This SaaS spend management guide is designed to help companies manage SaaS expenses more effectively despite their growing complexity. But what’s the point of having a guide like this?
Zylo’s research shows that enterprise companies underestimate their spending on SaaS by an average of 304%.
This uncontrolled spending comes from things like application sprawl, software redundancy, shadow IT, license waste, and missed renewals.
The financial impact can be pretty significant. Large enterprises spend an average of $264 million a year on SaaS, with a whopping $127 million wasted on unused licenses each year.
So, let’s go over the steps for a standard operational procedure for SaaS cost optimization, one by one.
Guide to Make SaaS Spend Management Strategy
With so many SaaS apps out there, it’s become pretty important to have good subscription management strategies.
If you don’t manage SaaS expenses properly, you could end up losing a lot of money. So, let’s go over a few basic steps to create a solid SaaS spend management strategy.
Conducting a Comprehensive SaaS Audit
The goal of this audit is to identify all the SaaS applications in use, including those that have been approved by IT and those that are being used without IT’s knowledge.
Companies can use spend analytics to examine software transaction data from accounting systems to get a complete picture of how SaaS is used.
You can also cross-reference this data with a solid SaaS product taxonomy to identify and categorize all commercial SaaS applications accurately.
It’s also a good idea to document key contract details, such as renewal and cancellation dates, terms and conditions, and license pricing.
You can also put together a plan to deal with shadow IT. This shadow IT mitigation is essential to avoid redundant applications and security risks.
For reference, you can read more insight at “Tired of SaaS Surprises? Take Control of Your SaaS Spend Management.”
Gaining Visibility into SaaS Spending
It’s not just about knowing what apps are being used in a SaaS environment. It’s also about understanding who’s using them, how often, and why.
As Zylo’s analysis shows, a lot of companies only use 42% of the licenses they buy, which is a huge waste of resources.
Andrey Saltan and Kari Smolander show how SaaS providers are starting to use pricing based on how much customers use the software and what it’s worth to them.
Knowing these models can help businesses figure out if they’re paying the right amount for how much they use.
Using SaaS utilization analytics through SaaS management platforms helps you get better insights into usage patterns, cost allocation, and license optimization. This can help you deal with shadow IT better.
For monthly cost SaaS calculation, please refer to “How Much is SaaS Per Month: Factors, Average Cost, & Best Price Guide.”
Utilizing SaaS Management Platforms
If you want to manage your SaaS portfolio effectively, you should use a SaaS management platform (SMP), like Octobits.
Octobits can give you one place to store all your SaaS data, so you can keep track of spending, manage contracts, and make sure you’re getting the most out of your licenses.
SMPs can automate tasks like license provisioning and de-provisioning, which frees up IT resources for other important projects.
Plus, SMPs give everyone in the company a single source of the truth for SaaS data, and they make it easier for IT, software asset management, procurement, and the business teams to work together.
By putting all your SaaS management in one place, you can get everyone working towards the same goals, even if they’re in different teams.
Optimizing SaaS Licenses and Subscriptions
License optimization is a critical part of reducing SaaS costs. Benjamin Brandall’s 2018 research shows that it’s important to understand different pricing structures and make sure that each subscription is right for what it’s used for.
This could mean downgrading licenses when you don’t need all the bells and whistles, or consolidating multiple licenses to save some cash.
It’s also worth considering how many companies have a lot of similar tools—like multiple project management apps—which makes workflows more complicated and leads to unnecessary costs.
Making these subscriptions more efficient helps get rid of any unnecessary duplication, which saves money.
Your vendor negotiation tactics can also make a big difference in getting good terms, especially when it comes to licenses that aren’t being used much.
Establishing SaaS Governance Policies
One thing that’s often overlooked in the SaaS spend management guide is setting up governance policies.
Even though it’s crucial to ensure that SaaS management processes are followed across the company, setting up governance policies is the best way to do this.
So, ideally, SaaS purchasing should be a joint effort between IT, procurement, and finance to make sure the whole company sticks to the approved procurement policies.
Dan Ma and Abraham Seidmann also recommend aligning pricing models and governance with a company’s overall strategy.
If you don’t have proper governance in place, applications can spread without any control, which can lead to financial and security issues.
Good IT governance gives you the boundaries you need to stop this happening. It makes sure that software buying fits with your business goals and reduces the risks of shadow IT.
You’ll find all the details on the process in “Best Practices for a Successful SaaS Spend Management Process.”
Continuous Monitoring and Management
SaaS management isn’t something you can just get done once. The bottom line is you’ve got to keep an eye on how the software is being used, whether it’s all above board, and what it’s costing you.
Knowing how your SaaS licenses are being used is key to making sure you’re not wasting any of them.
So, it’s a good idea to have regular SaaS reviews and to keep the lines of communication open between departments.
That way, you can spot when needs change, when applications aren’t being used as much as they could be, and when you can bring things together in a more efficient way.
SaaS utilization analytics are really important in this phase because they provide data-driven insights that help you make better decisions.
Keeping an eye on contracts is also a good way to make sure they’re reviewed before auto-renewals. This gives companies the chance to renegotiate terms or cancel unneeded services.
This helps to keep software spending at an optimal level by making sure vendors are negotiated with effectively and that procurement policies are followed.
Ultimately, for insight on strategy for 2025, please refer to “A Beginner Guide to SaaS Spend Management Strategy for 2025.”
In Closing
The key to running a tight ship is having a solid SaaS spend management plan.
As we’ve seen in this SaaS spend management guide, a proactive and structured approach can help your organization maximize software investments while keeping finances healthy and operations running smoothly.
