5 Best Practices in Strategic Vendor Management

December 27, 2021March 28, 2023 Zeeshan

It’s impossible to conduct business nowadays without having a strong partnership with the key vendors. Especially when you outsource IT services, software development vendor management is extremely important to maintain efficient processes and communication.

Vendor management dictates how to build and support productive relationships between you and your providers. The strategic, structured approach offered by vendor management allows you to control the partnership and create the maximum value for you and for the vendor also.

GBKSOFT, a software outsourcing vendor for more than two hundred clients, shares the best practices you need to follow to have a thriving partnership.

Contract Management

Contract plays a great role in your cooperation. It helps to establish conditions and expectations, but also, good documentation can help you resolve controversial issues or disagreements and mitigate conflicts.

However, it doesn’t end with signing a contract in the beginning: it’s a continuous process, as your dynamics with a vendor may change, and the contract and other documents should reflect that shift adequately.

The main aspects of you need to cover include:

scope of work you have agreed upon;
price and payment procedure;
timing;
termination process;
consequences in case of contract breach;
conditions and process of contract change;
privacy and security.

Performance Monitoring

Performance monitoring will help you understand how efficient your vendor is and check its reliability. With a data-driven approach, you will be able to objectively assess the quality of the work the vendor does and determine if the cooperation is going the way you have planned.

But to estimate anything, firstly, you need to establish the standards you will be focusing on your estimation. Sit down with the vendor and set some common goals you both are interested in. Determine the KPIs that will show the progress to the aforementioned goals. Create a clear action plan that will help reach the goals.

Another important part of this process is to stay constantly in touch with your vendor. Agree on the regularity and format of the reporting and choose the data you would like to get from a vendor on a permanent basis. Request access to internal spaces, wikis, or tasks management tools like Jira, Asana, or Confluence. This way, you will be able to track the real progress and results seamlessly, without sending extra emails and waiting for replies.

At the same time, non-conflict, constructive and honest communication will facilitate efficient cooperation. You will be able to detect bottlenecks and other problematic aspects and resolve issues much quicker and easier. Make supplier risk assessment a key component of performance monitoring.

Risk Management

There are always risks when you engage with a third party. Considering that software development is usually a massive and prolonged project, the impact of a vendor on your internal processes is huge. Hence, the best thing you can do is to implement risk management measures, think through the possible risks and probable actions you would do if it is needed.

The main risks that you can encounter are:

compliance: the vendor may not follow some of your standards or policies, and hence, jeopardize the project;
performance: the outsourcing company may perform worse than you expected;
security: either way, the vendor gets access to your internal data; it can breach and stolen, and you can take the fall for unreliable security measures;
payment: the vendor may be unable to satisfy your fiscal requirement, for example, when the vendor spends a higher budget to complete the agreed scope of work;
brand and reputation: your company may suffer if the vendor turns to be unreliable, responsible for data breaches and personal data disclosure, etc.

To handle possible risks, you can refer to different risk management frameworks, conduct risk assessment, and focus on close monitoring to see the issue before it becomes critical.

Collaboration

You and your vendor are in close cooperation, and efficient collaboration is something you should fight for. A clear understanding of your roles is important. But at the same time, if you delegate the task to a vendor and withdraw from the process, you won’t get any decent result. Over time, your business objectives could warrant a strategic partnership for mutual growth.

Consider the vendor as your trusted partner who is here to help you grow and develop. Hence, stay open to communication, engage in the project, and answer the vendors’ requests. An outsourced team is here to bring you their technical expertise and effort, while you possess valuable knowledge on your business operations, your market, target audience, competitors, previous experiences, etc. Combining these two spheres, you can guarantee a positive outcome.

Moreover, great vendors usually have a selection of projects and companies they like to work for long term. Presenting yourself as a client-focused on adequate communication and collaboration will increase your chances to obtain a partner for years.

Communication

Sometimes, communication may be a challenge. In the case of outsourced partners, you are most probably to be located in different countries, hence the time difference and need for remote collaboration. Moreover, there is a cultural and sometimes language difference that creates a place for misunderstandings and miscommunication.

However, if you put effort into establishing clear dialogue, you will be able to find the most convenient way to communicate. Regularity is the key, so you can agree upon daily or weekly meetings to discuss the project. Thanks to remote collaboration tools and video conferencing, you won’t have any problems with face-to-face communication even if you are situated in different parts of the world.

You may also ask vendors to add you to their chat with developers and other team members who work on the project. This way, the specialists and you can have a discussion directly, without middlemen or delays. Transparency and straightforwardness will only help your development to blossom.

In Conclusion

A relationship with an outsourcing software vendor can be successfully managed, and it will only bring benefits to your project. Vendor management practices will help you be in control of the project, but at the same time build a strong connection with a vendor. Leverage out tips to improve your partnership. We wish you luck!