Five challenges of SaaS spend management and how to overcome them
Is your SaaS spending getting out of control? Has the lack of ground-level visibility and monitoring impacted your business growth? We get it, and you're not at fault. A study by Gartner shows SaaS spending to have topped the list of cloud offerings and is predicted to reach $208 billion in 2023 — 15% more than in 2022.
SaaS continues to advance year after year, and so has the decentralized SaaS buying cycle. That means every stakeholder within an organization can buy SaaS leading to lesser visibility of contract value, renewals, and authenticity of purchase platforms.
All of these pose a significant threat to CFOs desperately looking for centralized visibility on their spending.
Ultimately, SaaS may be decentralized, but there are solutions to get your organization out of this doom. But, before that, let's first understand the challenges an organization faces due to ineffective SaaS spend management.
Five challenges of SaaS spend management
1. No overarching visibility on SaaS spend across the organization
Buying SaaS online is super easy. Your employees sign up for online subscriptions, which eventually get auto-renewed or upgraded without prior notice. Also, often less authentic platforms such as G2, Capterra, or Reddit are used by stakeholders to research and understand pricing.
Curbing such SaaS spend is more strenuous, especially for hyper-growth businesses without a trustworthy system. Moreover, it's notably more complex for IT teams to identify unused or wasteful licenses and incorrect usage of applications by various teams.
There's also a lack of visibility with SaaS contracts. They may not provide necessary information regarding usage limits, lock-ins, and other crucial clauses. Missing details lead to organizations overpaying on SaaS, or worse, undergoing a vendor lock-in. But due to lesser visibility, CFOs fail to keep track of contractual information effectively.
2. Forecasting future SaaS spending becomes difficult without data
What's more crucial than curbing your current SaaS spending? It's optimizing and forecasting future expenses. But with the absence of data and analytics, or appropriate tools, it can get more challenging for your organization to track SaaS usage over time as the numbers grow.
Your organization could have multiple data streams making manual data analysis for a clear-cut spending forecast impossible. But you need valuable, data-driven insights on spending, usage, app duplication, and more for efficient SaaS spend management.
3. Higher than necessary spend due to the inability to track negative spends
Failing to zero in on SaaS usages, functionalities, and subscriptions across your organization results in off-the-shelf pricing. Your employees might lack the knowledge or high-level context to make smart purchase decisions and ultimately overspend on SaaS that does not meet their needs.
Here's an example: A SaaS plan costs $10 a month for a single user, but a "team plan" costs $30 for a team of 100 or fewer. And unfortunately, if four or more employees unknowingly buy the "single user" plan, it's a waste of resources.
4. Inability to determine the ROI of SaaS tools
It is essential to determine the ROI from your SaaS investments. But many organizations neglect to measure ROI from their SaaS.
SaaS pricing is an ever-changing cycle. Therefore, you must track and analyze your returns, such as productivity, efficiency, time-saving and revenue creation.
When you fail to measure the ROI, you fall back on creating a pathway for more strategic buying decisions of the future, eliminating application redundancy, and streamlining renewals.
5. Slower compliance cycles due to dispersed contracts in multiple inboxes
Another significant challenge your organization might face is scattered contract information delaying your compliance audits. This leads to slower compliance cycles and unwanted auto-renewals, which are vital in controlling spending.
Contracts and renewal notices get lost in your employees' inboxes. And leadership can find it tricky to gather contracts and examine auto-renewals, cancellations, and other clauses, along with SaaS security and compliance checks, among many more legalities.
What are the solutions for efficient SaaS spend management?
Here are some sure-shot ways in which you can combat the above avoidable problems:
1. Have a single source of truth for all things SaaS
One effective solution to tackle the issue of scattered SaaS information is handling and storing every detail on a single dashboard. You could start small with online database tools such as Airtable and Notion or go plain and simple by using regular spreadsheets.
Also, educate your employees to follow regular spreadsheet updates every time a new subscription or renewal is made. This way, there's no more loss of critical data in multiple inboxes.
But there's a catch. Spreadsheets or modern databases and tracking tools like Airtable have limited functionalities. Instead, a SaaS spend management software such as Spendflo can take such admin tasks off your hands. It can centralize all your SaaS details related to subscriptions and manage inventory to save you time and immense manual labor.
2. Understand Employee SaaS usage
It is imperative to understand how employees use SaaS that they bought. Do they actually need it? How often have they accessed it? When was the last time they accessed it?
Having this data will aid better decision-making while formulating SaaS renewal strategies.
3. Conduct employee surveys to understand which SaaS tools work or don't
Most SaaS tools are bought to increase employee collaboration and productivity. Therefore, it's just as important to find out if the end-users are happy with the tools. You can lead the way by conducting frequent employee surveys to understand their sentiments with respect to the tools they are using.
Most of the tools could be pricier for current market standards, incompatible, or even redundant. Regular employee surveys help gather data that can drive better decisions during renewals. It also curbs unwanted auto-renewals and decreases your SaaS spending rapidly.
4. Research pricing of SaaS tools and their competitors
Performing thorough competitor research on various price points and plans can help you and your teams make intelligent purchase decisions and get the best market deals. Hurried and overlooked purchases are bad news for successful SaaS spend management.
A more productive approach is to use a platform like Spendflo, which has industry-standard benchmarks for each of your SaaS tools. Using Spendflo saves you time and money. It helps keep track of your SaaS expenses, from purchasing to monitoring every aspect of the usage.
5. Consolidate all of your contracts in one place
Double-checking contracts is crucial to avoid future vendor lock-ins due to auto-renewal or cancellation clauses that might cost you a lot of money or, worse - penalties. But if there's a lack of a streamlined process to collect and store your contracts, it can get super exhausting to manage your SaaS subscriptions.
A perfect solution to manage your contracts is consolidating and accessing them through a single repository. A SaaS spend management tool can be a great alternative to all the manual effort that consolidates and revisits your contracts.
SaaS spend management is tricky. But the good news is that a SaaS spend management tool such as Spendflo will not let you do all the heavy lifting and lose sleep over excessive SaaS spending.
To sum things up, here's what you get by using Spendflo to counterattack unmanageable SaaS spending:
- A one-stop research platform for tool compatibility checks, valuable vendor insights, price analysis, and more
- Centralized contract and license management
- Fast-track your approval workflows
- Track SaaS usage and understand employee sentiment
- Start making more intelligent purchase decisions based on data-driven, actionable insights
Are you interested to learn more? Schedule a free savings analysis!
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