How to Reduce Your SaaS Costs? : A Complete Guide to SaaS Cost Optimization
In this age of SaaS, with service providers springing up every day, it becomes difficult for companies to assess and get the best prices suitable for their budget. Managing and reducing the costs involved is a totally different story. Here we explain how you can reduce upto 30% off your current/future spending.
Software as a service or SaaS, has changed the way businesses operate around the world. According to the 2018 global outsourcing survey, 93% of CIOs are adapting or planning to migrate to the cloud. The major reasons for them were to reduce their overall expenditure involved in purchase/installation, ongoing costs like maintenance and upgrading in the future. Other than that, on-premise structure also made it hard for them to instantly remove the physical servers when they wanted to cancel the service.
So, in order to satisfy their organization’s diverse needs with agile and modern solutions, these companies are spending billions trying to integrate various SaaS softwares into their business environment so as to create a sustainable software stack.
Growth and Usage of SaaS Apps
According to a recent report, in 2018 a company spent around $343,000 on SaaS, which is approximately a 78% increase as compared to the previous year!
And as per the reports, the average number of SaaS applications used in a company was a whopping 150!
Imagine the amount of money a company would be spending during the initial stages of purchasing SaaS softwares for the first time! Come on, do the math!
Now wait! Isn’t SaaS costs supposed to be a lot cheaper than an on-premise setup?
Certainly yes, if you can manage it properly.
Impacts of SaaS overspending
According to the SaaS Cloud Spend Survey 2020 by Harness, the average spend across all survey responses was around $4.69 million.
And out of that, 30-35% is wasted!
That money could’ve been invested in developing the business, marketing or improving the customer experience.
SaaS overspending can dent your business in many ways:
According to the 2019 survey by Cloudability, 58 percent of respondents said they are overspending on cloud resources, and out of those, 69 percent said they overspent by up to 25 percent more than their budget.
Overspending beyond budget can have negative impacts in ways you never imagined. It can:
- Affect the quality of service - Spending more than needed on unnecessary cloud tools can reduce your bandwidth to spend on customer service, the product or marketing. 38 percent of the respondents saw poor cloud usage straining their service levels.
- Impact internal processes and innovation - Spending on unnecessary cloud apps can leave your team dangling without crucial resources needed for them to innovate at a faster rate. 25 percent of the respondents said poor cloud spend management hindered their ability to innovate with cloud resources.
- Lead to under-provisioning of resources - Unused resources left running can suck up your budget and give you less room for other expenditure.
Pitfalls leading to SaaS Overspending
Now, how can you be aware of the pitfalls that lead to your SaaS overspending? Here are some cues to avoid that -
1. Perception that Cloud=Cheap
Compared to an on-premise setup, cloud is definitely cheaper and easier to manage. But poor management of cloud resources can cost you a ton of money. Different vendors charge different pricing for their services. This pricing can change depending on the region, utilization, and more which makes it difficult for companies to understand cloud expenses.
Spendflo’s Solution: Conduct data-backed negotiations with the SaaS vendors to get upto 30% savings on the initial cost.
2. Hidden duplicate or orphaned subscriptions
When employees, departments or teams try to procure SaaS licenses without the permission of the IT team or with the help of a procurement team, it could lead to duplication of existing apps used in an organization.
This happens mainly when a company is in its growing stage and continues to work without any SaaS strategic plans or any preset app usage protocols for its employees.
Orphaned subscriptions may occur when the company fails to reassign or block the subscription of an outgoing employee. This results in in-app subscription without any ownership.
Stealth IT, the information technology (IT) systems built and used within organizations without explicit organizational approval comprises 50% or more of IT spending in large enterprises. - Everest Group
Spendflo’s Solution: Implementing a deeply integrated SaaS approval process into your internal communication systems. This prevents unnecessary spending on SaaS subscriptions without approval from the IT leaders. Only the approved SaaS requests will be handled.
3. Traditional expense management
With the growing dependency of companies on SaaS cloud computing, employees are using more applications for higher productivity. As more employees use these SaaS applications, the company might not be able to keep a track of how and when these cloud apps are used.
The absence of a SaaS subscription management system would easily lead to duplicate and orphaned subscriptions mentioned above. It could also lead to uncontrolled spending without any record of the same.
Spendflo’s Solution: A robust SaaS procurement and renewal management tool, which shows you metrics such as
- Amount saved
- Renewal dates
- Currently ongoing subscriptions
- SaaS request owners
How can you streamline your SaaS spend?
In this age, SaaS softwares really does make it easier for organizations to run efficiently. But without proper strategy to manage the costs, you could lose track of your spending. While shifting to the cloud may be a cheaper and efficient solution, it also makes it less predictable and uncontrollable than older methods.
But there’s a way to manage it efficiently. We recommend 3 simple yet testes tips for any organization that is looking to manage their SaaS stack more efficiently -
- Organize your SaaS stack
- Reduce SaaS Spend
- Handle your SaaS purchasing in alignment with internal processes
With the right SaaS subscription management strategy, you can save up to 30% on your SaaS spend.
Organize Your SaaS stack
Automating tracking of SaaS tools will help you understand how much you are spending for SaaS subscriptions. It is recommended for organizations with no real grasp on the spending.
How is it done?
Usually, a SaaS Management platform will first map your current portfolio to understand which SaaS applications are being used and who is using which application. This data will be analyzed to track the monthly and yearly spend for all your applications. Spendflo has a free consultation and an easy-to-fill survey that can help you get on track at the earliest.
Reduce SaaS Spend
Come up with valuable insights to reduce SaaS spend and plan SaaS procurement and SaaS renewals at just the right time.
How is it done?
This step involves two different approaches.
1. Data-backed negotiations:
Utilizing data derived from negotiations we benchmark pricing for our customers and negotiate in good faith with vendors. We also procure licenses and provide discounted pricing to our customer base from the largest vendors in the world.
Plus we identify duplicate software and right size licenses for reducing the overall application spend and increase the business value using them.
2. Planning SaaS Renewals:
If you need to get SaaS costs under control, ironically, you must never miss a renewal. So, calendarize key dates for SaaS software like renewals, cancellation, onboarding, etc. We start negotiating rates and renewals based on user insights prior to the renewal dates.
Handle your SaaS procurement in alignment with internal processes
Startups today need SaaS to run efficiently. Efficiency not only involves operations but also in unknown areas such as your SaaS spend.
It can be done by identifying the gaps in adoption within specific teams to plan enablement and training. Using a tracking application usage across teams to enable better pricing.
Monitor and Manage your SaaS spend effectively!
SaaS enables SMBs and enterprises to run their businesses at scale efficiently. But the costs involved due to improper management of SaaS applications can negatively impact them directly and indirectly. Therefore it is recommended to understand how SaaS procurement and management can reduce duplicate subscriptions, and increase your savings.
With a dedicated procurement and management team in place, you as business can:
- Control costs and increase savings
- Eliminate underutilization of resources, and
- Manage renewals and weed out duplicate subscriptions
To understand how you can save upto 30% on your SaaS spend, schedule a demo with Spendflo today.
Spendflo raises $4.4M to reinstate the modern SaaS buyer back in the driver’s seat
Turning SaaS Procurements from an everyday firefight into a tactical advantage