Tips for Effective Software Vendor Management

13 October4 min read
Tips for Effective Software Vendor Management

These days, a lot of companies prefer to delegate their tasks to an external vendor to meet the desired goals and objectives. In the last few years, there has been a significant boom in the IT outsourcing industry making it the number #1 choice of global organizations ensuring fruitful partnerships. Especially, the software development outsourcing industry is gaining a lot of popularity. Based on the Statista Reports, the IT Outsourcing industry grew at a combined revenue of 351 billion US Dollars in the year 2021 and is expected to grow even more in the future. However, hiring a software vendor will help you in delivering the services at a fast pace while saving a lot of your money and time. 

The most challenging part of the whole outsourcing process is to establish a constant relationship with your software vendors which most of the companies fail to achieve. This is where you require effective vendor management to ensure a successful outsourcing journey. Curating a well-defined set of workflows at each stage of the software development outsourcing will serve as a crucial aspect for vendors. It will minimize the risks involved and will guarantee smooth collaboration between the involved parties. Before hiring your software vendor, it’s time to have a quick overview of some important tips for effective vendor management: 

1. Have a Clear Understanding of Your Project

It’s the most important yet the most underrated tip in the software vendor management process. Prior to boarding a software vendor, you must have a clear understanding of the know-how of the project. Right from technical documentation, program source code, to product specifications and budget expectations, everything must be defined clearly to avoid any misunderstanding with the third-party vendor. Step-by-step conduction and monitoring of each task will leave room for more clarity for both parties. Also, it’s important to go through a thorough market evaluation before finalizing the software vendor that resonates with your requirements. 

2. Set Clear Expectations

Each company has its own set of expectations while outsourcing the project to a software vendor. Onboarding a software vendor will require you to share major processes that would align them with your company’s goals and objectives. It’s important to convey your company’s expectations clearly right from the beginning to boost the growth of the company. Staying on the same page is the most important factor when it comes to collaboration with a third-party vendor. Following this step will reduce the chances of risks and other harmful threats that might serve as an obstacle to the completion of the project. 

3. Establish an Effective Communication

Streamlined communication with the vendor across each step of the software development outsourcing is yet another important tip to be taken into consideration. There are several communication channels that you can use to interact with vendors on regular basis. Some of those online platforms are Slack, Trello, Microsoft Teams, and so on. The choice of communication channels totally depends on your preferences. Frequent communication will be recommended to gather the timely progress of the project in order to avoid any misconceptions from happening throughout the outsourcing journey.

4. Establish Timely Deadlines

Achieving specific deadlines is and has been one of the most necessary aspects for successful partnerships. The companies should set clear deadlines for vendors right from the start to maintain transparency throughout the completion of the process. Instead of putting constant pressure on vendors for timely delivery, it’s always recommended to stay realistic when it comes to setting the right timeline. This will not only help them deliver the best quality final product but will also assist you in sustaining a good relationship with the third party. In fact, timely meetings twice or thrice a week will set the foundation for the successful delivery of the product.

5. Be Aware of Security Risks

Security is yet another concern that should be considered for effective vendor management. Vendors are likely to bring potential risks that might hinder the growth and reputation of your company. It’s important to monitor and track your vendors to prevent any malicious threats such as data breaches etc. from happening. Being in constant touch with the vendor will also help in preserving the overall security of the project. Risk mitigation-related agreements or data breach compensations should be made clear right at the beginning of the partnership to avoid major consequences. Conveying the risk mitigation management plan to vendors will help both parties eliminate major security risks. 


With the above being said and done, effective vendor management is not a one-day process, rather it requires a constant check based on your company’s goals and objectives. Keeping a track of vendors’ performance will help them deliver the best of their potential ensuring great quality. Next time, whenever you hop onto your next outsourcing partnership, don’t forget to hop on to these simple yet significant steps in mind for effective vendor management.