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. If your finance department or procurement team is still using manual spreadsheets for SaaS cost management, you've probably lost track of your subscription costs.

So, what are the right ways to approach SaaS cost management?

At Sastrify, we're helping fast-growing companies avoid common SaaS buying mistakes. Let's take 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?

The way that a company tracks, oversees, and takes control of its SaaS strategy is essentially SaaS spend management. This may sound simple, but like with most things in SaaS, it’s a complex process with various aspects.

A robust SaaS spend management structure should allow you to:

• Manage and control costs surrounding your SaaS spending.
• Help centralize and create visibility across all SaaS tools.
• Gain insights that reflect how effectively SaaS subscriptions are being utilized.
• Compare figures and costs to identify any wasteful spending.
• Renegotiate your SaaS contracts.
• Monitor SaaS usage to make appropriate changes and adaptations when necessary.
• Create forecasts for SaaS spending costs.

Why is SaaS spend management so important?

SaaS spend management is important because most businesses need to constantly expand their SaaS needs. If you aren’t perennially reviewing your subscriptions, tools, user activity, and other key aspects of your SaaS structure, it’s not hard to lose sight of wasteful spending and redundancies.

Here are some key reasons why SaaS spend management is so important

Independent buying decisions

Especially for mid-to-enterprise-sized companies, most departments are responsible for their own SaaS needs and structure. When you have various departments working independently of one-another, it’s difficult for all of your team members–especially remote workers–to gain the maximum benefits of your SaaS infrastructure.

Different departments may be taking on subscriptions for tools that are unavailable to them, or they simply might be unaware of existing technologies that could make their work lives easier.

Centralizing your SaaS subscriptions through spend management is a key part to maximizing your ROI on SaaS spending.

SaaS app function overlap

Again, without a coherent centralized SaaS network, you might be overspending on tools if you have significant overlap in application function. If you have three different ATS systems, for example, that’s three different contracts, compliance standards, talent pools, and perennial costs that all fill the same need.

When you have a large number of teams and employees, it’s easy to find crossover in your SaaS app functions, especially if some solutions do multiple things for you. A robust SaaS spend management system will help you weed out the redundancies and save on unnecessary costs.

Unused SaaS licenses

One important thing to look at is how many active users you have across your solutions. If some of your SaaS tools aren’t being used at the rate you’d like them to be or, worse, at all, then it’s time either to limit the amount of tools you’re using or to educate/engage team members to get the most of your resources.

A proactive spend management strategy will allow you to identify whether it’s time to let go of a contract or find a way to encourage more active participation.

Renewals and cancellations

SaaS renewals and cancellations are an important part of any spend management strategy. One of the challenges with cleaning your stack and staying on top of renewals is how time consuming of a process it is. Third-party procurement solutions, like Sastrify, can help by automatically notifying you of any upcoming renewals and contract re-negotiations to help you maximize your savings potential.

How can high-growth companies 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 best practices

Luckily, there are a number of ways you can get the most of your SaaS spend management strategy. Below we’ll look at some of the most important SaaS best practices to help simplify the management process.

1. Develop a SaaS policy

With several different departments, teams, and employees using different SaaS solutions, you centralize your SaaS buying and spending by having a unified policy. An SaaS policy can help you determine:

• What kind of procurement is involved in the SaaS purchasing process.
• Who has authorization to purchase SaaS solutions.
• How SaaS purchases are approved and what kind of processes should be in place before a purchase can be made.
• How you are tracking end-user purchases.
• How many people should be using a specific SaaS tool in order for you to get the greatest ROI.
• Any kind of payment caps on SaaS tools or approval processes for more expensive purchases/subscriptions.

2. Take a SaaS inventory

Build a list of current and potential SaaS suppliers with information like:

• Name of vendor.
• Contact information of supplier.
• SaaS tool.
• Type of license.
• How it's priced.
• Any SaaS costs.
• Active SaaS users.
• Date it becomes effective.
• When it needs to be renewed.
• Terms of cancellation and renewal.
• Integrations.
• Service-level agreement link.

3. Routine SaaS reviews

You should be reviewing and assessing your SaaS needs and any SaaS updates on a regular basis. Your SaaS needs will rapidly change as more tools are added and the use-function of older tools become obsolete or can be replaced by better technologies.

Take some time each quarter to review your SaaS stack and come up with an informed decision on how to reduce waste and get the most out of your subscriptions, or integrate a third-party procurement solution, like Sastrify, that can automate the process for you.

5 key principles of SaaS spend management

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:

1. Centralize your SaaS procurement
2. Monitor license usage
3. Archive unused licenses
4. Re-allocate users to appropriate package or service levels
5. 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.

