At Zendesk, the leading customer support software, they’ve built a huge culture around SaaS products – with Zendesk being a SaaS product itself. In keeping with that philosophy, all of their vendors are SaaS companies, which they vet on a quarterly basis to ensure their offerings remain in line with what the company is looking for. In overseeing IT business apps for a company of 3,000 employees serving nearly 5,000 times the amount in customers, Mandy Shimshock of Zendesk needs to ensure the vendors she approves are the right fit.

Shimshock spoke about how to handle vendor management in detail at Biz Systems Magic, the first and only conference for Business Systems leaders. Acknowledging Zendesk’s SaaS-first philosophy, she helped develop their qualifications framework for incoming partners, saying the speed at which technology progresses today doesn’t allow you to stay stagnant for too long.

“We’ve all seen how this has changed the role of a CIO or IT leader. A couple of decades ago, when a CIO was making a decision for an application, they were making it for at least a decade for that ERP or HR software. That’s no longer the name of the game here. At this point, things are moving really quickly, and so you have to be agile with how you’re selecting your tools and getting them up and running.”

Choosing Vendors for a SaaS-First Company

The framework Shimshock helped develop consists of four components for vendor scoring: functional, technical, strategic and TCO. For functional, she wants to know how does the product meet the hands-on business requirements or use cases the company needs. For technical, she wonders whether the product itself will fit in well with their current ecosystem. “This is where open and robust APIs are going to come into play,” Shimshock said. 

For strategic, you have to think about the vendor’s relationship with your own company. “Is it a peer you’re looking at or a competitor,” she asked. This is something that should be considered.

Finally, she added, you have to look at the total cost of ownership. How much will it cost to get this product up and running? Is there admin involved? Do you need to hire additional staff or consultants? These are things you have to weigh, she said, when thinking about the monetary cost. 

After going through each element, you should put a percentage to each of the sections, or make your framework a grading rubric. Figure out the piece of the framework score that matters most to you and compare it to what the vendor offers. This should help you narrow down your choices for vendor selection. 

Checking Your Vendor Needs Off the List

After making sure the vendor is a cultural fit and provides the basics you need, now’s the time to run it through a bit more of an extensive review. First, according to Shimshock, you have to identify the use case. Do we need a good/service to satisfy this need, and if so, does it already exist in our ecosystem? If not, then you can move on to determining budget and timeline and how this fits into your ops plan for the next several months or quarters.

If this does fit into your overall business strategy, you must now engage Source-to-Pay (S2P) as this process (and the users who drive it) will oversee every step of procurement from spend management and strategic sourcing to purchasing, performance management and accounts payable. You’ll also need to identify whether this is software or a service. If it is software, you’ll need to determine a broader user group within your company (IT, security, legal, etc.). 

If needed, now’s a great time to circle back and make sure the must-haves in terms of use cases/functionality are there, as well as any nice-to-haves, and compare it to what the vendor offers in their RFP. Shimshock says it may also be helpful to have a RACI chart throughout this entire experience so it’s clear who owns what during the decision-making process.

Once you’ve heard from all stakeholders in the collaborate stage and any executives needed to make a final decision – making sure you’ve crossed all your t’s and dotted your i’s – be sure to have legal and other necessary parties issue a master service agreement spelling out legalities, a project-based statement of work, and a purchase order based on the agreed upon terms.

What to Do After a Vendor Purchase

Mandy Shimshock of Zendesk answers a question from the crowd at the Biz Systems Magic conference on Aug. 27, 2019, in San Francisco.

Once a vendor is on board, they still have to be reviewed to make sure they’re continuously meeting your needs throughout adoption and implementation. For this process, you’ll want to focus on high-value vendors – ones who have high growth and are categorized by risk, as you won’t have time to evaluate every single vendor you have. 

In QBRs, you’ll want to review the contract and financial performance, areas of opportunity, an upcoming roadmap of what’s next for implementation and any high-priority action items. You’ll also want to look at stakeholder participation and determine if this particular vendor warrants a quarterly review. For vendor SOC reports, you’ll want to check and make sure that they are meeting key deadlines year-over-year and have set controls in place to prove effectiveness. 

It also doesn’t hurt, Shimshock said, to lock in peer reviews, as you’ll want to figure out if there are any red flags or gaps you’re not aware of.

“Make sure to check any red flags before letting them ‘in the door’ again or at all, if possible,” Shimshock said. “It’ll save you a lot of trouble later.”

Open Communication Between Vendors and Business Systems

Overseeing Zendesk’s 25+ core applications can be tough, but is doable if you have the right processes in place. “We really want an open partnership here,” Shimshock said of the relationship with their vendors throughout the vetting process, “and so we want honesty. You know, what’s going well and what’s not. If there are modules we’re not using or don’t know about, if we’re not following best practices, if there are things that the vendor knows they need to work on, we need to know.”

“Having that communication upfront will make it easy to maintain a relationship moving forward and will help us embody the best-of-breed, SaaS-first philosophy that I’m sure many of us are moving towards.”

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Pamela Seaton
About Pamela Seaton

Pamela is a journalist and technology enthusiast writing for the growing business systems community.