IT Vendor Management in 2025: Best practices for overcoming challenges

Managing IT vendors is tough, and the explosion of SaaS applications isn’t making it any easier. Businesses are adopting more tools to stay ahead, but this often leads to SaaS sprawl—where disconnected apps multiply across the organization. The result? Inefficiencies, security gaps, and redundant vendor contracts.

Traditional IT vendor management isn’t built for today’s SaaS-heavy environments. It struggles to keep up with the risks and complexities of managing a vast network of tools and subscriptions. Effective IT vendor management can enhance internal operations and ensure a collaborative relationship between organizations and their vendors.

This article will discuss the basics of IT vendor management, the challenges and flaws of the traditional vendor management process for procurement, the advantages of centralizing your IT equipment vendors with a single vendor management software, and why IT vendor management is outdated in 2024.

What is an IT vendor?

An IT vendor is a company or individual that provides technology-related products or services to other businesses or organizations. These vendors can offer a wide range of solutions covering each part of the IT lifecycle. These include hardware (servers, computers, and networking equipment), software (operating systems, applications, and databases), cloud services, IT support, cybersecurity solutions, and more.

IT vendors are typically contracted to supply, install, manage, or maintain IT infrastructure and services.

What is IT Vendor Management: The basics

IT vendor management effectively oversees and coordinates external providers in alignment with an organization’s objectives and standards through structured vendor management processes. This approach encompasses setting clear expectations, defining roles and responsibilities, monitoring performance, and meticulously managing contractual agreements.

Effective vendor management involves a series of strategic activities designed to optimize the performance and reliability of third-party vendors. This includes everything from selecting the right vendors and negotiating contracts to monitoring vendor performance and managing risks. By maintaining a strong vendor management process, organizations can foster productive vendor relationships, achieve cost savings, and enhance operational efficiency. In today’s competitive business environment, having a robust vendor management strategy is essential for sustaining growth and achieving long-term success.

• Vendor selection: Managing vendor relationships starts by choosing the right partners. This involves carefully selecting third-party vendors that align with the organization’s business objectives, meeting both short-term needs and long-term strategy.

• Contract management: The goal is to create a mutually beneficial agreement acknowledging your organization’s requirements and the vendor’s services.

• Vendor performance monitoring: Tracking and assessing supplier performance against a defined set of key performance indicators (KPIs) ensures that third-party suppliers will deliver high-quality services. Setting expectations for performance enhancement is an ongoing part of the vendor management process, so both parties always know what to expect.

• Relationship management: Effective vendor management relies on strong vendor relationships. You must establish and maintain robust communication channels and promote collaborative efforts to achieve this.

• Risk management: Managing risk includes taking the necessary measures to safeguard against data breaches and other liabilities that could impact the organization.

5 Qualities to Look For in an IT Vendor

When selecting an IT vendor, it's crucial to consider several key qualities to ensure a successful partnership. Here are the five essential qualities to look for in an IT vendor:

Reliability and Trustworthiness: A dependable IT vendor should have a proven track record of delivering consistent and reliable services. This includes meeting deadlines, maintaining open communication, and being transparent about their processes and capabilities. Trust is fundamental, as you'll rely on them to handle critical aspects of your IT infrastructure.

1. Technical Expertise and Innovation: The vendor should possess extensive technical expertise and stay current on technological advancements. They should be able to offer innovative solutions that align with your business needs and help you remain competitive in a rapidly evolving tech landscape.

2. Customer Support and Service: Excellent customer service is a hallmark of a good IT vendor. They should provide responsive and practical support and promptly address issues or concerns. A vendor that prioritizes customer satisfaction will likely foster a positive and productive working relationship.

3. Scalability and Flexibility: Your IT needs will evolve as your business grows. A suitable vendor should offer scalable solutions that adapt to your changing requirements. Their flexibility ensures that they can accommodate your business's unique demands, whether you're expanding operations or adjusting to market shifts.

