Working with External Vendors: Risk Management and Best Practices

You just secured the budget to scale your product, and now every decision you make needs to show value. Bringing in external vendors is necessary for speed and expertise, but it comes with risks—misalignment, hidden costs, security concerns, and the possibility that deliverables won’t meet expectations. If things go wrong, you’re the one who has to answer for it.  A survey by Deloitte found that 71% of procurement leaders believe that increasing supplier risk is a major challenge facing their organization.

Managing external vendors in a corporate environment isn’t just about contracts and deadlines. It’s about ensuring seamless collaboration, maintaining product stability, and proving ROI to leadership. Without the right approach, you could face communication breakdowns, cost overruns, or vendor lock-in—turning what should be a growth initiative into a bottleneck.  

In this article, we’ll break down the biggest challenges of managing external vendors and provide practical strategies to keep your project on track.

1. The Challenges of Managing External Vendors

Working with external vendors can be a strategic advantage—giving you access to specialized skills, accelerating timelines, and allowing your internal teams to focus on core business goals. But it also comes with risks. Without the right structure in place, vendor relationships can lead to delays, misalignment, and unexpected costs.

Here are the biggest challenges you need to anticipate and how to address them.

1. Lack of Control & Visibility

When working with external vendors, you don’t have the same level of control as you do with your internal teams. Vendors have their own processes, priorities, and working styles. Without direct oversight, it can be difficult to track progress, ensure accountability, and intervene early when things go off track. According to Gartner, 60% of organizations work with more than 1,000 third parties, complicating oversight and increasing the potential for misalignment.

How to overcome it

• Define clear KPIs and reporting structures – Set measurable success criteria upfront and require regular progress reports.
• Use real-time collaboration tools – Platforms like Jira, Confluence, or Slack can provide visibility into ongoing work.
• Assign an internal vendor manager – A dedicated point of contact ensures alignment and quick decision-making.

2. Misalignment with Business Goals

Your vendor might be focused on delivering what they think is a great solution, but if they don’t fully understand your company’s objectives, the results may miss the mark. Without a clear strategy, vendors may prioritize speed over quality, focus on unnecessary features, or fail to align with long-term business goals. A case study by McKinsey highlights that closer relationships between buyers and suppliers can create significant value and help supply chains become more resilient.

How to overcome it

• Onboard vendors like internal team members – Give them context on your company’s vision, strategy, and KPIs.
• Set up structured check-ins – Weekly or bi-weekly syncs help course-correct before issues escalate.
• Share clear documentation and use case examples – Make sure they understand not just what needs to be done, but why.

3. Integration with Internal Teams & Processes

Bringing in external vendors means introducing new workflows, tools, and communication styles into your existing corporate structure. If not managed properly, this can lead to inefficiencies, duplicated efforts, and friction between teams.

How to overcome it

• Standardize tools and workflows – Choose project management and communication tools that work for both internal and external teams.
• Appoint a liaison for cross-team coordination – Someone needs to ensure smooth integration between vendors and internal departments.
• Test with a small pilot before scaling – Start with a limited engagement to work out process issues before committing to larger projects.

Each of these challenges has the potential to derail your project if left unaddressed. But with the right structure in place, you can build vendor relationships that drive efficiency and support your growth goals. In the next section, we’ll dive into the most common vendor pitfalls—and how to avoid them.

2. Avoiding Common Vendor Pitfalls

Even with the right vendors in place, things can still go wrong. Unexpected costs, security risks, and over-dependence on external teams can turn what should be a strategic advantage into a liability. To avoid these pitfalls, you need a structured approach to vendor collaboration—one that ensures transparency, accountability, and long-term flexibility.

We’ve worked with corporate teams scaling digital products across industries, and we’ve seen firsthand how mismanaged vendor relationships can slow down progress. The key is proactive oversight, clear expectations, and built-in safeguards to keep projects running smoothly. Here’s how we approach these challenges—and how you can too.

1. Managing Cost Overruns & Scope Creep

A vendor relationship that starts with a clear budget can quickly spiral out of control. Scope creep—small, seemingly harmless additions to a project—can add up fast, leading to delays and inflated costs. Vendors may push for extra features, or internal stakeholders may request changes that aren’t properly evaluated. Without tight financial oversight, you could find yourself justifying budget increases to leadership with little to show for it.

