SaaS is a sneaky expense but a humongous one for most businesses today. At the Indonesia Economic Forum round table, we spoke to a few business leaders...
Opening the round table and setting the macro-economic context was Dr. Ilham A. Habibie, a serial entrepreneur, business leader, investor and policy advisor. “South Asian businesses are growing exponentially over the last decade. The startup wave began with e-commerce and ride-hailing, but now the financial services sector is rapidly digitizing,” he began. Not just large corporations but a vast majority of the 62 million micro, small and medium enterprises (SMEs) — which contribute to 57% of Indonesia’s GDP and 99% of the country’s workforce — are also going through digital transformation, leveraging various tech tools.
This marks a critical shift in the nature of the Indonesian economy itself. “Easy and affordable access to technology, especially on the Software-as-a-Service (SaaS) model, I believe can bridge the gap between large corporations and SMEs,” he added. He also opened up challenge #1 of the business leader.
SaaS can be a sneaky expense. “We manage hundreds of millions in SaaS spends. We are one of the largest SaaS buyers. And we see first-hand how big an expense it is,” says Siddharth Sridharan, CEO of Spendflo.
Patrick Vaz of Modalco agrees, “most of the time, organizations don’t know what they need. For every stage the company is at, the requirement is different. The biggest challenge is knowing what you need and what’s nice to have today, and projecting what tools you will need where you’re going.”
On the other hand, whether it’s startups, scale-ups or SMEs, not every organization has a dedicated CFO. At best, they have a VP/director/manager of finance. As Dr. Habibie suggests, “in the case of SMEs, the CFO is typically the business owner themselves or a family member.” They don’t have a background in tech buying. It is imperative that they keep a keen eye on how SaaS is being bought and used. For this, they need:
The volume and variety of tools that organizations use have changed dramatically over the last 2-3 years. Alex Jatra, Chief Financial Officer of Ayoconnect notes, “Pre-COVID, it was primarily email. Since we started working remotely, we have project management toolslike Slack, Zoom, Jira, digital signatures, etc. In total, at Ayoconnect, we use close to 85 different products.” The subscription and usage management across these various tools has become complex, especially since buying has decentralized.
Dr. Bayu Prawira Hie, a digital transformation expert, focusing on the BFSI industry, identifies a more fundamental problem. There are “16,500 small banks who are now under pressure from the authorities to embrace digital transformation. However, they don’t have the right people even to identify what SaaS tools to buy and put together a cost-efficient tech stack.” So, they end up paying too much for tools that aren’t great together. To manage these complexities SaaS stack, business leaders need:
“At Ayoconnect, we spend almost one million dollars on SaaS tools. It has increased further since Covid,” says Alex. This is a pesky problem. So much so that a CFO regularly sits with his VP of finance to review SaaS spending.
He says, “I do a review on a monthly basis with my team, something we call expense flossing, making sure the costs are real and needed. We discuss renewal timelines, the number of users, user-friendliness etc. Cloud infra is a big line item for us. With the cloud, development costs are amortized, unlike having an on-prem data center. But we need to be cautious about not ending up paying more.”
To enable reviews, business leaders need:
Frederic, the CFO of HappyFresh, has a pressing concern. He says, “SaaS becomes a big line item, particularly when you’re in the business managing traffic, and you get charged based on traffic. Traffic doesn’t mean conversions for a CFO, but it impacts the bottom line of the P&L. At HappyFresh, we had a hockey stick of SaaS spends in marketing and analytics, with no impact on the bottom line.”
Poonam Sagar, co-owner of Infotech Solutions, finds that wastage happens the same way spending happens — small drops but adding up to a considerable expense. She says, “since Covid, companies started buying collaboration tools — not just Jira and Trello, but also Canva, Dropbox and so on. But we sometimes buy the tool for everyone without understanding who really needs it. In client-facing projects, the development team might say, ‘we need this tool’ and buy it, but this expense does not even register in the books because they’ve paid with their credit card. Such expenses drip, drip, drip, so we don’t notice it, but it all adds up.”
For Alex, the problem is slightly different. He says, “we sometimes do trials for products because some user likes it. But then, if the person in charge or preference changes, we might forget that we even had that license, and it keeps paying until the end of time.”
To eliminate these sorts of wastage, CFOs need:
“What’s going to be more important than saving money after spending it is how do we stop teams from spending it in the first place? One dollar on something you don’t need is one dollar wasted,” says Patrick Vaz, Advisor Modalku. As Siddharth of Spendflo suggests, we see this a lot and help CFOs by:
As Siddharth likes to say, “nobody starts a company to buy and manage SaaS.” In the sense that an organization’s core value is elsewhere. SaaS tools need to power growth without weighing down the bottom line. Which is why Spendflo exists.
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