How to Manage SaaS Spend
HC
Admina team
2023/06/04
What is SaaS Spend Management?
Picture your business as a ship setting sail on an adventurous journey across the vast ocean. The Software-as-a-Service (SaaS) solutions you employ serve as essential tools and technologies that keep your enterprise running smoothly.
As you adopt more SaaS applications, it becomes increasingly challenging to manage them all effectively, potentially leading to unnecessary or unused subscriptions. By the end of 2023, it's estimated that 99 percent of companies will use at least one SaaS solution due to its numerous advantages such as enhanced productivity, scalability, cost savings, and flexibility.
However, with widespread adoption comes the challenge of managing your SaaS expenditures efficiently. As you integrate more cloud-based software into your operations, it's crucial to maximize your investment while avoiding common overspending pitfalls.
Our guide on managing SaaS spend is here to help navigate this complex world of subscription-based software and identify typical overspending mistakes. Let's dive in and optimize your SaaS experience!
Source: Unsplash
With more companies jumping on the SaaS bandwagon, subscription spending is soaring. In fact, it's predicted to hit a whopping $590 billion in 2023. With such a significant investment at stake, it's crucial to have proper SaaS spend management in place.
So, what exactly is SaaS spend management? It's all about overseeing and controlling how you spend your money on different SaaS subscriptions. It's like being the financial captain of your business ship, ensuring that you navigate the sea of subscriptions with a keen eye on your budget.
One important aspect of SaaS management is SaaS discovery. Think of it as exploring and taking inventory of all the SaaS tools your company is currently using. It's like shining a light on what subscriptions you have, who's using them, and how they contribute to your business objectives.
Discovery is a crucial step in the SaaS management process because, without knowing exactly what subscriptions you have, it's difficult to manage and optimize your SaaS spending. It allows you to identify any redundant or underutilized subscriptions that might be eating up your budget without providing much value.
By gaining visibility into your SaaS landscape through discovery, you can take control of your SaaS spend. You can assess the necessity and effectiveness of each subscription, negotiate better deals, consolidate overlapping tools, and even identify opportunities for cost-saving measures.
Ultimately, the goal of SaaS spend management is to optimize your overall SaaS costs and boost savings. It's about making informed decisions regarding your subscriptions, maximizing their value, and ensuring that you're getting the most bang for your buck.
SaaS Spend Management and Shadow IT
Let's talk a little bit more about shadow IT. It refers to the use of technology, including SaaS apps, within an organization without the explicit approval or knowledge of the IT department or management. Shadow IT becomes evident when employees independently sign up for and use SaaS tools that they find helpful for their work, bypassing the official IT procurement process.
The relationship between SaaS spend management and shadow IT becomes significant when it comes to managing costs and avoiding wasteful spending. Shadow IT can lead to hidden SaaS app usage, where employees subscribe to applications without the organization's oversight. This can result in redundant subscriptions, underutilized licenses, and overall increased spending that goes unnoticed by the IT or finance teams.
Organizations can detect and manage these hidden or unauthorized SaaS applications with effective SaaS spend management practices, including thorough SaaS discovery and usage tracking. By shining a light on shadow IT, businesses gain visibility into the full scope of their SaaS landscape and the associated costs.
Through active monitoring and analysis, organizations can identify which SaaS applications are being used, who is using them, and whether they align with the company's approved SaaS portfolio.
This allows IT and finance teams to assess the value and necessity of these applications, negotiate better pricing or licensing terms, and potentially consolidate or replace them with more cost-effective alternatives.
Source: Unsplash
Why Do You Need to Manage SaaS Spend?
While SaaS software is like an essential tool in your toolbox, helping you streamline processes, boost productivity, and drive growth, there's a catch: each SaaS tool comes with a price tag.
SaaS spend management is important for a number of reasons:
Cost Control: SaaS spending can add up quickly, especially as your business scales and more teams and individuals require access to various software. Without proper management, you may end up overspending on subscriptions you don't need or paying for features you rarely use.
Budget Optimization: Managing SaaS spend allows you to optimize your budget. By evaluating each subscription's cost and value, you can identify opportunities to negotiate better deals, consolidate redundant tools, or even find alternative solutions that offer similar features at a lower cost. SaaS optimization ensures that you're making the most efficient use of your financial resources.
Avoiding redundancies: Over time, businesses often accumulate multiple SaaS subscriptions that serve similar purposes. This redundancy can lead to unnecessary costs and confusion.
Usage Tracking: SaaS spend management involves keeping a close eye on subscription usage. By monitoring usage patterns, you can identify any underutilized subscriptions or users who no longer require access. This visibility enables you to make data-driven decisions about renewals, cancellations, or reassigning licenses, ensuring that you're only paying for what you actually need and use.
Flexibility: As your business evolves, your software needs may change. Managing your SaaS spend allows you to adapt to these changes with ease. You can add or remove subscriptions as necessary, adjust user licenses, or explore new tools that align better with your evolving requirements. This scalability and flexibility enable you to optimize your SaaS software ecosystem and support your business's growth effectively.
In a nutshell, managing SaaS spend is crucial because it empowers you to control costs, optimize your budget, eliminate redundancies, track usage, negotiate better deals, and adapt to changing business needs.
By actively managing your SaaS spend, you're ensuring financial efficiency and maximizing the value and impact of your software investments. It's a win-win situation for your business's bottom line and overall success.
Source: Unsplash
Common SaaS Overspending Mistakes
Are you ready to navigate the world of SaaS subscriptions without blowing your budget? We're here to shed some light on common SaaS overspending mistakes that can drain your finances faster than you can say "subscription renewal." So, let's buckle up and learn how to avoid these costly pitfalls in the future.
