The digital landscape is rapidly changing as companies are leaning more heavily on software solutions for business tasks. Long gone are the days when these companies would make a single purchase and gain access to a needed software platform in perpetuity.
Rather, software products are now seeking monthly recurring revenue, which means subscription models. These cloud-based solutions accessed via subscriptions are known collectively as Software as a Service — or SaaS for short. Given just how important SaaS solutions are to startups and more mature companies, SaaS budgeting is one of the most essential tasks a scaling company can undertake.
SaaS products no doubt help companies achieve their business goals. SaaS products are typically flexible and easy to implement, giving companies and their team members key functionality on demand. In fact, spending on SaaS has been on the rise in recent years and shows no signs of slowing down.
Given this growth in usage, SaaS budget planning will only grow in importance, too. Without proper budgeting from the start and implementing SaaS cost management best practices, overall spending can quickly overwhelm any business.
But here’s the good news: Sastrify is a SaaS management platform that helps you prevent out-of-control and wasteful spending on software. To help you discover your company’s potential savings, we are bringing you everything on SaaS spend, including seven tips for mastering the budgeting process.
Follow these tips to simplify and effectively plan your SaaS budget
Your company is successful because it offers a product or service that delivers real value to a target audience. You are too busy managing and improving business to become an expert in SaaS budgeting. Fortunately, many tools exist that make the SaaS budgeting process fast and relatively easy. Follow these tips to make a seemingly massive task feel more manageable and, ultimately, more effective.
1. Take inventory of your SaaS tools and identify stakeholders
Businesses around the world are joining the cloud revolution. Your company is likely doing the same, subscribing to and using some of the most popular SaaS platforms available. When budgeting for SaaS subscriptions, start by creating an accurate inventory of the tools that your company is currently paying for.
Some companies try to use Excel spreadsheets to organize their SaaS inventory, but this is an ineffective approach. Instead, you should use a tool that allows for access across departments to ensure data security and prevent information from breaking during updates.
When creating your inventory, be sure to get as much information about each product as possible, including:
- Contract details such as term lengths and conditions
- The number of users for each SaaS tool, plus the number of licenses or seats you’re paying for on a given platform
- Notes from key stakeholders on how often they’re using various SaaS tools (helping you identify if any of your SaaS products are underutilized)
- The person in charge of managing each SaaS tool
(On that last point, you will find as you go through the budget planning process that it is best to centralize management of your SaaS subscriptions if you want to properly control costs, as failing to centralize is a common SaaS mistake.)
Once you’ve gathered the details outlined in the bullets above, you will have the information needed to paint a clear picture of your company’s SaaS spending. For example, you will be able to quickly identify tools that are being maximized, ones that are delivering value, and tools that are underutilized, ones that aren’t delivering a return on investment. SaaS inventories help you answer platform-specific questions like:
- Do we need more licenses?
- Is this tool valuable to its users?
- Are we making an investment that is proportional to a tool’s value?
SaaS inventories tend to be quantitative in nature, but don’t be afraid to gather qualitative information too. Spend a few minutes talking to power users about relevant SaaS products. Ask them how they use software, how often, what they use it for, if they think there are alternatives, etc.
This qualitative data can provide depth to your inventory and help you back SaaS-related decisions with clear rationale.
2. Organize and assign your SaaS tools properly
Your company may already have a system in place for organizing and tracking SaaS subscriptions. If so, make sure that the existing system is responsive to change and that it is accessible across all departments. If you are tracking SaaS subscriptions via an Excel spreadsheet, that will not cut it.
You need a system that prevents data from breaking and protects your SaaS-related information from risk. If your company does not have the right system in place, it's time to create one. Proper SaaS organization helps you replace any chaos with order.
SaaS organization also provides several key insights that are helpful for budgeting, including answers to these key questions:
- How many redundant applications is your company using?
- How many licenses are you paying for that are going unused?
- How many users have access to a service level that includes features they don’t want or need?
Your company is certainly wasting money on software if it is paying for redundant applications, unused licenses, or unnecessary service levels. Answers to these questions are highly valuable, though, even if they uncover waste.
Why? Because they help you take the third step of creating an accurate, reliable, reasonable budget for SaaS subscriptions.
3. Set a SaaS subscription budget
After making an inventory of existing SaaS subscriptions and discussing with the stakeholders, you would then have a better idea of how much money your company is spending on cloud software.
Because there is no single department that is in charge of managing SaaS expenditures, your other option is to get input from a wide range of teams so that you can make informed SaaS decisions during the budget planning process. Comprehensive input is invaluable when you move forward with the SaaS budgeting process. Ready to move forward? Break the process into 3 steps:
- Create an Overview of Current-Year Spending: Whether or not you feel like you are spending the right amount in the current year, create an overview of cost for tool-by-tool. This serves as the foundation of the budgeting process.
- Identify the Main Cost Drivers for Each Tool: Next, identify the cost driver for each platform. Different SaaS products use different pricing approaches. Most charge per user, some per feature, others on a pay-as-you-go basis, etc. Identify what drives the cost each month and how the cost changes throughout the year (or doesn’t change if the price is stable from January through December).
- Estimate the Cost Drivers’ Variables on a Monthly Basis: Now it is time to optimize what you are spending. Based on the number of users you have and the features they absolutely require within each SaaS tool, calculate an ideal spend based on real needs. Once you calculate the ideal spend, you may find that the number remains too high for your overall budget plan. At that point, it is time to talk to each department again and make tough decisions in an effort to get your SaaS budget aligned with the overall corporate budget.
