We’re in the SaaS age. For every business challenge you face, there’s likely a SaaS tool available to help. Whether it's for automating customer relationship management, streamlining internal communications, or handling security, SaaS has made business operations simpler and more efficient.

The bad news is: it can quickly get out of control. Many SMBs adopt multiple SaaS tools without a well-defined strategy, leading to challenges like shadow IT, SaaS sprawl, unnecessary costs, and difficulty in tracking licenses.

This is where SaaS vendor management comes in. Follow along as we explore:

• What SaaS vendor management means and why it’s important

• Key steps for implementing SaaS vendor management to ensure compliance (SOC 2, ISO 27001, PCI-DSS, DORA)

• Best practices for effective SaaS vendor management

• How dedicated tools can simplify the vendor-management process

What is SaaS vendor management?

At its core, SaaS vendor management is about building a mutually beneficial relationship with your SaaS vendors. It involves overseeing and controlling the lifecycle of the SaaS vendors your business engages with, from initial selection to offboarding.

Here are the key aspects of SaaS vendor management:

• Vendor selection and contract negotiation: This involves choosing solutions that add the most value and incur the least risk to your organization. Unfortunately, as an SMB, you may not have significant sway in price negotiations. Due to the limited seats or licenses you require, vendors are often unwilling to offer customized pricing.

• Contract management: Once you’ve found the right fit, it’s crucial to establish clear service-level agreements (SLAs) that protect your interests. For instance, the contract should include clauses on data security, incident response, and compliance with regulatory standards.

• Risk management: Every SaaS vendor you onboard is a potential attack surface. It’s important that you assess and manage the risks associated with each relationship. Start by identifying the data shared with the SaaS vendor and checking the vendor’s compliance status.

• Ongoing vendor-performance monitoring: Continuous monitoring is essential to ensure SaaS vendors meet their contractual obligations. Regular reviews of vendor performance, security practices, and compliance are necessary to ensure your vendors continue to successfully address your evolving requirements..

• Vendor offboarding: When it’s time to part ways with a vendor, proper offboarding ensures that your data is handled securely — and that all access to your systems is revoked. This stage facilitates a secure, seamless transition with minimal business disruptions.

Importance of SaaS vendor management

Here are five key benefits of effective SaaS vendor management:

• Security and compliance: Vendor management allows businesses to prioritize partners who adhere to strong security protocols and compliance standards, minimizing the risk of legal or reputation damage caused by security incidents.

• SaaS spend management: With multiple SaaS vendors on board, it’s easy for costs to spiral out of control — especially when tools overlap in functionality. Vendor management helps you eliminate redundancies and negotiate better terms for your contracts.

• Prevent SaaS sprawl: Proper vendor management helps ensure that businesses avoid the costly trap of onboarding SaaS tools without evaluating their long-term relevance and value.

• Ensure vendor accountability and continuity: By tracking vendor performance, you can ensure that vendors deliver on their promises and meet the service levels outlined in their contracts. This translates to fewer operational headaches and a more stable software environment.

• Boost efficiency and productivity: When your software stack is properly aligned with your business processes and goals, your workflows are more  streamlined. Consequently, employees can focus on value-added tasks rather than waste time navigating between tools or troubleshooting problems.

Steps to implement a SaaS vendor management process

Exactly how your organization implements SaaS vendor management depends on its primary goals. To  negotiate better contracts? To cut unnecessary spending? Or to ensure the highest levels of security and compliance?

For SMBs tasked with SOC 2, ISO 27001, or any other compliance, implementation  often focuses on mitigating risks, managing data privacy, and ensuring accountability.

Here’s a structured approach to implementing SaaS vendor management with compliance in mind:

Step 1: Inventory your SaaS vendors

Start by conducting a comprehensive assessment of all the SaaS tools and vendors currently in use across your organization. This inventory will give you visibility into your software ecosystem, including SaaS apps you didn’t know about. AccessOwl has a free shadow IT scanner you can use for SaaS app discovery.

By understanding which tools your organization is using, who uses them, and what data they have access to, you’ll have a clear starting point for optimizing your vendor management process.

