager of your company’s SaaS vendors. 

In this role, you’re involved in the entire SaaS lifecycle, although to what extent will vary from one organization to the next. But to some degree, you’re involved in:

• Vendor selection. Working with other stakeholders to create vendor score cards, you’ll work with procurement to develop Requests for Proposal (RFP) and coordinate distribution, as well as review proposal responses from vendors.
• Negotiations. Helping get the best deal, you’ll make sure you get the best prices, terms and conditions. If there’s a procurement team, they’ll be the primary negotiator, but you’ll work closely with them.
• Vendor onboarding. You’ll ensure smooth onboarding and integration into existing IT infrastructure, review user access processes, and troubleshoot problems.
• License inventory management and audit support. Collaborating with software app owners, you’ll complete license true-ups, reconciliations, and audit support, including dispute resolution and audit defense. Fortunately, audits for SaaS tend to be less focused on contentious license misuse and more on security, access, compliance, and usage agreement enforcement.
• Contract management. You’ll maintain contract records, ensuring accurate license records to include key dates around renewals and cancellations.
• Software vendor relations. As a vendor manager, you’ll track and maintain issue logs, coaching notes, and vendor feedback. It’ll also be your job to communicate stakeholder updates, priorities, and messaging to vendors in a timely and clear manner, ensuring alignment and reducing miscommunications
• Performance reporting. You will monitor vendor performance using predefined KPIs and success metrics to proactively identify usage trends, issues, and opportunities for incremental improvements.

Essentially, you’re the go-to person for everything related to SaaS vendors, making sure all relationships run smoothly and ultimately deliver value to the business.

Let’s touch on what an effective vendor management program requires.

Requirements for effective software vendor management 

To be impactful, SaaS vendor management needs:

• Visibility: This means a clear understanding of all your SaaS subscriptions, their usage, and associated costs. 
• Collaboration with security teams to mitigate vendor risks: Identify and address potential security threats or compliance issues, as well as track software and systems that need security updates or patches. 
• Data-driven decision-making: Use data to evaluate usage, value, cost, and business need, and determine how to improve and if you continue with a given vendor. In the SaaS world, this could be eliminating redundant, abandoned, or underutilized applications, as well as switching to another tier or tool altogether.
• A focus on tech stack ROI: Optimize software spending continually by ensuring optimal utilization of existing tools.
• A high awareness of SaaS vendor market landscape: Keep up with changes in software license models and vendor offerings.

Who performs software vendor management

It depends. Sometimes this role is in IT or it’s a duty IT performs. And other times, it’s a dedicated role that may be inside or outside of IT in business units, operations, or even finance.

Obviously, scale largely drives whether software vendor management is a full-time job for someone. For example, you’re very likely to dedicate these tasks to someone if your company:

• Uses a higher-than-average number of different vendors or tools
• Spends more than $1million annually on software
• Is highly regulated or in an industry that requires patching as soon as Common Vulnerabilities and Exposures (CVEs) are announced
• Tends to have complex contracts

That said, smaller teams should consider a SaaS vendor management program, particularly if they’re struggling with:

• Too many idle licenses
• Excessive accidental auto-renewals or missed renewals
• Overlapping software bought by multiple teams
• Growing compliance issues
• Lack of centralized vendor repository

10 best practices for successful SaaS vendor management

A software or SaaS vendor management program that delivers reduced risk and maximizes the value of SaaS is data-driven, proactive, and collaborative. Follow just some of these SaaS vendor management best practices and your job will be easier, more productive, and impactful.

1. Centralize vendor contracts into one place

Create and maintain a SaaS system of record, or a single source of truth for all your company’s SaaS apps. This way, you’ll spare yourself the endless contract search, keep a pulse on vendor risk, as well as prevent an app from falling into the abyss. More importantly, it’ll help avoid buying a duplicate app and ultimately save on SaaS. Make sure to include:

• Contracts
• Points of contact
• Renewal or cancellation dates
• Security questionnaires
• Compliance certifications like SOC 2, ISO, GDPR. Track expiration dates for your own compliance requirements, as well.

