As SaaS becomes more popular, companies are facing a new challenge: how to manage the costs and risks associated with SaaS subscriptions?
This is where a solid SaaS spend management strategy really comes in handy.
Let’s talk about why it’s important to manage your SaaS spending, what happens when you don’t, and what you need to do to make it work.
What is a SaaS Spend Management Strategy?
SaaS spend management is all about keeping an eye on how SaaS apps are being used in your company and making sure you’re getting the most out of them.
So, it’s all about subscription management strategy; having good procurement policies, checking out how they’re being used, and spotting ways to cut costs and work more efficiently.
As more and more companies start using SaaS, the problem of shadow IT is becoming more and more of a security risk and costing businesses a lot of money.
Absolutely. The financial impact of unmanaged SaaS spend is significant. That’s why having a multi-faceted approach to effective SaaS spend management strategies is important.
For some insights on the fundamental breakdown, you can check “Tired of SaaS Surprises? Take Control of Your SaaS Spend Management.”
The Impact of Unmanaged SaaS Spending
The unchecked growth of SaaS applications within organizations, often called shadow IT, is a big financial and security problem.
As Ritish Reddy, CEO of Zluri, points out, SaaS applications are crucial for businesses of all sizes.
But without proper shadow IT control, it’s tough to keep track of their costs and usage patterns. This can lead to inefficiencies and hidden risks.
Ritish Reddy also found a whopping 41% of employees use tech not seen by IT departments.
This lack of visibility has some pretty serious consequences. Enterprises have more than twice as many shadow apps as small and medium-sized businesses (SMBs).
The financial impact of this unmanaged SaaS spending is pretty significant.
Gartner says companies could be spending more than they need to on SaaS—at least 25% more—by 2027 because of extra licenses and tools that overlap.
That adds up to about $135,000 in wasted resources each year. Meanwhile, to get the lowdown on how much you’ll pay each month, please refer to “How Much is SaaS Per Month: Factors, Average Cost, & Best Price Guide.”
Another reason for this overspending is that it’s easy for employees to buy SaaS apps, often through expense accounts. In large organizations, one in three employees has done this.
This lack of control also affects license utilization. On average, 25% to 50% of SaaS spending is wasted on provisioned licenses that employees rarely use.
Zylo data shows that 38% of all SaaS licenses go unused within a 30-day period, which could be a waste of over $1,500 per employee per year.
Another thing that makes this worse is that some companies buy the same apps twice. In large organizations, this can lead to up to 12% of SaaS apps being duplicates.
This adds to the costs and makes it harder for teams to work efficiently and access data. On top of that, unmanaged SaaS apps can pose a big security risk, leading to data breaches and compliance violations.
You can find all the details on the SaaS subscription agreement in “Your SaaS Subscription Agreement Explained: Key Terms & Best Practices.”
Components of a Successful SaaS Spend Management Strategy
One of the most important parts of any successful SaaS spend management strategy is to have a complete and up-to-date list of all your SaaS products.
As Andrey Saltan and Kari Smolander point out in their study on SaaS pricing practices, this inventory should include key info about each application, like total spend analytics, who owns it (department, team, or individual), categorization, number of licenses, compliance status, security profile, contract terms, and renewal date.
This system of record gives you the visibility you need to make smart choices about how you use each application and find ways for any SaaS cost optimization strategy.
It’s not enough to just discover what you’re spending on SaaS. You also need to have a plan to control and optimize that spending. This means dealing with the big problem of licenses that aren’t being used.
Zylo data shows that these account for 38% of all SaaS licenses and could be costing companies over $1,500 per employee each year.
For the lowdown on the management system, kindly read “SaaS Subscription Management System: What Needs to Consider & How?“
Also, it’s important for any company to have processes in place to track how licenses are being used, reclaim any unused licenses, and license rightsizing to match actual needs.
Another important thing to look at is combining similar apps. Zylo data shows that up to 12% of SaaS applications in large organizations are duplicates, often the result of decentralized purchasing practices.
Setting up a formal SaaS application approval process, with input from Legal, Finance, IT, and Security, can help stop these unnecessary purchases and ensure they’re in line with the company’s needs.
At the end of the day, any winning strategy has got to tackle security and compliance head-on. If you don’t manage your SaaS apps, you’re more likely to have a data breach or violate regulations.
The good thing is you can easily check that your SaaS applications are up to date with the latest data security and privacy standards. If there are any issues, you can fix them right away.
Automated user onboarding and offboarding processes can also help keep things secure by controlling access and preventing risks associated with former employees.
For the full lowdown on the strategy process, you can read “Best Practices for a Successful SaaS Spend Management Process.”
Support System for SaaS Spend Management Strategy
We can all agree that SaaS spend management strategy, licenses, and renewals can be a hassle. It can lead to inefficiencies, cost overruns, and security vulnerabilities.
That’s why we at Octobits are working to solve this problem.
At Octobits, we’re all about giving IT departments and MSPs the tools they need to streamline their SaaS environment, drive operational efficiency, and cut down on costs.
Octobits provides an all-in-one SaaS management platforms to give you visibility, control, and centralized management for all your software tools.
Octobits integrates easily with major IT systems like Microsoft 365, AWS, and CrowdStrike, so you can get a clear picture of your entire software ecosystem.
And you can get Octobits for free until December 2024. This helps you keep an eye on your overall spending.
In Closing
Managing SaaS spending effectively is the key to making the greatest value from your software investments. This helps you cut costs, avoid risks, and get the most out of your software.
This means it’s becoming crucial for businesses to implement structured and collaborative management frameworks.
At the end of the day, if you get your SaaS spend management strategy right, you can be sure every dollar you spend will help your business grow and work more efficiently.