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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:

1. Turnover
   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.

1. 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:

1. Deactivating unused accounts
2. Analyzing inactivity hotspots
3. Customizing workflows
4. Monitoring unexcpected consumption
5. 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.

Sometimes, you simply need to commit to an annual plan to realize significant savings..

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

The average company dreads the expiration of software subscriptions. 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 management and negotiation is an opportunity for more savings or service.

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 the SaaS payments from thousands of subscriptions. 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:

1. Cheaper
   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.
2. Less
   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.
3. Better
   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 subscriptions and usage

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 silos: Centralized SaaS management can be time-consuming because creating the all-around systems and processes can feel overwhelming.

That is where SaaS management platforms like Sastrify come 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 and usage.

Rather than digging through your business app-by-app, Sastrify automatically detects redundant programs and highlights them so you can take care of them, saving you a significant amount of time and money. 

You can access our extensive pricing benchmarks or upload your SaaS invoices for quick analysis to find out where you're overspending on software. 

Plus, we also handle the high-stakes negotiations for you to ensure you're signing the best contracts for your business.

How do I know when it's the right time to get SaaS buying assistance?

As a SaaS procurement platform, we obviously advocate for companies getting help with their SaaS stack and negotiations (e.g. from us). But we also know that there are times when we aren’t needed, and we’re more than happy to be honest about those.

Types of SaaS tools you should buy on your own

There are a few buckets of SaaS tools where it’s simpler to buy on your own and not really necessary to get third-party negotiation help.

1. Tools you can use for free

Let’s divide this into two types of free:

• A SaaS tool you want to use where the free version meets your needs – Maybe there are product tiers and the free plan works because you have limited licenses and you don't need premium features
• A SaaS tool you can test for free (or cheap) before buying – If you just have to register for free or even pay a small fee before using, then you can test the tool out before thinking about premium (paid) features.

There are countless SaaS tools that offer a free tier or a free trial. Take advantage of the opportunity!

2. Low cost tools that you already understand well

If you have a good understanding of the features and technology of a specific SaaS tool, and it’s still relatively low cost, you should buy that on your own as well. The low cost makes it a low-risk purchase, so go right ahead and buy or negotiate by yourself.

3. Tools for a small group of users

This aligns with tools that are low cost, but if the group of users in the organization is small – i.e. it’s just for one person or a small team – then you probably don’t need expert help. A small number of users typically translates to a smaller bill, and the effort and time of a full expert negotiation is probably unnecessary.

Examples of SaaS tools that can typically be bought on your own

Can we ask procurement to jot a few down here? Sergio or Alex? I couldn’t really find any articles on this and I don’t want to generalize without knowing Sastrify’s advice

SaaS tools where you should seek expert advice

With tools outside of the categories above, it pays to turn to a procurement platform and advice from experts. For example:

• Higher cost – If a tool is going to cost your company a lot of money, expert advice (and help in the negotiations) can lead to big savings.
  
• More users – If you plan to deploy the tool to a significant number of users or even the entire organization, then the stakes are much higher.
• Increased complexity – If you need help understanding the features of a complex tool, or if the negotiation itself is complex and you need levers you can pull to get a better deal, expert help is key.

Examples:

There are a variety of larger or more complex tools when we highly recommend using a procurement platform like Sastrify.

One example is Microsoft, which has a variety of licenses such as E3, E5, and E7.

• E3 licensing is the most basic and provides access to Office 365, Windows 10 Enterprise, Enterprise Mobility + Security, and Microsoft 365 Business. It is designed for smaller organizations and businesses.
• E5 licensing is the more premium option and provides access to Office 365, Windows 10 Enterprise, Enterprise Mobility + Security, Microsoft 365 Business, and advanced analytics and security. It is designed for larger organizations that need more advanced features.
• E7 licensing is the most comprehensive and provides access to Office 365, Windows 10 Enterprise, Enterprise Mobility + Security, Microsoft 365 Business, advanced analytics and security, and voice and conferencing services. It is designed for large organizations that need the most comprehensive features.

Microsoft is widely used, complex, and generally a high cost item for companies, so getting expert help can lead to much better deal outcomes.

Other tools that require more expertise include:

• ERP/finance suite tools – e.g. SAP, Netsuite, Sage Intacct
• HRIS tools – e.g. Workday, BambooHR, Personio
• Niche tools – i.e. those specific to an industry

Working with a SaaS procurement solution like Sastrify can improve your SaaS buying and deals on both the tools you purchase on your own and the ones you hand to the experts.

Sastrify analyzes your SaaS usage, cleans stack, and automatically sends you auto-renewal notifications so you can increase your savings potential. On top of that, we’ll negotiate your contracts with vendors for you so you can spend more time on the important work that matters.

Content management platform Usercentrics has experienced this firsthand: