Vendor management is the process of evaluating, onboarding, monitoring, and eventually off-boarding service vendors—the organizations that store, process, or transmit data on behalf of your company. Vendor management processes and procedures help build trust between a company and its vendors. Most B2B SaaS companies experience vendor management from both sides: having vendors and being a vendor. Establishing robust processes and procedures on both sides of vendor management is vital to growing your business and reducing risk for your company and customers.
This guide will give you some of the basics of vendor management, talk about the levels of maturity, and give practical advice to advance from one stage to the next as you "level up" and move forward in your vendor risk management approach. And if you want a tool to help you get there, you can sign up for free to use Conveyor's Vendor Management module.
The Importance of Vendor Management
Every company needs vendors, yet vendors increase your vulnerability to security threats. Many of the largest data breaches in the past decade or so have happened because of vulnerabilities from third party vendors. The customers you want to work with realize the vulnerabilities vendors present, too. That’s why they put potential vendors like you through security questionnaires (sometimes called vendor security assessments, or VSAs) and require documentation of security protocols. The thoroughness and speed of your responses to VSAs during the sales process can make or break a sale. A company’s processes and procedures for managing vendors and working through customers’ vendor management processes have impacts throughout the entire business. Companies that implement vendor management policies and procedures are more secure, reduce their exposure to risk, and are better able to meet organizational goals.
Vendor Management Maturity Model
As organizations grow and mature, so much their vendor management processes and procedures as well as the team and tools used to manage it all.
The Conveyor vendor management maturity model explains how vendor management looks at different at levels of maturity, including the challenges faced and tools used. Organizations have the opportunity to level up and improve vendor management protocols to reduce risk to the company and its customers.
Vendor Management at Level 1
Companies at Level 1 of the maturity model in terms of vendor management are reactive instead of proactive and struggle with unpredictable processes. Many organizations at this level rely on shared spreadsheets to track vendors. And information on vendors—agreements, security reviews, monitoring policies, and more—is spread throughout the company’s file storage systems.
Vendor Management at Level 2
Companies who have matured to Level 2 have defined more consistent processes. They often still rely heavily on spreadsheets but have implemented some generalized software platform to help manage workflows (i.e., a project management system or a calendar for reminders).
Vendor Management at Level 3
Maturing to Level 3 is like upgrading from a flip phone to a smartphone. At this level, processes are standardized and proactive, with automations to help streamline workflows and save time. From the “managing vendors” side, level 3 companies are able to quickly and thoroughly evaluate potential vendors at the beginning of the relationship as well as on an ongoing basis.
From the “being a vendor” side, they can respond to security questionnaires with less time and fewer people. At Level 3, compliance becomes a revenue driver with current and potential customers, as opposed to a cost center like at lower levels.
Vendor Management at Level 4
At Level 4, organizations have standardized, proactive processes that are automated as much as possible. Workflows are controlled, measured, and applied to multiple projects. As a result, GRC teams can move quickly on evaluating vendors and being evaluated as a vendor, and they can report on the value of these processes to the business’s bottom line through the pipeline, close rates, and sales velocity.
Benefits of Leveling Up Vendor Management
Companies that move purposefully through the levels of maturity when it comes to vendor management are reducing their risk, making GRC an integrated part of the sales process, and better protecting their customers and data.
Changing the Security Conversation
Proving security compliance is vital for building trust between vendors and customers. However, establishing and maintaining security verification becomes more complex as products and security standards and frameworks evolve.
Companies at the most advanced level of security maturity build trust and use it as a competitive advantage. Leveled up organizations transition their GRC approach from simply checking boxes to having real trust-building conversations.
Speeding Up Sales by Streamlining the Security Questionnaire Process
At Levels 1 and 2, the sales process is often slowed down by manual, labor-intensive processes that might look something like this:
- A potential customer sends their security questionnaire.
- The request goes to the salesperson who attempts to answer it and passes sections off to various teams.
- Each team (security, legal, product, marketing) has its own way of compiling the required information and reports.
- The salesperson tries to coordinate assignments and deadlines.
- The teams' responses have duplicate information.
- The salesperson and/or compliance manager works to clean up the information provided by each team.
- Several weeks later, the security questionnaire is finally ready to submit!
Leveling up vendor management to Levels 3 and 4 helps remove compliance as a sales impediment by making security questionnaires easier to complete and documentation easier to compile and share. Higher level organizations can work through the security questionnaire process in a few days:
- Potential customer signs an NDA.
- The appropriate watermarked reports and other documentation are shared automatically and securely.
- Additional information can be requested and submitted quickly.
- GRC is removed as a delay to the sales process!
Organizations accomplish these goals by implementing smart GRC software that helps manage security and compliance at every step ofthe vendor management process.
Proving Compliance's Value
Organizations carrying out vendor management at Levels 3 and 4 of the maturity framework experience a drastic improvement in how compliance is viewed throughout the organization, compared to Levels 1 and 2.
Instead of being seen as a cost center or an impediment to sales, compliance becomes a selling point for potential customers. It’s easier for businesses to buy from you because you’re secure—managing risk on your own vendors and over performing on other GCR activities becomes a selling point.
How to Reach Vendor Management Maturity
The first step to maturity is knowing where you currently stand. Based on the descriptions above, identify at what level your organization is doing vendor management currently.
Companies at level 1 should focus on your processes. Get them documented, improved, tested, and implemented consistently. Then work on making each process repeatable and streamlined across your organization.
Companies at level 2 are in a great spot for seeing huge value from streamlining GRC and vendor management processes. To get to level 3, make your processes more proactive. You’ll need tools and software to help you with automation and control.
Companies at level 3, great work! You’re doing well. Take a minute to high five yourself. Then sign up for a free trial of Conveyor to see how you can get to level 4 with intelligent automation, alerts, and proactive solutions.