Tech companies move fast, taking products to market and aiming for hockey-stick-style growth. No matter their size, those scaling companies need the right equation to support their business objectives. Cost management used to be something only thought about when things became messy. In recent years, the concept has become more of a priority rather than an afterthought.
Each penny invested in operations, SaaS platforms included, should deliver a return towards the future. Using an excel spreadsheet for SaaS cost management is malpractice as it is incredibly easy to lose track of costs. A series of risks threaten your data, from information growing outdated to securing cross-department access and more.
So, what are the right ways to approach SaaS cost management? At Sastrify, we are here to help you avoid common SaaS buying mistakes. In this article, you will have a closer look at how easy it is to let your company's expenses spin out of control and what you can do to manage your spending on SaaS platforms. Stop paying for SaaS tools you’re not using by stepping up your SaaS spend management game.
What is SaaS spend management?
SaaS spend management is the use of tools, strategies, and negotiation tactics to manage and control software as a service (SaaS) costs. SaaS spend management tools clearly display SaaS platforms in use, their costs, and usage.
How to reduce SaaS spend?
Since most SaaS platforms include monthly or yearly agreements, much of the costs associated with SaaS software come during the negotiation process. Along with this, there are several SaaS software costs that can be reduced that are related to utilization, users, and more.
SaaS spend management principles
SaaS can appear to be so affordable that most companies pass establishing adequate cost-control measures upfront. That is a big mistake! The benefits of cost management could amount to millions of dollars in savings. If nothing else, following the below 4 principles can help any company to control SaaS spend:
- Centralize your SaaS procurement
- Monitor license usage
- Archive unused licenses
- Re-allocate users to appropriate package or service levels
- Leverage your buying power
1. Centralize your SaaS spend management
In fast-growing companies, SaaS procurement tends to take place within departments.
SaaS spend management example
The sales team needs a CRM, so it seeks out the best software to meet its needs — and signs up. The development team needs a product for tracking bugs and managing projects, so it evaluates its options — and signs up. The marketing team needs an email marketing tool, so it conducts research on different platforms — and signs up.
Undoubtedly, teams that will ultimately use specific software products must be part of the decision-making process. The decision-making process, however, needs to be centralized so the company can manage costs properly. With a centralized Saas management platform, your company will be able to identify and limit redundancy while ensuring that it is also maximizing savings.
Gartner studies estimate that as much as 30–40% of technology spending results in hidden costs within the organization. That makes it impossible to accurately assess what any given company is procuring and actively using.
For example, one employee subscribing to a SaaS tool for less than $10 a month does not trigger any alarms. But when you multiply that one instance by 100 over 2 years, the numbers start adding up quickly. The cost of SaaS subscriptions and licenses can pile up and eventually swamp your company to the bottom. When all of those contracts are managed centrally, your company can then enjoy a level of transparency that helps identify opportunities for savings.
According to the IDC, 70% of US tech spending now occurs from business-unit budgets, and this number will continue to grow in the following years. If they do not find a way to centralize their SaaS procurement, companies will be plagued by budget overruns and missed opportunities. Effective SaaS budgeting is nothing without centralized saas management.
There is another step beyond centralization that you can take to improve SaaS procurement, which is using a platform that automates the process. With Sastrify, you can automate the procurement process and keep costs under control by quickly collecting information, navigating the approvals process, and providing data visualization. See the graphic below for a comparison of decentralized procurement and centralized procurement. It generally shows the automated saas procurement through a software platform like Sastrify.
2. Manage SaaS spend by monitoring SaaS license usage
Perhaps the most common SaaS mistake companies make is paying for licenses that are not getting used. For example, if you’re paying for 100 licenses with your CRM provider but your company only has 70 members on its sales team, 30 licenses are going unused. Fluctuation in the number of team members is typically the problem, but vigilant monitoring of license usage can solve that problem.
The price of unmanaged SaaS Software is much larger than anyone assumes. Gartner’s research reveals that more than 30% of the growing cost of “software and cloud services” will go unused in any given month through 2022. That is a lot of money getting invested in technology that no one is using.
There are two common reasons why SaaS licenses go unused:
Team members come and go over time. In many cases, new team members get added to SaaS platforms and take up licenses. But too often departing team members are not removed from those same SaaS platforms. Over time, it may appear that your company is maxing out its licenses for a platform. However, many of those licenses belong to employees who are no longer working with you.
- Growth Assumption
Scaling companies sometimes assume that they will grow rapidly, necessitating more licenses in the future than they need in the present. Using the CRM example above, a company knows it only needs 25 licenses at the moment but it expects to rapidly scale its sales team to nearly 100 members by the end of the year. That’s an inspiring goal and one that is realistic for startups that are gaining traction. Most SaaS platforms though will let you upgrade to new service levels and add licenses as needed. There is no reason to buy licenses you might need in the future until you truly need them. It is just money spent that could be saved.
Clearly, your company should only pay for essential applications and the exact number of licenses needed for each. You must monitor usage closely and identify when SaaS subscriptions and licenses become superfluous to get rid of what's unnecessary.
Management Tasks to Reduce SaaS Spend
Several activities have to be regular:
- Deactivating unused accounts
- Analyzing inactivity hotspots
- Customizing workflows
- Monitoring unexcpected consumption
- and re-harvesting unused licenses
3. Cancel or archive unused licenses to manage SaaS spend
This next part is easy: When you discover unused licenses, simply cancel or archive them. It is just another reason why centralizing management of SaaS applications and subscriptions is so essential to spend management. Without centralized management, administrators are reluctant to cancel or archive licenses they suspect are going unused. After all, what if someone in a different department is still using that license?
Centralized management of SaaS licenses means that a single team or group within the company has full access to information on SaaS usage: who is using the tools, how much that activity costs, and if/when someone with a license no longer needs it.
