Tips for Vendor Management in Software Outsourcing


30 Jul, 2020


5 min read

digital products

Teamwork is an essential ingredient for successful software outsourcing. From team organization to open-communication, knowledge of employee roles, and more, all contribute to the success of your software development project.

It also means having top-notch vendor management skills to build lasting relations with your service providers.

Vendor management is an umbrella term that defines the process of controlling development costs, reducing risks, ensuring excellent service, and timely delivery of outsourced projects. From researching on the best vendors to the total cost, quality of work, managing relations, and evaluating their performance, is the responsibility of entrepreneurs when outsourcing projects.

That said, the process comes with its challenges. It is challenging to manage multiple vendors and monitor the project as it progresses. But if you understand the expected problems and how to dodge them, you can ensure maximum success.

Thus, here we highlight some complications that come with vendor management and tips to overcome them:

Challenges in Vendor Management

Vendor management offers many benefits for entrepreneurs looking to outsource their software development projects. From a variety of vendor options and contract management to excellent performance, and a better relationship with your development partners, and much more comes with vendor management.

But if implemented incorrectly, these benefits do not outweigh the resulting difficulties. Some of the challenges you can expect are:

Vendor Compliance Risk

Research is vital to any decision you make as an entrepreneur dealing with B2B service providers. Not every vendor will deliver a similar quality of work. Meaning, lack of knowledge on available vendors can cost you dearly in terms of quality, time, and money.

Set your standards before you select your vendor. Ask yourself who can meet the criteria, ensuring world-class software, a cost-effective solution, and excellent performance to help your decision.

Vendor Reputation Risk

When it comes to selecting vendors for outsourcing software development, you need to be sure of their reputation in the industry. Plus, you need to ensure their quality of work is unparalleled, relative to other vendors before you sign a contract.

Choosing vendors whose work is not up to the industry standard will lead to delay in deadlines and disrupt your business goals.

Vendor Data Storage

Vendor management includes organizing your vendor data. As a company grows, you have multiple projects in progress. Meaning, you may have several outsource partners working on different software.

Without a vendor management system, it will be challenging to store and find information for relevant companies. Thus, you need a data storage solution to keep all information arranged in an orderly manner.

Lack of Visibility

Improper data storage also leads to a lack of visibility, which may create resource allocation problems and decrease the efficiency of the team.

Thus, a centralized data storage solution not only allows proper vendor data management but also improves the visibility of operations for the entire organization.

Vendor Payment Risk

Regardless of the industry standard, not all vendors operate on the same payment plans. That said, it can be challenging to understand their payment terms and ensuring that each one is made on time. It is particularly tricky when you multiple vendors as outsource partners, working on different software projects with separate deadlines and expenses.

Tips for Vendor Management

With such challenges, we can say that having an effective vendor management system in place is vital for successful project management.

That said, before you start on your next outsourcing project, here are some tips you can put into practice for efficient vendor management:

Appoint a Dedicated Project Manager

The proverb, ‘too many cooks spoil the broth,’ is an excellent way to explain why you need to appoint a project manager before you get started. Instead of too many people communicating with the vendor, assign the responsibility to one person who understands the project goals.

Whether you pick a team lead or business development manager, they must engage with the vendor’s team lead to review their plan and oversee the project’s progress.

Communicate Often and Clearly

With outsourcing, vendors are most often in a different part of the world. Thus, a project manager is also responsible for ensuring clear-cut communication between you and the vendors.

Communication tools like Slack or project management software like JIRA help ensure transparency and accountability. They help in monitoring the progress, ask questions, solve concerns, and more, with ease. For successful software development, communication is a vital factor.

Provide a Clear Picture of Your Project

To ensure your software development project is on par with your business goals, you must provide a clear idea of your expectations and what you aim to achieve. That said, you must deliver your chosen vendor with proper documentation explaining, in detail, the purpose of the software, deadlines, and goals.

When creating your documents, here’s what you need to keep in mind:

Tech specifications, business logic, and manuals;

Guidelines for test schedules, reports, and meeting notes;

Set a reasonable timeline and budget expectations;

Include details on software architecture with description, program source code, and other relevant information.

Understand Cultural Differences

When it comes to outsourcing software development, cultural and geographical differences come into play. So, to build strong relations with your chosen vendor, be considerate of their concerns. Here are some primary issues you must understand:

The difference in time zones

Organizational hierarchy

Offensive words or phrases

Business ethics that may vary between cultures

Their standard working days and hours

Political standing


Ways to address each other respectfully

These issues depend on the location of your outsourcing company. Thus, understanding the differences in world cultures is one crucial factor to not only ensure the success of your project but also to strengthen relations with your vendor.

Remain Responsive and Available

We mentioned that communication is vital for successful vendor management. But communication is a two-way street. Meaning, not only do you need to ensure your vendor understands your goals and vision, but you must also be available and responsive whenever needed.

You need to practice checking your emails or social platforms as often as necessary so that the vendors can reach you whenever they have questions or concerns. It will help in ensuring your project stays on track and meets its deadline.

Determine the Right KPIs

Performance indicators or KPIs are the metrics that determine the success of your software project. It is also a crucial factor in vendor management to measure the success of the vendor during and after development.

Smart KPIs also help in highlighting your business needs and prioritizing tasks that are essential to achieving your goals. That said, set your KPIs before presenting them to your vendor:

Establish objectives

Outline your project criteria

Research and collect data

Then build your formula for a successful project

Note that as you update your project goals and objectives, you also need to adjust your KPIs.

Put These Tips into Practice to Build Better Relations with Your Vendors

Software outsourcing is immensely beneficial as it allows you to focus on other company operations simultaneously.

That said, to ensure its success, an effective vendor management system is essential. Being clear in your project goals and expectations will help in assuring the software is as you visualized. Plus, it will help in building lasting relations with vendors for future collaborations.

I hope the blog helps in understanding how to manage your vendor relations effectively. So, if you have an idea for software development, outsource to us, and we’ll help you reach your goals.



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