Step 2: Assess and classify vendors based on business risk

Not all tools are equal, in terms of their impact on data and operational security. That’s why the next step should be to identify and prioritize tools with the highest risks. This means evaluating factors such as the type of data they handle, their security practices, and their compliance with regulatory standards.

By classifying vendors according to risk, you can prioritize resources effectively and set the stage for deeper security reviews.

Step 3:  Document and review existing vendor contracts and agreements

Compliance-driven vendor management requires precise documentation of all your vendor relationships. This includes maintaining thorough records of contracts, service-level agreements (SLAs), and any terms related to security and data protection.

It’s also important to review existing agreements regularly, to ensure they reflect current security and compliance requirements. Contracts should specify clear expectations for data handling, incident response, and regular reporting on compliance measures.

By keeping these documents up to date, you’ll be better prepared for audits — and ensure your vendors remain aligned with your security policies.

Step 4: Continuous vendor monitoring

SaaS vendor management is an ongoing process that requires continuous monitoring to ensure your vendors continue to uphold their commitments — particularly around data security and regulatory compliance. This involves conducting security audits, performance reviews, and vendor self-assessments.

Just remember: SaaS vendor management is all about having a great and mutually beneficial relationship with your vendor. So you should always be engaged in a cycle of giving and receiving feedback that helps your SaaS provider better meet your needs.

We’ll talk about SaaS vendor management best practices in a while. But first, what type of vendor data should you be tracking to help with security and compliance?

Vendor data to track for security and compliance

If you’re ever audited for SOC 2 or ISO 27001 compliance, you’ll need to provide key data points about your vendors’ compliance practices. The same is true for other frameworks, like DORA, GDPR, PCI-DSS, etc.

Here are some critical types of vendor data you should track for security and compliance purposes:

1. Data types handled by vendors

Different types of data carry varying levels of sensitivity and regulatory obligations. For example, vendors that handle personally identifiable information (PII), financial records, intellectual property, or health data require more stringent security measures, due to the higher risks involved.

Once you’ve identified the types of data handled by each vendor, it’s equally important to track who within your organization has access to that data. This is achieved through SaaS user access management — which ensures that a user’s access is aligned with their roles and responsibilities (least privilege principle).

2. Data location and residency

Many frameworks, including DORA and GDPR, specify that sensitive data must be stored within certain geographic locations. Tracking the physical location of data centers and the regions where your data is processed helps you comply with these regulations.

3. Vendor compliance certifications

To ensure that your vendors meet industry-standard security requirements, track their certifications and compliance with frameworks such as SOC 2, and ISO 27001. These certifications demonstrate that vendors adhere to best practices for security and data protection, providing assurance that they meet your own compliance obligations.

4. Authentication methods

You should also track how vendors authenticate users who access your data or systems. Do they support more secure options like single sign-on (SSO) and multi-factor authentication (MFA), on top of traditional username / password access?

SSO allows users to log in to multiple systems using a single set of credentials, simplifying user management and reducing the risks associated with password fatigue. Popular SSO providers include Google Workspace, Microsoft Entra ID, and Okta.

5. Breach history

Note any past breaches or security incidents involving the vendor. Understanding their security history can help you assess ongoing risk and decide whether the vendor continues to meet your standards.

SaaS vendor-management best practices

By implementing these best practices, you can optimize your SaaS vendor-management processes, to get the most out of your SaaS investments.

1. Define your company’s SaaS procurement process

Establish a clear, consistent process for purchasing new tools, to ensure that selected SaaS solutions align with your business’ operational and compliance requirements. This is especially important in today's decentralized SaaS procurement landscape, where IT is no longer in full control — and individual teams and departments can choose SaaS solutions that best fit their needs.

2. Centralize SaaS management

While centralizing procurement may be impractical in the current SaaS landscape, centralizing vendor management is crucial. You need to have a single platform or system to track vendor contracts, performance, and compliance across the organization. You can track this either manually — through spreadsheets, for example — or automatically, with a SaaS app management tool. You can then assign a designated owner for each SaaS tool, to simplify administration.

3. Involve different stakeholders in the vendor management process

SaaS vendor management shouldn’t be  the responsibility of only the procurement or compliance teams. For instance, your finance team can help you  identify which SaaS vendors your organization is currently  paying.

