Vendor Management Software Market Size, Share, and Industry Analysis, By Deployment (Cloud and On-Premise) By Enterprise Type (Large Enterprises and Small and Medium-sized Enterprises (SMEs)), By functionality (Analytics & Reporting, Procurement & Sourcing, Onboarding & Compliance, Performance Management, Contract Management, and Others), By Industry (BFSI, IT & Telecom, Manufacturing, Energy & Utilities, Healthcare, Aerospace & Defense, and Others), and Regional Forecast till 2032

The global vendor management software market is rising significantly as this software helps to automate and smoothen the tracking and onboarding of numerous vendor management processes. Various vendor management practices include vendor onboarding, vendor risk management, contract management, vendor relationship management, and many other practices.

As enterprises of all types rely more on vendors for solutions and services that improve operational security and efficiency, creating an effective vendor management strategy is necessary for business success. It also helps enterprises optimize billing, integrate compliance management, minimize delays in the supply chain, and provide many other benefits. Such factors aid the growth of vendor management software across different sectors.

Moreover, enterprises of different types are experiencing SaaS extensions. The pervasive implementation of SaaS applications emphasizes the requirement for efficient vendor management to manage the complexity of numerous purchases and subscriptions.

• According to Spendflo Insights on SaaS Vendor Management 2024, nearly 40% of businesses are making use of over 50 SaaS tools, and 5% are leveraging 250 plus.

Impact of Generative AI on the Purpose-Built Application Market

Generative AI presents a range of creativity, flexibility, and adaptability by creating new content, scenarios, and knowledge from varied data sources. Regarding vendor management software, generative AI can create custom-made candidate experiences, create synthetic data for teaching machine learning models, or mimic workforce set-ups for strategic planning.

GenAI has started appearing in newer VMS solutions through LLMs (Large Language Models), generating outputs not seen with traditional artificial intelligence mechanisms. Hence, major VMS providers are implementing some applications of traditional AI and GenAI applications, which are beginning to appear in niche and purpose-driven VMS offerings. Growing usage of generative AI capabilities in these applications can open up various new prospects for market players.

Vendor Management Software Market Driver

Increasing Cyber-attacks due to Extended Supply Chain Drives the Demand for Vendor Management Software

Numerous market enterprises need to work with thousands of vendors connected in supply chains extended across the globe. Thus, it is difficult for firms to know everything they need about their dealers/vendors and monitor and control their performance. It’s challenging to know the vendors they work with, the ones they work with, and other jobs. Lack of knowledge increases the risk of data breaches, cyber-attacks, business losses, and many other factors. For instance,

• According to Airbase Insights 2024, 18% of enterprises work with approximately 1,000 third-party dealers. And 40% of cyberattacks are initiated in the expanded supply chain. That makes handling vendor risk a severe issue.

The adoption of vendor management software helps enterprises continuously monitor vendor performances, provides comprehensive risk assessment tools for financial stability, manages incidents on automated work operations, and provides many other benefits. Such benefits increase the demand for vendor management software in the market.

Vendor Management Software Market Restraint

Complex implementation of Vendor Management Systems Can Impede Market Progress

Various enterprises struggle to implement and integrate VMS with their existing systems, owing to their complex nature. It leads to potential disruptions and increased costs. Transferring vendor data from existing systems to new systems is time-consuming and requires efficient planning and accuracy. It takes approximately 12 months to set up a vendor management solution through the enterprise, and even then, only after thorough planning.

Also, employees may resist changes in methodologies and tools owing to a lack of technical knowledge. Such factors make the adoption of these solutions more challenging, thereby affecting the demand for this software in the market.

Vendor Management Software Market Opportunity

Rising Privacy Concerns and Regulatory Compliance to Create Various Market Opportunities

Governments and regulatory bodies are aware of the unsteady and perilous nature of attacks across different sectors. More regulatory and Legislative reforms are expected to line up in the coming future. Lawbreakers are increasingly focusing on infrastructure, and privacy and security are becoming contentious political issues. As a result, most regions are expected to experience overregulation and overcorrection. For instance,

• According to industry experts, approximately 75% of the population across the globe will be subject to a minimum of one set of privacy rules. Hence, businesses need to start laying the foundation for modifying that new environment and begin with a framework for vendor risk management developments.

Hence, enterprises need to align their solutions to common directing standards or frameworks such as ISO and NIST, making mapping procedures to precise compliance necessities easier.