4. Security and Compliance: Data security is paramount in today's digital age. An IT vendor must prioritize robust security measures to protect sensitive information. They should also adhere to industry standards and compliance regulations, ensuring your organization remains secure and compliant with relevant laws and guidelines.

Steps to setting up an effective IT vendor management process

Identify key players  

Before anything else, define the individuals and entities involved in the agreement. Include the buyer’s and IT vendor’s full legal names and contact information. This foundational step establishes accountability and creates a reliable communication channel. Identifying who to reach when questions arise saves time and avoids unnecessary confusion during the project. Maintaining accurate vendor data is also crucial for enhancing compliance and risk management.

Create a Vendor Matrix

• Prepare a file in which you collect all key information about the vendors you work with, such as skills, scope of services, contact information, and people.

• Update the table when you finish or start working with a vendor.

• Such a file will help you keep things in order and make it easier to onboard new people in the company.

Establish a clear scope  

Outline exactly what the vendor is expected to deliver, ensuring no room for ambiguity. Provide a detailed breakdown of services, products, expected deliverables, timelines, and key milestones. Presenting a clear vision of the project’s end goal enables better alignment between all parties and sets a shared standard for evaluating success.

Set pricing and payment terms

Money matters should never be left vague. Clearly state the total cost, payment schedule, and accepted payment methods to ensure transparency. Additionally, address taxes, fees, and how any cost adjustments will be managed if changes occur. Addressing all financial details upfront helps avoid stressful surprises later.

Establish vendor onboarding protocols

• Your business partners can better understand your industry and project thanks to the onboarding process.

• Prepare materials (presentations, videos, articles, etc.) in which you discuss the characteristics of the sector you work in and your company’s values and services, profile your customers, and define where your project stands in the market.

Service level agreement (SLA)

A well-thought-out service level agreement (SLA) defines the level of quality you expect and evaluates the vendor's performance. To hold the vendor accountable, include specific metrics, timelines, and performance benchmarks. With measurable standards in place, you ensure consistent delivery and maintain control over the quality and pace of the project.

Intellectual property rights

Clearly define who owns intellectual property, such as software, code, or documentation. Detail licensing terms so both parties understand their rights. This step is crucial for safeguarding proprietary assets and preventing future disputes over ownership.

Confidentiality and data security

Establish robust protocols to protect sensitive information from the start. Outline the specific measures the vendor will take, such as encryption, access controls, and compliance with data protection regulations. Prioritizing data security ensures your information stays protected and helps build trust during the partnership.

Warranties and liabilities

Define the vendor's guarantees for products or services and their liability limits. Clear warranty terms and liability limitations protect both parties from unnecessary risk while fostering a balanced, mutually beneficial relationship.

Termination clause

Every contract should have a defined exit strategy. The strategy should specify the conditions under which either party can terminate the agreement, including issues such as poor performance or unmet obligations. It should also provide clear timelines, notice requirements, and financial consequences to ensure a smooth and amicable transition if the partnership ends.

Require vendor insurance  

Confirm that the vendor carries appropriate insurance coverage, such as general liability, professional liability, or cybersecurity insurance, to minimize risk. This shared responsibility creates an additional safety net, protecting against unforeseen issues.

Monitor subcontractor use  

If subcontractors will be involved, request transparency about their roles and qualifications. Require the vendor to provide clear documentation on who their subcontractors are and what tasks they will perform. This will keep everyone accountable and ensure that subcontractors meet your quality expectations.

Compliance with laws and regulations

Verify that the vendor’s practices align with local and international laws, regulations, and standards. This is especially important for projects spanning multiple jurisdictions. Compliance safeguards your company’s reputation and minimizes potential legal risks.

Change management process

Plan for inevitable changes in scope, budget, or timelines. Set up a structured change management process that defines how modifications will be proposed, evaluated, and approved. This ensures the smooth implementation of changes without disrupting the project’s progress.

Set up an internal team structure

• To effectively manage the work of third-party vendors, you must also divide ownership and responsibility within your organization.

• Determine who is responsible for specific aspects of working with vendors, such as billing, contract management, ongoing communication, approval of project stages, and onboarding.