Involving all relevant stakeholders, such as IT, finance, legal, and end users, ensures that all aspects of the vendor relationship — like security, functionality, pricing, and performance — are evaluated for new and existing vendors.

4. Establish clear communication with SaaS vendors

Successful vendor relationships are built on transparency and regular communication. So you should aim to establish open lines of communication with vendors from the start — setting expectations for regular updates on security, performance, and compliance. This communication should include clear timelines for addressing issues such as security breaches, performance lapses, or system outages.

5. Have a contingency plan if your current vendor fails to meet expectations

No vendor relationship is guaranteed — and even the most reliable vendors can experience issues or fail to meet evolving compliance requirements. So having a contingency plan in place ensures that you’re prepared to switch to alternative solutions, if necessary. This means maintaining a list of backup vendors and having an exit strategy that brings minimal disruption to your operations.

6. Leverage automation

Automation can make or break your SaaS vendor-management process. As the number of SaaS vendors increases, manual tracking and management can become overwhelming — leading to inefficiencies.

Identify specific areas in your vendor-management process that can be simplified through automation, and explore the available solutions. SaaS management tools can track contracts, monitor performance, and assess compliance in real time, reducing the need for manual oversight.

Manual vs automated SaaS vendor management

While both modes of vendor management have their place, understanding their key differences will help you decide which approach best suits your business needs.

Manual SaaS vendor management

Manual SaaS vendor management is a team effort that typically involves spreadsheets, emails, and shared documents. This approach works well for small businesses with a limited number of vendors — or those with simple compliance requirements.

However, as your vendor list grows, manual management becomes increasingly inefficient and prone to errors. Here are some of the key challenges:

• Time-consuming processes: Managing multiple vendors manually requires significant time and effort. Teams must track renewals, contract terms, and performance metrics manually, increasing the likelihood of missed deadlines or overlooked details.

• Increased risk of human error: Relying on manual processes opens the door to errors, especially when dealing with large datasets. A user may forget to onboard a new tool or overlook crucial compliance information like data type.

• Limited visibility: Manual vendor management often produces data that’s fragmented across different spreadsheets or tools, making it difficult to get a comprehensive view of vendor performance, security compliance, and contract statuses.

These problems often lead to missed opportunities to optimize your vendor relationships.

Automated SaaS vendor management

Automated SaaS vendor management eliminates many of the inefficiencies of manual tracking, by using specialized software or platforms designed to handle the complexities of vendor management. This approach streamlines the process, enhances accuracy, and provides real-time insights into your vendor ecosystem.

Introducing AccessOwl SaaS vendor management

AccessOwl is a powerful tool designed to manage user access to SaaS applications while addressing the crucial need for compliance-focused SaaS vendor management. The AccessOwl team recognizes that managing user access alone isn't enough to meet the evolving needs of compliance-driven organizations, so they’ve taken it a step further.

How AccessOwl can help

First, you get all the standard identity governance and administration (IGA) features, including SaaS app discovery, centralized user account management, and user access reviews.

Second, you get a centralized platform to track all the important vendor-compliance data. AccessOwl lets you track the types of data handled by vendors, data location, vendor compliance certifications, and authentication methods.

Using this critical information, the tool automatically calculates the risk level of each vendor, enabling you to take the appropriate action like more stringent access controls.

AccessOwl also lets you upload files and links which you can use to document vendor contracts. This ensures that all agreements and terms of use are stored in one central location, making it easier to track, review, and update.

Better yet, AccessOwl can automatically update vendor information. Unlike with manual spreadsheets, you don’t need to constantly review and update your vendor list.

Beyond compliance, AccessOwl can also track vendor renewal dates to help with SaaS spend management.

Conclusion

As cloud adoption increases and businesses become more reliant on SaaS apps, having a vendor management system becomes crucial to business success. For small organizations with a limited number of SaaS vendors, a manual approach may suffice. Just follow the laid out steps and remember SaaS vendor management best practices.

However, If your organization is managing multiple SaaS contracts, has strict compliance requirements or needs real-time visibility into vendor performance, automation is the clear choice. In this case AccessOwl stands as an excellent option thanks to its blanket approach to security and compliance.

Ready to take control of your SaaS vendor management? Book a demo for more insights on how AccessOwl can help.