How to overcome it

• Define the scope in detail upfront – We use structured Product Validation Sprints to help our partners align stakeholders early, define must-have features, and set realistic timelines. The clearer the scope, the less room there is for ambiguity.
• Use milestone-based payments – Instead of paying vendors upfront or based on time spent, we tie payments to specific, measurable outcomes. This ensures that incentives remain aligned.
• Create a formal change request process – Any additional work should go through a structured approval process, assessing its impact on budget and timelines. Our teams use Agile roadmaps that allow for controlled flexibility—iterating quickly without losing sight of priorities.
• Set aside a contingency budget – We always advise setting aside a 10-20% buffer for inevitable changes. However, not every change should be absorbed automatically—only those that align with business goals.

Our Rapid Prototyping approach helps corporate teams validate ideas before committing to full-scale development, reducing costly rework down the line.

2. Ensuring Security & Compliance

When vendors handle customer data, proprietary technology, or sensitive business information, security risks increase. If a vendor fails to meet compliance standards or follows weak security protocols, it could expose your company to regulatory fines or reputational damage. The average organization has 182 vendors connecting to its system each week, many requiring privileged access, which poses significant security risks if not properly managed. For enterprises, this is non-negotiable—yet too many companies only realize a vendor is a security risk after an incident occurs. 

How to overcome it

• Vet vendors thoroughly before signing – Conduct security audits and ensure they comply with industry standards (GDPR, SOC 2, ISO 27001). Thinslices is committed to security best practices, and we work closely with enterprise teams to align with their internal security policies.
• Limit access to sensitive data – Not every vendor needs access to your full infrastructure. Set up role-based access controls to minimize exposure.
• Include security and compliance clauses in contracts – Make adherence to security standards a contractual obligation. This includes requiring vendors to report security incidents immediately.
• Regularly review security practices – Compliance isn’t a one-time event. Conduct quarterly reviews to ensure vendors maintain high security standards.

We integrate security reviews into our development lifecycle, working with our partners to ensure compliance from day one rather than as an afterthought.

3. Avoiding Vendor Lock-in & Dependency

Vendors that become too embedded in your operations can create long-term dependency, making it difficult (and expensive) to transition away if things go south. This is especially common when a vendor builds custom solutions without proper documentation, making knowledge transfer almost impossible. If your vendor holds the keys to your technology, they hold the keys to your future.

How to overcome it

• Negotiate knowledge transfer into contracts – At Thinslices, we work with our partners to document everything from architecture decisions to deployment processes. Make sure your vendors do the same.
• Use open standards and interoperable solutions – Avoid proprietary technologies that limit your ability to switch providers. We encourage corporate teams to prioritize scalable, flexible architectures that aren’t locked into a single vendor’s ecosystem.
• Train internal teams on vendor-managed systems – Even if a vendor is handling development, your internal teams should have enough technical knowledge to maintain and evolve the product independently.

Our approach is centered on transparency—whether that means co-developing solutions with internal teams, documenting every decision, or helping companies build internal capabilities to reduce reliance on external partners.

The key is to treat vendors as strategic partners, not just service providers. This means aligning expectations from day one, integrating them seamlessly with your internal teams, and creating a culture of shared ownership. When done right, vendors don’t just execute tasks—they actively contribute to your product’s growth.

In the next section, we’ll cover how to build strong, productive vendor relationships that not only mitigate risks but also accelerate product success.

3. Building Strong, Productive Vendor Relationships

Avoiding risks and setting clear expectations will keep vendor relationships from derailing, but if you want real value from external teams, you need more than just control—you need collaboration. The most successful partnerships happen when vendors are treated as an extension of your team, fully aligned with your product’s goals and empowered to contribute at a strategic level.

We’ve seen the difference between vendors who simply deliver on a contract and those who become true partners in scaling a product. The key is alignment, transparency, and shared accountability. Here’s how to make it happen.

