Outsourcing Vendor Management: When Does It Make Sense?

Vendor issues are increasingly difficult to navigate as data breaches, operational disruptions, and emerging risks continue to change at a rapid pace. On top of that, your organization must continue activities like due diligence, risk assessments, and continuous monitoring.

By outsourcing vendor management, your organization can minimize costs, improve risk management outcomes, and reap the consequential benefits.

When it comes to vendor risk management, the statistics don’t lie.

Organizations are now handling more vendor than ever, with notable increases in programs handling 101-300 vendors (23% to 28%) and those with over 1,000 vendors (16% to 18%), according to Venminder's State of Third-Party Risk Management 2025 survey. 

However, staffing vendor management programs hasn't increased – programs with 1-2 full-time employees increased while those with 6-10 FTEs dropped significantly (from 10% to 4%).

With so many responsibilities, it’s no surprise that vendor management employees are overwhelmed and have trouble juggling priorities. Responsibilities are only increasing, so outsourcing vendor management is a valuable solution for organizations to invest in. 

Lack of Subject Matter Expertise and Low Vendor Management Capacity Are Real Issues

While experienced vendor risk managers are always an asset, it is extremely difficult to find a single manager with comprehensive knowledge and expertise in every area of a vendor management program.

10 Areas within Scope of a Vendor Management Program:

1. Contract Management
2. Research and Negotiations
3. Business Continuity and Disaster Recovery
4. SOC Report Analysis
5. Financial Analysis
6. Regulatory Compliance
7. Performance and Relationship Management
8. Line of Business Interaction
9. Board Reporting
10. Federal and State Regulatory Exams

This list isn't comprehensive, but provides a good idea of the scope of expertise needed for a successful vendor management program. It's unlikely that every item will be in your vendor management department's skillset. Even if you’re lucky enough to employ a unicorn or two, it's unlikely they’ll have the capacity to do it all.

In many cases, vendor management departments require subject matter experts from other departments within the organization. For example, the risk manager may ask an information security expert to review a vendor’s SOC 2 report and evaluate cybersecurity measures.

However, these experts have their own priorities and tasks to complete within their department. While experts are working on their own projects, the vendor management team is left waiting, leading to due diligence and required risk assessments being forgotten, lost in the shuffle, or left further behind among other activities.

Maturing Your Program by Outsourcing Vendor Management

Whether your vendor management team faces difficulties with understaffing or lacking in diversified expertise, it's necessary to find a proper solution so that your organization can perform the required due diligence, reports, and assessments.

Outsourcing to Access Expertise and Improve Capacity

What are the benefits to outsourcing vendor management? Is outsourcing the best solution for your organization? Will it solve issues with capacity and gaps in expertise?

There's a lot to consider, and you need to make the best choice for your organization to improve efficiency and your bottom line. Let’s go over how outsourcing can benefit your organization.

Outsourcing vendor management helps accomplish the following:

• Track and manage contract renegotiation and renewal dates
• Support vendor risk monitoring
• Collect and organize vendor due diligence questionnaires and documents
• Provide the review, analysis, and qualified opinion of vendor controls through the review of:
  
  • Financial reports
  • Evidence of regulatory compliance
  • Systems configurations, access management, and cybersecurity controls
  • Independent third-party reports, including SOC documents
  • Business continuity and disaster recovery plans and test results
  • Privacy policies and practices
  • Vendor risk management practices

How Outsourcing Helps Overcome Internal Vendor Management Hurdles

Many organizations are realizing that recruiting and hiring additional FTEs can be difficult, expensive, and doesn't always successfully address unpredictable vendor management's workload or expertise needs. The truth is that strategic vendor management can deliver more with the right software.

When considering if outsourcing portions of vendor risk management is right for your organization, there are several benefits to consider.

• First, it leads to greater efficiency by improving the vendor due diligence reviews. Many organizations note remarkable improvements in the quality, consistency, and timing of vendor due diligence reviews. In these instances, your organization can reap the benefits of your vendor relationship sooner, saving time and effort for other departments.
• Second, outsourcing allows your team members to play to their strengths and focus on important tasks such as vendor risk framework, internal oversight, and compliance with the program. Instead of sorting through a mountain of tasks, your team can prioritize big-picture items that strengthen your organization. 

Outsourcing vendor management is a great resource that allows you to retain employee talent and save costs while still meeting the regulations and objectives to create an effective vendor management program.

More Effective Programs and Reduced Costs

By prioritizing vendor management and using tools and software, your organization is protected detrimental consequences. Outsourcing vendor management defends against the costs related to inconsistent contract management, poor vendor quality, inadequate vendor business continuity/disaster recovery, improper management of customer complaints, and preventable regulatory fines, to name just a few.

Overall, outsourcing vendor management is a strategic investment that offers expertise, specialization, and capacity required to meet your risk management needs. At the end of the day, your bottom line will benefit and outsourcing vendor management services has never made more sense.

Interested in learning how other organizations are navigating vendor management challenges and using vendor management software?

Download the State of Third-Party Risk Management 2025 Survey Results.