How to build a business case for vendor management software

Managing the performance of vendors and the risks they represent to your business can be a time-consuming, error-prone process when performed manually or with basic software.

It’s not a viable proposition when your business’s vendor numbers increase and you’re under extra pressure to manage them more effectively.

The availability of vendor lifecycle management (VLM) software is growing, presenting opportunities for your business to improve its approach and processes.

Securing approval to obtain VLM software often requires a strong business case, highlighting the quantifiable benefits of implementing technology to do a better job.

Seven steps to build a VLM software business case

1. Identify stakeholders and tailor the message
2. Highlight current vendor management challenges
3. Outline the benefits of using vendor lifecycle management software
4. Quantify the value proposition (ROI)
5. Define key performance indicators (KPIs) of implementing VLM software
6. Describe the software selection process
7. Present the business case

1. Identify stakeholders and tailor the message

Executives and senior management:

• Show how VLM software aligns with business goals like cost reduction, operational efficiency, risk mitigation, and improved compliance.
• Address concerns about implementation issues such as data migration and user adoption.

Department heads:

• Highlight individual departmental benefits like streamlined procurement, vendor relationship management and collaboration processes, improved process efficiency, reduced admin burden, and better vendor performance tracking.
• Outline how training and support will be provided for users.

IT personnel:

• Focus on data security and system integration capabilities.
• Determine the availability of necessary infrastructure for operating or accessing the VLM software.

2. Highlight current Vendor Management challenges

Provide a clear picture of the practical challenges currently encountered with how vendors are managed, covering matters such as:

• Data discrepancies and inaccuracies in vendor information
• Limited tracking capabilities for monitoring vendor performance and activities
• High levels of the administrative burden associated with manual vendor management processes
• Compliance risks due to inconsistent or outdated vendor management practices
• Difficulty in proactively identifying and addressing vendor-related issues.
• Lack of visibility into the status of vendor management activities and progress
• Inefficient communication and collaboration with vendors
• Manual and time-consuming processes for collecting and analysing vendor data
• Challenges in maintaining up-to-date vendor documentation and records.

Outline the benefits of using VLM software

Introduce vendor management software as a solution that can address current challenges.

As an example, here’s how some relevant functional capabilities of Gatekeeper’s software will help:

Vendor Management Challenge	Gatekeeper VLM Capability
Data discrepancies and inaccuracies in vendor information	Centralised Vendor Database: Gatekeeper provides a central repository for storing and managing all vendor data, ensuring consistency and accuracy
Limited tracking capabilities for monitoring vendor performance	Vendor Performance Management: Track key performance indicators with Gatekeeper’s visual dashboards, monitor activity logs, and generate reports to assess vendor performance with Balanced Scorecards
High levels of administrative burden	Workflow Automation: Automate manual tasks like onboarding, prequalification, approvals and renewal processes with the Kanban Workflow Engine, reducing administrative burden
Compliance risks due to limited vendor monitoring	Compliance Management: Be automatically alerted to changes in your vendor’s financial, cyber and risk profiles via our Market IQ Suite
Difficulty in proactively identifying and addressing vendor-related issues	Risk Management: Identify potential risks associated with vendors, set risk thresholds, and use them to trigger risk mitigation workflows
Lack of visibility into the status of vendor management activities and progress	Real-time Dashboards: Gain real-time insights into the status of vendor management activities, offering clear visibility into progress and overall performance
Inefficient communication and collaboration with vendors	Vendor Portal: Facilitate secure onboarding, communication and collaboration with vendors through Gatekeeper's dedicated vendor portal
Manual and time-consuming processes for collecting and analysing vendor data	Data Integration: Integrate Gatekeeper with existing systems such as NetSuite to streamline data collection and automate analysis, saving time and effort
Difficulties in maintaining vendor documentation and related records up to date	Data Delegation: Mandate the information the vendors must provide and keep up-to-date as part of onboarding and renewal with Gatekeeper’s due diligence questionnaires

 

Quantify the Value Proposition (ROI)

Indicate how the benefits obtained from the use of VLM software deliver financial and operational value to the business. You can use the ROI calculator below.