Done properly, it’s an always up-to-date inventory that accurately categorizes SaaS vendors by risk and value – with designations as strategic, operational, or low-risk. What makes a vendor strategic vendor is whether it:

• Has high revenue impact
• Introduces risk, either operational or security
• Enables innovation

Very often, strategic vendors are long-term relationships, touch sensitive data, and require lengthy integration. Overall, these kinds of SaaS vendors require a higher level of both time and financial commitment, hence more attention from SaaS vendor managers.

2. Assign owners for every SaaS app

One of the easiest ways to make your software vendor management more successful is to assign owners for every application within your vendor contract tracking system.

They’re your go-to person for questions and troubleshooting. Plus, it keeps things organized and prevents duplication of effort when it comes to renewal time. You’ll know exactly who to go to within your business to discuss any SaaS vendor audits, contract changes like more or fewer licenses, subscription tier adjustments, or even product changes.

3. Don’t deviate from corporate-mandated buying processes

Preventing budget-killing rogue software purchases means setting and following corporate-wide purchasing policies and processes.

For each app purchase:

• Involve the right stakeholders and for most organizations, it’s the business function, IT, Security, Legal, and if large enough, Vendor Management and Procurement
• Define needed requirements and features
• Understand how you’d prioritize them
• Get good usage forecasts to rightsize the number of licenses from the start
• Set a budget
• Research and evaluate product capabilities and vendor fit, as well as other factors like security and integrations
• Get competitive bids, no matter how much you like your top vendor

Address the issue of auto-renewals when negotiating. As you can imagine, vendors love them. But in some cases, you can contractually avoid them.

Purchasing ought to consider what must happen if your company decides to terminate a vendor relationship. Make sure you can extract data stored within their app to maintain business continuity.

Finally, don’t shortcut the SaaS purchasing process. Good decisions take time.

4. Use performance and usage metrics to measure vendor success

Vendor managers like you should keep a continual pulse on vendor performance. Specifically, you need to measure:

• Availability/uptime. Most of the time, SaaS vendors agree to 99.9% (some even have 99.99% or even 99.999%) availability, or uptime. This percentage of time the SaaS app is available is usually contractually agreed upon, so violating it may mean rebates to you.
• Internal Net Promoter Score (NPS) or other user satisfaction metrics. While not agreed upon in the contract, tracking NPS and user sentiment on apps in use becomes very useful for renewal season. By knowing what users think about an app, it is easier to decide whether it’s time to switch to another SaaS tool that may better meet needs.
• Mean-time-to-repair (MTTR) support SLAs. Contracts generally contain provisions that guarantee that the vendor will respond and resolve within a specified amount of time. Vendor management needs to measure the percent of time vendor support meets that contract commitment.
• Usage target metrics. When an app contract is signed, it usually includes a given number of seats based on estimates from business users.

Say that for X App, you get 10 licenses for target users., Let’s also say your success goal as a vendor manager is that 90% percent of target users actively use a given SaaS app. In our case, that means 9 out of those 10, or 90% utilization. Fast forward 4 months later, you find that it only gets 50% of your target users actively use this app.

This means that this vendor is falling behind, and you as the vendor manager must step in. You need to determine what’s going wrong, work to improve the value users get, or even reclaim and redeploy unused licenses. Else, as the contract’s end approaches, you need to find suitable alternatives.

5. Maintain good data for SaaS vendor audits

Contracts generally clearly communicate SLAs, uptime, support response, performance expectations, and how issues will be addressed. It’s your job to regularly check and make sure your SaaS vendors are delivering on their promises.

But thanks to “right-to-audit” contract provisions, SaaS vendors generally have a contractual right to ensure you’re also operating within contracts. To do this, they’re allowed to view usage data and access logs, or do any other compliance review.

There are a few types of audits SaaS vendor managers should expect.

• Performance and usage pattern reviews. Common around renewal time, vendors may evaluate how you’re using the app for performance/experience reasons. If users aren’t using the app or if key feature engagement is low, the vendor may suggest a different license tier, or even training.
• License compliance. Looking to see if the number of users/seats, features, or usage aligns with your contract, the vendor wants to ensure you’re not overprovisioning their app with having more users than you’ve paid for.

• Security & access reviews. SaaS vendors introduce new risk with each new user, and that risk is higher when a SaaS app stores or uses sensitive data. Thus, they have a right to make sure customers follow best security practices. They’ll want to review which users have access, how your company manages access, and any access tools like identity management and use of multi-factor authentication.
• Compliance-driven reviews. For their own compliance requirements, SaaS vendors might have to verify that customers follow required security and access practices.