1. Selecting the Right Vendor

Choosing the wrong vendor can set you back months. Some look great on paper but struggle to integrate into corporate workflows. Others lack the technical depth to support long-term scaling. The best vendors aren’t just technically competent—they understand corporate complexity, work well across teams, and can flex as your product evolves. 

How to do it right

• Prioritize enterprise experience – A vendor that understands corporate environments will handle stakeholder management, security, and compliance more effectively.
• Test with a pilot project – Before committing to a long-term engagement, start with a small project to evaluate working dynamics and delivery quality.
• Ask for references from similar companies – Don’t just look at case studies—talk to past clients about their experience working with the vendor.

We often begin with a Product Design Sprint, allowing corporate teams to test our approach, see how we collaborate, and ensure alignment before diving into full development.

2. Defining Success Early

Without a shared definition of success, even the most capable vendors can go off track. Ambiguity in KPIs, unclear expectations, or misalignment with business goals can lead to frustration on both sides. The earlier you set concrete, measurable success criteria, the easier it is to track progress and course-correct when needed.

How to do it right

• Develop a joint roadmap – Your vendor should be part of the planning process, ensuring their work supports your broader business objectives.
• Set clear, measurable KPIs – Focus on outcomes that matter, whether it’s reducing time-to-market, increasing feature adoption, or improving system performance.
• Establish regular performance reviews – Hold structured check-ins (weekly or bi-weekly) to assess progress, address blockers, and recalibrate priorities.

Our Product Validation Sprint helps corporate teams clarify their business objectives and translate them into actionable development roadmaps. This ensures all stakeholders—including vendors—are aligned before work begins.

3. Keeping Communication Transparent

Corporate teams often struggle with vendor communication—especially when working across different time zones, tools, and reporting structures. The more fragmented communication becomes, the higher the risk of delays, misunderstandings, and misalignment.

How to do it right

• Use shared project management tools – Platforms like Jira, Confluence, or Slack ensure transparency across teams.
• Hold bi-weekly syncs – Regular check-ins help identify risks early and keep stakeholders aligned.
• Encourage vendors to report risks proactively – A strong vendor relationship means vendors aren’t afraid to raise concerns when something isn’t working.

Getting vendor relationships right isn’t just about avoiding pitfalls—it’s about creating an environment where external teams actively contribute to your product’s success. When vendors are aligned with your strategy, understand your business goals, and integrate seamlessly with your internal teams, they become more than just service providers—they become growth partners.

But how do you measure the impact of a vendor partnership? How do you ensure that the investment you’ve made translates into real business value?

Let’s look at a real-world example.

4. Turning Vendor Collaboration into a Competitive Advantage

So far, we’ve explored the risks of working with external vendors and the strategies to mitigate them. But what does successful vendor collaboration actually look like in practice?

To illustrate how the right approach can turn external vendors into a real asset, let’s look at a case study. BMJ, a leading healthcare publisher, needed to scale their digital products efficiently while maintaining security and compliance. Their challenge wasn’t just finding a vendor—it was ensuring seamless integration, maintaining product stability, and moving fast without disrupting existing workflows.

Here’s how they tackled these obstacles and built a vendor partnership that helped them scale successfully.

Key Obstacles:

• Ensuring external developers fully understood BMJ’s mission and user needs.
• Maintaining a high standard of security and compliance in a heavily regulated industry.
• Avoiding disruption to existing workflows while introducing new features.
• Keeping iteration cycles fast without compromising on product stability.

What Made the Collaboration Work

1. Shared Ownership from Day One

BMJ didn’t treat their external development team as an outsourced service provider—they treated them as an extension of their own product team. From the start, our team was involved in strategic discussions, ensuring they understood not just what needed to be built, but why. This alignment helped bridge the gap between business goals, user needs, and technical execution.

2. Seamless Integration with Internal Teams

One of the biggest risks when working with external vendors is disjointed workflows. To avoid this, BMJ and the development team worked side by side, using the same tools, attending the same meetings, and following the same development processes. This deep integration created a frictionless collaboration, where external developers weren’t just executing tasks but contributing to product strategy, problem-solving, and continuous improvement.