• This will help ensure everyone is on the same page and the workflow is smooth.

The challenges of vendor management in IT

Data from Gartner show that 60% of organizations work with more than 1,000 third parties. Although companies must have various strong relationships with IT vendors to support their IT teams, it can also bring concerns regarding risk management and data security issues.

Managing multiple vendors also means your information is available to more stakeholders, opening up more vulnerabilities. Gartner Director Chris Audet explains that “third parties have greater access to organizational data assets and are working with an increasing number of third parties themselves.” If there ever was a data breach, your sensitive information could be more exposed than you think.

While there are strategies for effective vendor management, not all companies have them in place. Research from ISG states that 92% of Forbes Global 2000 companies use IT outsourcing, but only a few have an IT vendor management strategy. Vendor management efforts can become particularly challenging when decentralized across different departments, leading to inconsistent policies and fragmented communication.

A robust IT vendor management plan can help businesses select the most appropriate vendor based on affordability, availability, security, compliance regulations, and necessary features. However, even with a strategy in place, challenges may arise.

Ineffective contract process

Often, contracts are drawn up without a deep understanding of the rapidly evolving IT landscape. Additionally, there’s constant back and forth between you and the vendor, leading to loose ends in the agreement. This misalignment can cause discrepancies and inefficiencies when drafting those contracts, potentially binding organizations to outdated technologies or unsuitable terms. 

The IT vendor only has their best interest in mind

Much like any organization, vendors want the best deal for themselves. As much as you want reasonable prices and conditions, vendors want their profit. While you can prevent this by having clear service level agreements (SLAs) and expectations, there’s still a possibility for poor vendor performance, missed SLAs, delays, or falling short on other deliverables.

Inability to meet expectations

You are not your vendor’s only client, so it’s common for them to struggle to keep pace with every need in your organization. Remember that they are doing the same for many others. If something goes wrong or there's a supply chain disruption on their end, it also affects your business. If you don’t nurture your relationship with vendors, you end up with disruptions, delays, or misalignments in customer service and internal operations.

Lack of organization in large global organizations

Global organizations have large teams with long bureaucratic processes. Different teams and stakeholders need to review a single contract, making the overall process slow and sometimes disorganized. With so many vendors and contracts to oversee, keeping track of everything can be challenging. This task becomes even more daunting when you factor in geographical, regulatory, and cultural differences, which are the norm for global enterprises.

Poor coordination between different departments and leaders

Your IT team might want a specific product or service, but the Procurement team might struggle to see its value. Successful IT Vendor Management requires close collaboration among different departments and leaders within an organization. If coordination with the vendor management office is lacking, misunderstandings, miscommunication, and conflicting priorities can hinder the achievement of common project objectives.

Why the IT vendor management process is flawed for procurement

Most vendor and supplier relationship management processes include 7 to 10 steps that involve developing vendor management strategies, identifying vendor selection criteria, writing bid documents, evaluating suppliers, negotiating contracts, and managing relationships with third parties.

In recent years, companies have created a specific role dedicated to managing those relationships within their team. Vendor management enables companies to establish and maintain vendor management relationships for the long term, but it is still a long and complex process.

The traditional IT vendor management process is unsuitable for large enterprises, as it is time-consuming, requires extra staff to manage vendor relationships, and is complicated overall. Let’s break down the main reasons why the IT vendor relationship management process is flawed for procurement:

1. Not all strategies are effective

Companies manage hundreds of third-party vendors nowadays, so it’s challenging to develop a strategy that meets every need. Technology changes every day, and so do enterprise needs. That’s why managing vendors and establishing an up-to-date strategy that comprehensively covers business needs is incredibly challenging.

2. Constant bid document revisions

Setting ideal selection criteria is essential, but potential vendors may not meet all criteria in practice. As a result, the bid document may require constant revisions, which can be time-consuming and lead to delays.