For any kind of audit, you should be prepared to share your organization’s data. First, you’ll need to show how you onboard and offboard users, any tools or automated workflows you use for access, as well as the audit logs that prove you follow best practices for user access.

Second, you’ll need usage data to show your actual number of users does not exceed contractual limits.

Of course, to make sure you always have this data when a SaaS vendor wants it, automated tools for managing SaaS are a big boost. By using an end-to-end SaaS management platform with spend management analysis and reporting, the data you need to supply your vendors is always available and you won’t have to scramble for it.

6. Stay on top of the renewal process with automated alerting

Unexpected renewals are the worst. With at least 90 days prior to the key renewal or cancellation date, set automated reminders, put them on your calendar, or track them via a spreadsheet. This way, you’ll have plenty of time to ensure users want to renew or change, explore more suitable alternatives, and proactively negotiate for better pricing and contract terms.

7. Evaluate vendor return on investment (ROI) thoroughly

Every tool has a business case and it’s important to measure the ROI of each one. At the end of the day, even if you have solid vendor relationships and contracts, if you’re paying for something no one at your company uses or the costs outweigh the benefits, you’re at a strategic disadvantage and losing money. 

In this evaluation, you weigh the long-term benefits of the app provided to your organization against the costs. As for the benefits, what are the financial gains or money saved from using this SaaS tool? It could be savings from a faster process or lower error rates. It could also be higher revenue, better retention, or faster growth, too.

On the cost side, be sure to include all direct costs:

• SaaS subscription fees
• implementation
• IT training time
• IT support time
• Custom development time
• Paid integrations 

You’ll also want to consider indirect costs:

• Change management training
• Data migration costs
• Employee time for purchasing, onboarding, supporting vendor
• Productivity losses during transition

8. Leverage all data including price benchmarking, usage, user satisfaction, and performance during contract renewals

We’ve already talked about using data to measure vendor success. At renewal time, you’ll want to holistically use all data – including price benchmarking, usage, employee sentiment, and vendor performance to help procurement rightsize new contracts and pricing.

• Software contract benchmarking: This way, you’ll never wonder at renewal if you’re getting the best price. Keeping benchmarking data in your back pocket allows you to effectively negotiate and be confident in your renewal.
• Usage data. This way, your team is less likely to be upsold to licenses or features you won’t use.
• User feedback from internal users. If feedback is mixed, but you’ve decided you can’t pay the price for change, factor that into negotiations.

9. Monitor, reclaim and redeploy SaaS licenses to optimize costs

Regularly monitoring your company’s SaaS eliminates costly shelfware and duplicate subscriptions. It can be hard to pinpoint duplicate tools in your tech stack unless you know what every application does. With automated discovery, you can instantly highlight software overlaps and prevent another overlapping purchase.

10. Use an all-in-one SaaS management platform capable of facilitating SaaS vendor relations

Vendor management is a big job and done well, it delivers huge benefits and limits risk. Like anything else in technology, the right tool for the right job ensures a successful SaaS vendor management program.

The final SaaS vendor management best practice here is to use an all-in-one tool, purpose-built to manage SaaS assets, usage, contracts, vendors, licenses, and the entire SaaS user lifecycle. 

By deploying such a SaaS management platform, you’ll have real-time data to optimize licenses, costs, and budgets, as well as ease renewal season with price benchmarking data, and stay prepared for inevitable vendor audits.

Take your SaaS vendor management to the next level

BetterCloud, a Gartner Magic Quadrant leader and a consistent G2 leader in SaaS operations, is that all-in-one platform. It can help vendor management, procurement, and IT effectively manage their entire SaaS environment. With features such as automated app discovery, usage analytics, and proactive risk management, BetterCloud can help you control your SaaS spending, improve security, and optimize your tech stack.

By implementing effective SaaS vendor management best practices and leveraging BetterCloud, businesses can maximize the value of their software investments, improve operational efficiency, minimize risk, and gain a significant competitive advantage.

Ready to take your SaaS vendor management to new levels of success? Book a demo.

EDITOR’S NOTE: THIS IS AN UPDATE FROM AN EARLIER POST