The sooner you can centralize SaaS spend management at your company, the easier it becomes to cancel or archive unused licenses.
4. Re-allocate users to the appropriate package or service levels for better SaaS spend management
SaaS usage is not always as simple as providing licenses to users who need them and archiving licenses for users who don’t. In some cases, one user needs a lower level of service while another user requires a higher level of service. In many cases, ensuring that each user has the appropriate level of service within a SaaS application can lead to significant savings.
5. Review SaaS pricing pages for spend management
To get a sense of the different levels of SaaS support, check out any platform’s pricing page. A quick glance at Intercom’s pricing page reveals that users at higher levels can optimize performance, conduct A/B testing and implement conversational bots. Now, in many cases, companies using SaaS products, like Intercom, will have all of their licenses lumped into a single service level. But, in other cases, your company can access savings by allocating some licenses to a lower service level for users who do not need high-level features. SaaS providers often allow you to mix plans based on those personal requirements and interests.
If you are using a SaaS applications across various departments, the demands will certainly differ. You may find that your product and development teams need a high level of service and more features, while your sales and support teams need a low level of service and fewer features. If you are an enterprise-level user, you might be able to negotiate savings into one contract for the different needs across these departments.
Different users might have different subscriptions packages depending on their functional and technical needs.
Better SaaS spend management means leveraging your buying power
Some companies dread the expiration of SaaS contracts. Expiration means renegotiation, and, in many cases, it can mean higher prices over the term of the next contract.
But companies should look forward to contract negotiation when they are centralizing SaaS spend management. When SaaS subscriptions and licenses are properly monitored, contract negotiation is an opportunity for better spend management moving forward.
When you follow these 4 steps, you are armed with all the needed information to successfully negotiate attractive terms with your SaaS providers. SaaS providers are almost universally willing to make concessions if you can make a compelling case for why you need to pay less given how you are using the product. After all, it requires less time and cost for a SaaS platform to retain a user than to go out and onboard a new one.
Remember that there is power in numbers, which is just another reason why centralized management of SaaS platforms is so essential. By purchasing end-user licenses in bulk, your company can receive a reduced rate just like any other provider. Look at the enterprise level of service for any SaaS provider, and you will often not see a price quoted. Instead, you will see a prompt to “contact sales.” That is because enterprise-level pricing is often so good the provider does not want to make it public. When you have power in numbers, you can even renegotiate better renewal times.
Are you researching enterprise-level pricing for certain SaaS providers? At Sastrify, we maintain a valuable database that allows us to provide you with pricing benchmarks based on your unique needs. You can also upload your SaaS invoices for analysis to figure out whether or not you are paying too much for your existing contracts.
Paying less for your SaaS licenses
When you are in SaaS procurement mode looking for the right tool at the best price, remember that there are 3 ways to save on software:
Buying cheaper is all about negotiation. You can save on software by simply getting a better price. Again, it helps to be an enterprise-level user that enjoys power in numbers. You can also buy cheaper by switching from a monthly to a yearly plan or dealing with a reseller rather than directly with the vendor.
Buying less is the approach outlined in this post — only pay for the licenses that you are actually using. When you have 85 employees but 100 licenses for a given SaaS platform, you are throwing money out the window.
Buying better is all about optimizing your service level and plan. Find the right configuration for any SaaS platform your company needs and ensure that you are not paying for features that your team does not need.
At Sastrify, we provide a SaaS Spend Management Software that helps your company do all 3 when appropriate: track SaaS spending, buy cheaper, buy less, and buy better.
SaaS spend management software is designed for monitoring SaaS licenses
According to Gartner, most companies around the world consider SaaS solutions superior to on-premise systems. Why? Because they are easier to buy and manage. SaaS platforms typically save time and money. For example, imagine trying to create your own system that replicates what Salesforce can do for a sales team. Doing so would require manpower and financial resources that far exceed what it costs to just pay for Salesforce. While there may be some scenarios where it is better to build than to buy, in most cases, it is simpler and more financially sensible to buy SaaS solutions than to build your own.
But SaaS companies need revenue too, and they will not stop you from spending more than your company needs to on a given solution. It is far too common for startups and even mature companies to pay for more licenses and services than they need. If your company is not carefully tracking the usage of a SaaS platform and its services, effective cost management becomes nearly impossible. As noted above, creating an excel spreadsheet is not a proper way to track licenses and activity.
So, what is the solution? Companies that need SaaS products are typically busy creating and selling their own products. A SaaS Spend Management tool is not a priority, even though it should be.
How can a SaaS procurement software help you with SaaS spend management
There is a reason why so many companies continue to manage their SaaS spending in siloes: Centralized saas management can be time-consuming because creating the all-around systems and processes can feel overwhelming.
That is where Sastrify comes in: we provide one system of record for all cloud-based software purchased across your company. This enables you to manage, measure, and optimize cloud investments with real-time insights into spend, utilization, and data feedback. That way, you can make sure that every SaaS product is being used efficiently and with the utmost precision. You can also control renewal times and eliminate redundant or overlapping applications.
Rather than digging through your business app-by-app, Sastrify automatically detects redundant programs and highlights them so you can take care of them. That quickly saves you a significant amount of time and money. In the long run, our platform remarkably boosts your negotiation power by identifying precious savings potential and providing price benchmarks for popular SaaS softwares.
Are you ready to start saving on SaaS? We provide various tools to help you get started.
You can access our price benchmarks tool if you are seeking information about a specific product. You can also upload your SaaS invoices for analysis to find out where you are spending too much.
Your business and its bottom line are too important to waste money on SaaS platforms.
Use our SaaS savings calculator to find out how much your company can save on SaaS.