Such regulations and compliance can increase the need for vendor management software that precisely aligns with the standards, thereby creating numerous market opportunities.

Segmentation

Key Insights

The report covers the following key insights:

• Micro Macro Economic Indicators
• Drivers, Restraints, Trends, and Opportunities
• Business Strategies Adopted by the Key Players
• Impact of Generative AI on the Global Vendor Management Software Market
• Consolidated SWOT Analysis of Key Players

Analysis by Deployment

By deployment, the market is divided into cloud and on-premise.

Cloud-based deployment accounts for the highest market share for the year 2023, owing to its several benefits, such as process automation, incorporation with supplier partners, enhanced mobility within payment procedures, and many more benefits. With everything at one source, users can easily keep track of communications and follow up as per the requirements, resulting in better relationships with vendors and enhanced service overall. On-premise vendor management software is maintained and deployed on a firm’s servers. It provides enterprises with complete control over their security and data, but it necessitates significant upfront investment in hardware, software, and IT expertise.

Analysis by Enterprise Type

By enterprise type, the market is divided into large enterprises and small and medium-sized enterprises (SMEs).

Small and mid-sized enterprises are projected to grow with maximum CAGR during the forecast period. Vendor management software caters to the requirements of small enterprises, simplifying the supply chain, improving vendor relationships, and the impact they hold in handling vendor contracts and whole supplier relationships.

Analysis by Functionality

By functionality, the market is divided into analytics & reporting, procurement & sourcing, onboarding & compliance, performance management, contract management, and others.

Procurement and sourcing are estimated to grow at a significant growth rate, owing to the increasing demand from enterprises to manage their vendor relationships efficiently. It also provides enterprises with access to a wide network of suppliers, procurement agility, mitigates procurement risks, and many more. For instance,

• According to Industry Insights 2023, digital transformation stands at the third highest priority in the coming 12 months, with 80% of CPOs (Chief Procurement Officer) recording it as their enterprises’s highest priority.

Analysis by Industry

Various industries that have implemented vendor management software include BFSI, IT & telecom, manufacturing, energy & utilities, healthcare, aerospace & defense, and others (logistics, transportation).

Manufacturing is projected to grow considerably during the forecast period as vendor management software helps manufacturers optimize and streamline their complete lifecycle of working with external suppliers. Various key features of the software, such as centralized vendor information, contract management, inventory management, communication and collaboration, and performance monitoring, among other features, contribute to the market growth. It also helps manufacturers optimize costs, increase supply chain efficiency, improve quality control, and much more.

Regional Analysis

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In terms of geography, the global market is segmented into North America, Europe, Asia Pacific, South America, and the Middle East & Africa.

North America accounted for the highest market share for the year 2023 due to the early adoption of technological advancements and the eminence of big tech companies contributing to the market growth in the region. Also, the stringent regulations in the U.S. and Canada across healthcare, government, and finance for vendor management in the region aid the market progress in the region.

The Asia Pacific market is projected to grow with a significant CAGR during the study period owing to changing regulatory requirements, the emergence of technological innovation, and the extensive adoption of digital solutions. Also, countries such as China, Australia, India, and other emerging markets in Southeast Asia, including Vietnam, Indonesia, and Thailand, have observed progress in their economies owing to the increasing demand for their exports in the international market.

Key Players Covered

The global vendor management software market is consolidated, with numerous players in the market.

The report includes the profiles of the following key players:

• Empronc Solutions Pvt. Ltd. (India)
• GEP (U.S.)
• Oracle Corporation (U.S.)
• IBM Corporation (U.S.)
• Coupa Software (U.S.)
• 360factors, Inc. (U.S.)
• Bentley Systems, Inc. (U.S.)
• Deskera (Singapore)
• SAP SE (Germany)
• Freshworks Inc. (U.S.)

Key Industry Developments

• In February 2024, SourceNow announced the launch of a vendor management system, SourceNow VMS. The company aims to transform how enterprises navigate and obtain temporary workforce solutions. SourceNow VMS empowers organizations with transparency, efficiency, and flexibility.
• In May 2023, Vanta introduced a vendor risk management solution (VRM) to enable enterprises to automate, accelerate, and streamline third-party vendor security evaluations and outstanding diligence. With continuous vendor assessment, auto-discovery, and remediation work operations, the VRM of Vanta considerably minimizes the costs and time for security experts and beginners alike to manage, report, and review third-party vendor risk.