3. Vendor research and selection is lengthy 

When managing international teams, researching and selecting vendors can be highly time-consuming. Especially for organizations with distributed and global workforces, the IT or procurement teams must look for and establish trustworthy partners in each region where they operate. Not to mention the challenges of organizing and categorizing vendors and reviewing every need and every contract while also considering potential risks associated with each option.

4. Negotiating multiple contracts can lead to bad deals

As the saying goes, you can’t bite off more than you can chew. Negotiating contracts with various vendors can be a long and intricate task. You need to review each contract and ensure it is beneficial for your company, and often, you have to do it all simultaneously to secure a good deal. If you take too long to review an offer, you can lose your initial deal and end up with a deal that doesn’t benefit you entirely. 

5. Onboarding vendors is time-consuming 

Every time you close a deal with a new third party, they have to follow your onboarding process to understand workflows and expectations from your side. Getting your supplier up to speed with your internal way of doing things can require a few days if not weeks. Vendor onboarding demands time and resources for integration and compliance checks to ensure a smooth start to the partnership.

6. Performance monitoring can hinder the relationship

Establishing working relationships with vendors is hard when you must constantly monitor their performance to ensure they meet your expectations. This involves setting up SLAs and regularly reviewing KPIs against agreed-upon benchmarks. In the long run, the need for constant performance monitoring can strain the relationship if any issues arise. 

7. Vendor relationships need to be continually optimized

To effectively optimize vendor relationships, seeking out and evaluating potential new partners is crucial. However, given that business needs and priorities are constantly evolving, this process may need to be restarted periodically to ensure that vendor relationships remain aligned with business objectives. 

The advantages of centralizing your IT equipment vendors with IT vendor management software 

Organizations rely mostly on IT vendor management because that’s how it’s always been done. However, we’ve already discussed how challenging the effective vendor management process is and the flaws it exhibits. One way to overcome these challenges and flaws is to centralize your IT equipment vendors.

Here are the six main reasons why it makes sense utilize vendor management software to centralize your IT equipment vendors:

1. It saves you money: 

Vendor management systems are complex, but with a single solution for saving on IT procurement services, you can achieve cost savings in terms of time and human resources. Instead of having a team dedicated to managing vendor relationships and relationship building, you only have to rely on one service to procure and manage your IT equipment, eliminating the need to traverse the conditions of vendor management and improving cost control. 

2. It improves performance management: 

With just one solution to oversee, managing expectations and SLAs is easier since you’re dealing with only one platform. That platform provides visibility over all your IT assets through tracking and reporting capabilities. This makes managing performance, compliance, and transparency easier throughout the vendor management lifecycle. Utilizing software tools like Kissflow, Precoro, and Jira can further enhance and automate this process.

3. It reduces risk: 

When you deal with a limited number of key partners it becomes easier to assess and mitigate potential risks. Your data is not available for multiple vendors, so there are fewer chances for breaches. With a single supplier who has high-security standards in place, you minimize risk.  

4. It saves you time: 

Managing numerous vendor contracts can be time-consuming and complex. A centralized platform streamlines the process, allowing you to concentrate on negotiating contract terms for a single agreement. This approach enhances the effectiveness of contract management while minimizing administrative burdens.

5. It doesn't require managing and maintaining multiple vendor relationships: 

Building and maintaining vendor relationships can be resource-intensive. With a centralized solution, you minimize the need to cultivate and nurture multiple relationships. Instead, you get visibility over your IT assets through a Dashboard where everything is always up-to-date.

6. It can scale with your growing business needs: 

A centralized approach to IT equipment vendors can quickly scale with your organization's growth. Since you’re managing a platform and not individual vendors, the service adapts to your needs regardless of geography. This way, you don’t have to look for vendors every time you expand to a new region because the platform is already available in that location.

7. Improve Vendor Performance Monitoring

• Vendor management software provides real-time visibility into vendor performance, enabling proactive management and improvement of vendor relationships.

• Key performance indicators (KPIs) and metrics can be tracked and analyzed to ensure vendors meet expectations and deliver high-quality services.