One of the easiest ways to clear space in your SaaS budget is to find tools that you do not need at all. Perhaps a platform is redundant, or its usage is so low that you can not rationalize investing in it. These are good problems to have.
When you clear a SaaS product altogether, you have more budget space to work with for the SaaS products you really need.
Here are a few other best practices during this step:
- Prioritize function over price. (If you’re getting real value from a SaaS platform, it will pay for itself over time.)
- Stay realistic. (Don’t underestimate how much you will need to spend on SaaS as underestimating can limit your options and close your company off from products it could really use.)
- Track costs per employee by the department. (For benchmarking and rich information in the future, create a system that tracks how much you are spending on SaaS per employee within each department.)
- Identify owners across the organization. (Identify who should be responsible for each tool in case needs arise related to support access, new account creation, admin credentials, etc. See the illustration below for more.)
It is also helpful to stay current on market prices for relevant SaaS products. When you are aware of market prices for different tools, you are more able to explore various options and best fits for your business.
4. Discover your SaaS options
Your company may have existing relationships with SaaS providers. But just because you currently subscribe to a certain cloud software solution, that doesn’t mean you have to continue subscribing forever. Given how much the SaaS industry has grown in the 21st century, you almost always have multiple options. Make those various options compete for your business.
During the discovery process, use these two approaches:
- Stakeholder Conversations: Again, it’s important to talk to the team members who are actually using a software solution. Learn about what they like and what they do not like. Ask about what features they need that they do not have and what features they have that they do not use. Employees, department heads, and other stakeholders are valuable sources of information.
- Independent Research: Conduct independent research into your various product options. Conduct research online. Read industry journals and publications. Compare prices. Read case studies. Closely examine testimonials and reviews. This type of research can help you discover information that internal stakeholders do not have.
As you use both approaches for researching cloud software options, pay special attention to the services and functions each product offers. Beware of paying extra for features that you do not need and save money by choosing less expensive products that do not offer key features.
5. Explore opportunities to save on costs
Streamlining your SaaS budget also includes reviewing existing subscriptions and finding out which ones are not maximized. Especially with fast-growing companies, SaaS subscriptions can sometimes get neglected, resulting in unnecessary expenses.
Some of the things you need to look out for are unauthorized installations, underutilized licenses, duplicate apps, extra licenses, inactive users, and off-the-shelf pricing.
At Sastrify, we often say that there are three ways to optimize your SaaS spend:
- Buy Cheaper: Find a way to get a better price for the platform that you are currently using or the platform that you would like to use.
- Buy Less: Identify where you are spending on licenses that you do not need, and start paying for the right amount of licenses for your business.
- Buy Better: Make sure that you are paying for features and service levels that your business really needs.
Renewal periods are ideal for making decisions that can help you save on your SaaS spend. At Sastrify, we also offer subscription renewal alerts so that you can plan ahead, speak to users, adjust features, add or subtract licenses and take other actions in time for renegotiation.
6. Monitor data to identify necessary budget tweaks
After purchasing or renewing subscriptions and removing redundant SaaS tools, it is important to keep track of data to make sure everything is in order. The goal is to maximize the utility of software solutions that your company is using while minimizing unnecessary spending, if not outright eliminating it.
When you keep tabs, you are in a better position to determine when to adjust your service levels, add or subtract licenses, or switch providers altogether. That does not only help save money in the long run but also ensures higher efficiency and better productivity in your operations.
At Sastrify, we provide tremendous support at this step. Our platform helps by regularly monitoring user statistics and eliminating anyone who has been inactive for a given period of time. When you choose Sastrify for SaaS management, you no longer have to analyze your company’s SaaS usage and manually intervene to make adjustments. Sastrify handles all of that for you!
7. Get SaaS spend management software
If you read through the six tips listed above, you will discover that SaaS budgeting and ongoing management can be a hands-on job. To avoid that, choose a SaaS spend management platform that can handle the nitty-gritty of data analysis and subscription management. While the platform optimizes your SaaS usage and spending, you can then fully focus on the most important aspects of running your business.
Some tools even integrate contract management into their services, which further ensures accuracy in tracking data. The right SaaS spend management platform makes it easier for you to produce comprehensive reports about the company’s SaaS subscriptions and related expenses. All so that you can take action to save money while getting the features you need from your SaaS products.
Why is SaaS budgeting so important?
What makes SaaS budgeting so important right now? As companies of all kinds depend on software more and more — for marketing, sales, support, and other departments — SaaS-related expenses are becoming a greater and greater portion of overall operating budgets. Without the right budgeting practices in place, SaaS-related costs could quickly add up and begin encroaching on revenue.
When SaaS tools are harnessed effectively, they can boost a company’s efficiency and productivity. The whole concept is undoubtedly worth a measured investment. On the other hand, uninformed SaaS spending can cost a company significant money. That is when investments in SaaS are not properly measured because they take away from other line items in the budget and overall profit.
It is best to take a proactive approach to SaaS cost management before spending on SaaS becomes too complicated to effectively budget. Another reason why you should follow the seven tips on keeping your SaaS budget aligned.
Let Sastrify help manage your company’s SaaS spend
Sastrify is an online platform that assists users in managing their spending on online toolsets and productivity suites. Whether you are looking to save on costs related to Salesforce, Intercom, Aircall, or a wide range of other tools, we can help. As the leading SaaS spend management software, we are dedicated to making the experience of SaaS budgeting as seamless as possible.
Getting started is easy! You can always take advantage of our price benchmarking tool to better understand how your SaaS spend compares to averages. You can also upload your SaaS invoices to get an analysis of your spend.
The bottom line: We’re here to help improve your bottom line. Contact us for a free SaaS spend analysis.