3. Agile Development for Faster Iteration

BMJ needed to move quickly without sacrificing quality. By using Agile methodologies, our team helped roll out new features in controlled increments, allowing BMJ to test, validate, and refine based on real user feedback. Instead of waiting for months-long release cycles, BMJ was able to deliver meaningful updates in weeks, keeping pace with evolving market demands.

4. Prioritizing Security and Compliance

In healthcare, security isn’t just important—it’s non-negotiable. We worked closely with BMJ’s compliance experts to ensure that every development decision aligned with strict regulatory standards. By embedding security best practices into the development process from the start, they avoided costly rework and ensured that BMJ’s digital tools remained compliant as they scaled.

The Results

• Faster time-to-market: New product features were delivered in weeks instead of months, allowing BMJ to stay ahead of industry demands.
• Stronger product stability: Despite rapid iteration, system performance remained consistent, ensuring a seamless experience for end users.
• Scalable foundation: The collaboration didn’t just solve immediate challenges—it set up BMJ with a scalable architecture that could support future growth.

A successful vendor relationship isn’t just about outsourcing development—it’s about building a long-term partnership that supports growth. When external teams are properly integrated, strategically aligned, and given room to contribute, they don’t just execute tasks—they help shape the future of the product.

5. Vendor Relationships and Long-Term Business Impact

Managing vendors effectively isn’t just about keeping projects on track—it’s about ensuring long-term scalability, business resilience, and measurable ROI. As an executive, you’re not only focused on execution but also on how vendor relationships contribute to growth, efficiency, and competitive advantage over time.

Here’s how to think about vendor partnerships beyond the immediate project:

1. Vendor Relationships and Product Scalability

A vendor who delivers well in the short term but isn’t set up for long-term collaboration can create bottlenecks instead of growth opportunities. As your product scales, your vendor strategy needs to evolve with it.

Key considerations for scalability:

• Flexible engagement models – Can the vendor scale up or down based on your needs
• Technology alignment – Are they building solutions that integrate well with your long-term architecture?
• Cross-functional collaboration – Can they work seamlessly across your internal teams as the company grows?

2. Executive-Level KPIs for Vendor Management

Executives don’t need to track every operational detail of vendor management—but they do need clear metrics that indicate whether vendor relationships are driving business value.

Key KPIs to track:

• Time-to-market impact – How much faster are we delivering products/features with vendor support?
• Cost vs. value ratio – Are vendor costs translating into measurable business gains?
• Vendor performance scorecards – Are vendors consistently hitting SLAs (service level agreements) and business objectives?
• Innovation contribution – Are vendors introducing ideas or just executing what’s asked?

A Deloitte report found that companies with structured vendor performance management frameworks achieve higher cost savings (12-15%) and 20% faster execution on key projects.

3. Presenting Vendor ROI to Leadership

For executives, vendor management isn’t just about whether the work gets done—it’s about whether the investment was worth it. If you want to secure continued funding for external partnerships, you need to clearly communicate ROI to leadership.

How to present vendor ROI effectively:

• Link vendor impact to business goals – Instead of just reporting “Vendor X delivered Feature Y,” show how it improved adoption rates, customer satisfaction, or revenue.
• Use data to support value claims – Include stats on how vendors improved time-to-market, reduced costs, or enhanced product stability.
• Highlight risk mitigation – Leadership cares about risk as much as growth. Show how the vendor helped avoid potential compliance issues, security risks, or operational inefficiencies.

Scaling a product is never just about the technology—it’s about having the right partnerships in place to support long-term growth. When vendor relationships are managed strategically, they drive efficiency, reduce risk, and create competitive advantages.

Now, let’s wrap up with the key takeaways from this article.

Conclusion: Making External Vendors an Asset, Not a Risk

Managing external vendors for corporate growth projects is never just about outsourcing tasks—it’s about creating a partnership that drives real business impact. Done right, vendors don’t slow you down or introduce unnecessary risks. They help you scale faster, iterate smarter, and bring new expertise into your product development process.

If you approach vendor relationships with structure, transparency, and shared ownership, they stop being a source of friction and become a key driver of your product’s success.

And that’s the goal—not just to manage external vendors but to turn them into a competitive advantage.