Mistake #1: Purchasing Too Many Licenses
Picture this: you've got a growing team, and you want to make sure everyone has access to the tools they need. So, you go ahead and purchase a boatload of user licenses for your SaaS applications.
But wait – are all those licenses actually being used? Providing too many SaaS licenses is a common mistake that can quickly eat into your budget. Take the time to assess user needs, track usage patterns, and adjust license numbers accordingly. This way, you'll only pay for what you truly need.
Mistake #2: Neglecting to Track Usage
Out of sight, out of mind, right? Not true. Failing to keep tabs on SaaS usage can lead to overspending.
Some employees might have subscriptions they no longer use, while others may not be fully utilizing the features and benefits of their assigned apps.
Regularly monitor usage, identify underutilized subscriptions, and either optimize usage or consider canceling them altogether. By staying vigilant, you'll ensure your SaaS investments align with actual usage.
Mistake #3: Ignoring Contract Renewals
Contracts are like relationships with SaaS providers – they need attention. Renewing contracts without evaluating your needs or negotiating better terms can be a costly mistake.
Take the opportunity to reassess your requirements, explore competitive offerings, and engage in contract discussions with your providers.
You might uncover opportunities for cost savings, discounted rates, or additional features that can make a significant difference to your bottom line.
Mistake #4: Falling for Shiny New Tools
We get it – new SaaS tools hit the market all the time, promising to revolutionize your business. But before jumping on the bandwagon, consider whether the tool genuinely adds value or if it simply duplicates features you already have.
Impulse purchases can lead to a cluttered software ecosystem and unnecessary spending. Prioritize evaluating the actual need and potential benefits before opening your wallet. Remember: it's quality, not quantity, that matters.
Mistake #5: Not Merging Similar Tools
Speaking of cluttered software ecosystems, failing to group similar tools is another overspending mistake. Over time, different teams or individuals might adopt similar SaaS applications for similar purposes, leading to redundant costs.
Take a holistic view of your software landscape, identify overlaps, and consider consolidating to a single, comprehensive tool where possible. Consolidation not only saves money but also streamlines processes and enhances collaboration.
By steering clear of these common SaaS overspending mistakes, you're on the path to financial efficiency and smarter SaaS investments.
Source: Pexels
Steps to Manage SaaS Spend
Navigating the seas of SaaS subscriptions can be tricky, but fear not - we're here to help you track SaaS spending.
So, batten down the hatches, and let's discover the essential steps to master the art of managing your SaaS spend.
Step 1: Take Stock of Your SaaS Landscape
Before you can manage your SaaS spend, you need to know what you're dealing with. Start by taking a comprehensive inventory of all your SaaS subscriptions.
Who has access to which tools? Which departments are using what? Understanding your SaaS landscape is like creating a map - it helps you gain visibility and control over your subscriptions.
Step 2: Evaluate SaaS Value and Usage
Once you have a clear view of your SaaS ecosystem, it's time to evaluate the value and usage of each subscription to avoid SaaS sprawl.
Are all your employees actively using the tools? Are there any redundancies or underutilized applications? Analyze the data and engage with teams to determine the necessity and effectiveness of each subscription.
This step allows you to identify opportunities for optimization and potential cost savings.
Step 3: Optimize User Licenses
Licenses can be a significant part of your SaaS spend, so it's crucial to optimize them. Assess user needs and adjust license numbers accordingly.
Are there any users with unused or unnecessary licenses? Can you downgrade certain licenses without impacting productivity? By rightsizing your licenses, you can avoid over-provisioning and save money on unused or underutilized subscriptions.
Step 4: Negotiate Better Deals
Don't be afraid to flex your negotiation skills. Engage in conversations with your SaaS providers when it's time to renew contracts or make changes. Armed with data on usage, explore opportunities to negotiate better pricing, discounts, or more favorable terms.
Your subscription providers want to keep your business, so leverage that to your advantage and secure the best possible deals.
Step 5: Consolidate and Streamline
Over time, you may find that different teams or individuals have adopted similar SaaS tools for similar purposes. Consolidating those tools can bring significant savings.
Identify areas where consolidation makes sense and migrate to comprehensive solutions that meet multiple needs. Streamlining your software ecosystem not only reduces costs but also simplifies workflows and enhances collaboration.
Step 6: Continuously Monitor and Optimize
Managing your SaaS spend is an ongoing process, not a one-time task. Continuously monitor usage, regularly reassess subscriptions, and keep an eye on the evolving needs of your organization.
Stay informed about new tools, industry trends, and changing pricing models. By maintaining an active approach to optimization, you'll ensure that your SaaS spend remains aligned with your business goals and budget.
Step 7: Utilize a SaaS Spend Management Software
To enhance your SaaS spend management efforts, consider leveraging a specialized SaaS management platform. These tools provide centralized visibility into your subscriptions, automate usage tracking, generate cost reports, and offer insights for better decision-making.
A SaaS spend management tool can help streamline the management process, improve accuracy, and save you valuable time and effort.
Making the most of your SaaS investments will be easier with these strategies in place.
Conclusion
We have now reached the end of our comprehensive guide on effective SaaS spend management. By applying these strategies, you can take charge of your SaaS budget and optimize expenditures.
Keep in mind that managing SaaS spend is an ongoing process. Regularly monitor usage, reevaluate subscriptions, and stay updated on new tools and pricing models.
Adopting a proactive approach with data-driven decisions helps uncover cost-saving opportunities, allowing for better resource allocation and business growth.
To further enhance your experience, consider Admina – our centralized SaaS management platform that automates license tracking while providing valuable insights for informed decision-making.
With its powerful analytics and reporting features, Admina enables better contract negotiations, consolidation, and strategic investments to maximize your SaaS budget's potential.
Don't miss out on this innovative solution. Schedule a free demo of Admina today to embark on a new era of efficient SaaS spend management.
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