Are excessive SaaS costs eating up all of your company’s budget? The popularity of Software-as-a-Service (SaaS) applications has altered the business landscape, but it comes at a price—a sizable chunk of your valuable investment.
Source:Cledara
As per a report by Vertice, over the last five years, business SaaS spending has increased from 11% to 16%, four times the inflation rate. While organizations like the ease of work that SaaS offers, maintaining several apps and optimizing expenditures for ROI has become difficult.
To make matters worse, ‘shadow purchases’ put finance staff in the dark and hamper cost-cutting decisions. But there is always a solution.
This post discusses five great ideas to cut SaaS costs in your organization. Say goodbye to wasteful expenditures and join us to optimize ROI.
Discover how your company can master the art of reducing SaaS costs without losing productivity or growth.
Why should organizations worry about SaaS spend?
Organizations are always concerned about SaaS spend and its impact on their revenue. First, uncontrolled procurement of various SaaS apps leads to wasteful spending and resources.
Many businesses make the mistake of purchasing an array of apps without consulting their teams. These purchases eventually end up being underutilized, leading to poor ROI.
Shadow IT
The rising practice of shadow IT, in which employees make unauthorized SaaS purchases without conferring with the IT or finance departments.
To put this in context, as per G2, 80% of employees claim to be utilizing unauthorized SaaS services, and overall, shadow IT is estimated to be ten times that of recognized cloud usage.
As a result, SaaS spending spirals out of control, depleting financial resources while offering little return.
However, businesses can use effective strategies to regain control and optimize their spending.
But before we look at the top strategies to reduce software spend, let us see where businesses are overspending.
- Shadow IT, in which employees purchase SaaS software without the consent of IT or finance, adds to overspending.
- Purchasing licenses in excess without considering the requirements results in increased spend and poor ROI.
- Lack of visibility into app usage and expenses leads to ineffective cost management and loss of control over software spend.
- Lack of automation systems leads to auto-renewal of contracts, escalating software costs.
- Without price benchmarking, companies risk overpaying for subscriptions, enabling vendors to profit from their market ignorance.
5 Ways to Reduce SaaS Spend in 2023
Now for a look at the strategies that can help you:
1. Get complete visibility and optimize costs based on usage
As per IT asset management, more than 35% of the spending on SaaS is wasted by organizations.
Gaining complete visibility and optimizing usage is critical for efficiently reducing SaaS expenses in 2023. Use a SaaS spend management platform for extensive visibility into your SaaS portfolio.
Track how each employee is using the SaaS apps. Leverage usage analytics to trace underutilized apps and why they are not utilized optimally.
Educate your team to increase usage and/or eliminate unused apps from your portfolio to increase SaaS savings.
A SaaS spend management platform will provide a comprehensive view of apps, vendors, and related expenses, enabling strategic vendor negotiations, app consolidation, and smart decision-making to reduce SaaS spend.
Note: Select a SaaS spend management platform based on the number of SSO, finance, HRIS, and direct integration capabilities.
2. Consolidate expensive vendors
Consolidating expensive vendors is an effective technique to reduce SaaS spend in 2023.
Vendor consolidation is a strategic method to identify high-cost vendors and streamline your partnerships by combining them into a single provider.
For instance, if your company has multiple vendors that provide similar services, you can compare their performance, pricing, and contractual conditions. You can choose the most reliable and cost-effective provider and move your business to them.
By consolidating vendors, businesses can optimize their SaaS spend, streamline vendor relationships, and simplify procurement procedures. However, a thorough evaluation must verify that the consolidated vendors correspond with long-term goals and objectives.
3. Automate your renewal process
Another popular method for reducing SaaS spend is to automate your renewal process. Manual renewal management is cumbersome and prone to mistakes, leading to escalated software expenses.
Implementing an automated renewal management solution eliminates spreadsheets and gives you complete control over the process.
This system can track contract expirations proactively, create renewal calendars, and send timely reminders to guarantee you never miss a renewal date or fall into expensive auto-renewals.
During renewal negotiations, automation enables you to make informed choices. With a thorough understanding of your app’s use and requirements, you can negotiate better pricing terms, eliminate unneeded licenses, and consolidate vendors to save money.
4. Centralize your procurement to prevent Shadow IT
Your procurement process must be centralized to successfully reduce SaaS spending and eliminate the risks that come from Shadow IT. A SaaS management software can give you better visibility and control over the apps.
Establish explicit software procurement standards and processes to ensure all purchases follow an approved procedure. Create a centralized system for employees to request extra apps or software licenses and automatically assign these requests to the right stakeholder for approval.
Choose the right procurement software. In this case, the best practice is choosing a comprehensive SaaS management solution like CloudEagle with automated workflows to streamline the procurement process.
5. Ace your negotiations
Ace your negotiations to streamline your SaaS spend by using price benchmarks. Conduct extensive research to determine the fair market value of apps. Use these details as leverage for a favorable price, discounts, or additional features.
Prepare a clear and well-defined negotiating strategy based on benchmark data, usage insights, requirements, and market conditions. Make a persuasive argument, promise a long-term engagement with the vendor, and secure the right price for the product.
Consider teaming with SaaS procurement specialists if your internal procurement team is stacked with other strategic tasks. These experts have the industry expertise and negotiation abilities to ace negotiations and achieve the best terms on your behalf.
Remember to approach negotiations confidently and be ready to seek alternatives if required. With the correct negotiating technique and pricing benchmarks, you can achieve considerable cost savings and efficiently optimize your SaaS spend.
Note: It should be underlined that optimizing SaaS spend is a continuous process. Organizations can exert control over their SaaS spending and optimize the value of their investments by regularly monitoring consumption, assessing vendor relationships, and proactively managing renewals.
Bonus
We have discussed five brilliant ways to reduce your SaaS spend. You’ll need to use a SaaS management system to make it possible.
A robust SaaS management system can help you adopt all the abovementioned strategies and gain total access to your apps, vendors, costs, and usage data to optimize your spending.
Contract renewals can be streamlined, procurement can be centralized, and pricing benchmarks can help you win more deals. Utilize the power of a complete SaaS management platform to maximize your ROI and achieve financial efficiency.
Conclusion
Optimizing SaaS spend is a challenge for enterprises. It is no longer possible to ignore overspending or make rash purchases. Businesses can regain control of their SaaS spending and achieve significant cost savings by taking proactive steps and applying the strategies discussed in this article.
Finance and IT teams can streamline business operations and make informed decisions by identifying areas of overspending and optimizing them using a SaaS spend management platform.
So, are you in control of your spend? Do you want to know what CIOs, CFOs, and CPOs discuss when optimizing SaaS spend? Let us know, and we’ll provide you with the expert advice you need.