Case study

Canadian company Orium faced this exact problem a few years ago during the Pandemic. Tim Fernihough, Cofounder and Standards and Compliance Director, needed to ship computers to his new hires in Latin America but encountered many obstacles along the way. 

Tim researched services that would export and import their existing equipment to Canada but found them cost-prohibitive. He then considered building relationships with vendors in other countries personally, but that was not a scalable solution and required navigating language barriers.

Tim found in GroWrk a solution to his fulfillment and procurement challenges without having to build relationships with vendors whenever they hired someone in a new country. 

“I can trust GroWrk to have those relationships for me. I have one central place where I can come and say I need a laptop in Brazil, Peru, Chile, or Uruguay, and trust that GroWrk has the relationships to find those fulfillment partners quickly.” 

Best Practices for the Vendor Management Process

Clearly Define the Project Scope of Work

• A successful vendor management process involves taking a much deeper look at the scope of work you’re asking of your vendors.

• This involves an honest look at what an IT vendor can and cannot achieve, and writing up a scope of work document to include.

Collaboratively Define Roles & Responsibilities

• A collaborative definition of roles and responsibilities with a vendor can set you up for early buy-in.

• A few tips include being clear about expectations, defining clear roles and responsibilities, and establishing a communication plan.

Conduct Vendor Performance Reviews

• IT vendor performance reviews should be conducted at least annually, and more frequently if there are concerns about performance.

• The goals of a vendor performance review include identifying areas for improvement, providing feedback, and setting goals for future performance.

How to improve your vendor management strategy with GroWrk

The traditional multi-step vendor management process is outdated for global businesses. Managing multiple vendors is inefficient and unnecessarily complicated, especially when modern solutions can simplify the entire workflow.

With centralized platforms like GroWrk, you can consolidate procurement and asset management into a single Dashboard. Instead of juggling third-party vendors, you gain full visibility and control over every item from purchase to the end of its lifecycle.

Whether you’re stocking inventory or ordering for an employee, the process is seamless. Select the region and device type, choose the equipment, add it to your cart, and place the order. GroWrk handles the rest, ensuring timely delivery to your employees.

Additionally, the GroWrk Dashboard integrates with top HR and IT systems, making transitions effortless. It provides full transparency and control over your equipment’s lifecycle—without adding strain to your operations.

If you're ready to upgrade your strategy, explore how GroWrk’s solution can streamline IT vendor management for your organization. Our team is ready to show you how to centralize your vendor management. Book a demo today to learn more. 

FAQs:

What are the goals of IT vendor management?

IT vendor management serves several critical objectives. Firstly, it aims to control costs by ensuring that IT services remain cost-effective and within budget. It also focuses on risk mitigation, where potential risks associated with vendor relationships, such as service disruptions and security vulnerabilities, are identified and addressed. Another goal is to optimize performance by monitoring and improving vendor performance to meet or exceed service level agreements (SLAs). 

What is a vendor management strategy?

A vendor management strategy is a structured plan that outlines how an organization will oversee and optimize its relationships with third-party vendors. This approach includes defining objectives and business requirements, selecting vendors, negotiating contracts, monitoring performance, and managing risks. It is the blueprint that guides how the organization collaborates with vendors to efficiently and cost-effectively achieve business goals, mitigate risk, and meet its operational requirements.

What does an IT vendor manager do?

An IT vendor manager has a multifaceted role in managing vendor relationships. Their responsibilities encompass vendor selection, where they identify suitable vendors based on the organization’s specific requirements, especially for software development projects. They negotiate contracts, aiming to secure favorable contract terms and pricing. Continuous performance monitoring, which involves assessing vendor performance and tracking KPIs, is another critical duty. Vendor managers also focus on building productive relationships with vendors through effective communication, collaboration, strategic planning,, and risk assessment.

How do you choose an IT vendor?

To choose an IT vendor, organizations should consider factors such as the vendor's capabilities, pricing, service quality, compatibility with the organization's needs and goals, the vendor's reputation, and commitment to customer satisfaction.