You should also focus on the following areas: 

• Reduced admin overhead, ability to complete more VLM activities with fewer errors in less time, minimised disruption to other workloads through automated notifications, reduced need for extra resources to manage an increasing number of vendors
• Wider visibility of risk related to vendors and their supply chain, allowing more focused mitigation strategies, faster responses to potential or actual risk occurrence, and maximized containment of flow-down risk from vendors to the business
• Improved decision-making based on the visibility of vendor spend, risk status and service delivery performance
• Enhanced user experience and satisfaction with the VLM software versus spreadsheets and manual activities
• Better vendor performance in service delivery, compliance with contractual and regulatory obligations, and adherence to agreed vendor management processes
• Increased collaboration and communication with vendors and among internal teams interacting with them
• Defined and agreed KPIs to measure the success of implementing a new solution.

Define Key Performance Indicators (KPIs) of Implementing VLM Software

KPIs are essential metrics used to evaluate the effectiveness and success of implementing vendor lifecycle management software.

Suggestions for some common  KPIs that should appear in the business case include:

• Cost reduction: quantify the reduction in administrative costs, such as labour hours spent on vendor management tasks
• Process efficiency metrics: measure the efficiency of vendor management processes, such as cycle times, approval delays, and error rates through automation
• Time saved: measure the time saved in vendor onboarding, ongoing management and termination processes compared to previous manual or less efficient methods
• Vendor compliance rate: evaluate the percentage of vendors compliant with contractual terms, regulatory requirements and internal policies before and after implementation
• Vendor performance: track improvements in vendor performance metrics, such as on-time delivery, quality of products or services, and adherence to contractual terms
• Vendor relationship satisfaction: assess the satisfaction levels of internal stakeholders and vendors with the vendor management process and VLM software usability.

Including these and other relevant KPIs in the business case provides stakeholders with clear metrics for assessing the impact and value of implementing vendor lifecycle management software.

Describe the Software Selection Process

• Present a brief overview of the software evaluation process, including its purpose, objectives, and scope
• Outline the criteria used to evaluate the software options, such as functionality, scalability, usability, integration capabilities, vendor reputation, cost, and support services provided
• Note if the vendors have, as Gatekeeper does, in-house implementation consultants with deep product knowledge and configuration expertise, a standardised implementation approach, and customer success managers dedicated to ensuring that implementation goes according to plan
• Highlight any specific requirements or priorities identified during the evaluation process
• List the software options considered during the evaluation, including their names, vendors, and brief product descriptions. Detail the outcomes of discussions held with customers named by each vendor about the success of their software implementation
• Summarise and compare the findings of the evaluation for each software option, highlighting strengths, weaknesses, and suitability for the business's needs
• Include quantitative and qualitative assessments based on the evaluation criteria
• Clearly state the preferred software option selected based on the evaluation results
• Justify why the preferred software best meets the business's requirements and objectives compared to other options
• Discuss any trade-offs or compromises made during the selection process

Present the Business Case to your CFO

• Address Concerns: Anticipate and address potential concerns the CFO may have, such as implementation costs, ROI timelines, and integration with existing systems. Provide evidence-backed responses to alleviate any doubts or objections
• Tailor the Message: Customise your presentation to resonate with the CFO's priorities and communication preferences. Focus on financial metrics, strategic alignment, and bottom-line impact to capture their attention and support
• Provide Supporting Materials: Supplement your presentation with relevant documents, such as financial projections, case studies from your preferred vendor, and vendor comparisons. Offer additional resources for deeper dives into specific aspects of the business case
• Seek Feedback and Collaboration: Encourage an open dialogue with the CFO and invite their input throughout the presentation. Position the discussion as a collaborative effort to align on shared goals and priorities.

Vendor management software is an investment in building stronger relationships, optimising processes, minimising risk, and gaining a competitive edge.

Wrap up

By following the outlined approach and addressing key considerations, you can build a compelling business case that helps move your organisation beyond manual processes.

While a compelling business case doesn’t guarantee approval, it’s much more likely to deliver that outcome than any ‘back-of-an-envelope’ approach.

To learn how Gatekeeper can help with the management of your vendors, don't hesitate to get in touch with us.