The fact that it’s so easy for businesses to adopt Software as a Service (SaaS) solutions has led to a huge increase in their use. However, this convenience often hides a growing financial challenge: unmanaged SaaS spending.
If you don’t have a solid SaaS spend management process in place, your company could end up losing a lot of money because of shadow IT, redundant apps, and underused licences.
That’s why it’s crucial for organisations to implement a solid SaaS spend optimization process. So, let’s talk more about SaaS cost management strategies here.
What is SaaS Management?
SaaS management is all about making sure you’re getting the most out of your software-as-a-service (SaaS) applications at work.
It’s about keeping an eye on, managing, and making the most of your company’s SaaS applications to make sure they’re being used properly and effectively.
One of the most important things to think about when it comes to SaaS management is controlling SaaS spend.
Zlury white papers show SaaS spending is one of the top three expenses for businesses, with the average cost of a SaaS application for an enterprise being around $306,500.
In addition, 41% of employees use technology that IT can’t see, which means there are some applications out there that aren’t being managed properly and could be risky.
On top of that, around 25% of SaaS licences in enterprises are unused, which represents a lot of wasted expenditure.
Good SaaS management tackles these issues by getting a clear picture of all your SaaS apps, looking at how they’re used, making sure you’re getting the most out of your licences, negotiating better contracts and keeping things secure.
Then, what is SaaS operations? SaaS operations (SaaSOps) are the day-to-day activities involved in managing and optimising SaaS applications within an organisation.
SaaS management is all about the big picture, while SaaS operations are where the rubber meets the road. It’s about making sure that SaaS applications are deployed, used, and maintained effectively.
For insights on SaaS subscription, kindly read “Your SaaS Subscription Agreement Explained: Key Terms & Best Practices.”
Challenges in Managing SaaS Expenses
The increasing adoption of SaaS applications, while beneficial for productivity and innovation, presents significant challenges for managing software as a service expenses.
One of the main problems is the lack of visibility into how SaaS is being used across organisations.
As companies grow, they end up with a lot more shadow IT applications, which aren’t managed by the IT department.
Zluri’s research shows how enterprises have seven times more shadow apps than managed apps, while SMBs have three times as many.
This lack of visibility makes it tricky to keep track of spending, stick to security policies and make the most of licence usage.
This lack of oversight can have a big impact on the bottom line. As businesses grow, the average annual SaaS spend per employee goes up. In SMBs, it’s $6,935, while in large enterprises it’s $12,690.
But a lot of this spending is wasted because people don’t use all the SaaS licences they have.
Roughly 20% of licences go unused in SMBs, while mid-market companies are closer to 35%.
This means that companies are paying for software that isn’t being used, which is costing them a lot of money.
For instance, one company we looked at saved $100,000 in six months by making better use of the platform. This shows that there’s a lot of money to be saved by managing SaaS spending effectively.
For information into monthly SaaS pricing, you can read “How Much is SaaS Per Month: Factors, Average Cost, & Best Price Guide.”
Complete Guide of SaaS Spend Management Process
Inventory All SaaS Applications
The first thing you need to do to get a handle on SaaS spending is to make a list of all the SaaS apps your company uses.
This covers both apps managed by IT and those used without IT’s knowledge.
The reality is many businesses have around seven times more unmanaged SaaS apps than those they manage.
It just goes to show how widespread the use of unmanaged apps really is.
So, you need to find out about these hidden applications. Tools like Spendflo’s SmartScan can help automate this process by extracting and categorising data from contracts and identifying potential redundancies or underutilised licences.
Also, you can maximise this phase with the use of AI-powered OCR and NLP.
Analyse SaaS Usage and Utilisation
Once you’ve got a full list of what you’re using, the next thing to do is look at how you’re using your SaaS.
This means keeping an eye on how often people use the apps, who they are, and why. This data can also show us where we’re using the same application more than once.
For instance, mid-market businesses typically use around 137 SaaS applications, which suggests there may be a lot of overlap in functionality.
Looking at how people use the software can also show you which licences aren’t being used much.
The data shows that mid-market companies have a 35% rate of unused SaaS licences, which means there’s a big chance to save money.
Optimise SaaS Spend
With this data in hand, companies can make the most of their SaaS spend management process.
This could mean negotiating better deals with suppliers, reducing the number of licences for applications that aren’t used much, or getting rid of tools that are no longer needed.
For example, Monday.com saved $100,000 in six months just by making better use of their platform.
For insights on SaaS systems optimisation, please refer to “SaaS Subscription Management System: What Needs to Consider & How?“
Implement a SaaS Management Platform
Using a SaaS management platform can make this process a lot more efficient.
These platforms give you a central place to manage all aspects of the SaaS lifecycle, from procurement to renewal.
Tools like automated contract review, licence optimisation recommendations, and usage tracking can help businesses take control of their SaaS spending.
Spendflo, for instance, has a range of AI-powered tools for analysing contracts, managing licences and helping with procurement. This lets organisations automate key processes and make data-driven decisions.
Establish Governance Policies
To make sure they’re going to be around for the long haul, organisations should get their SaaS governance policies in order.
These policies should set out the steps for buying, monitoring use, making sure everything’s secure and renewing contracts.
If you standardise these processes, you can cut down on shadow IT, stop making the same purchases twice and make sure that SaaS usage is what your business needs.
The sources show how one of the main issues with SaaS management is that it’s often a case of each department making its own decisions about purchases without IT input.
Continuous Monitoring and Optimization
The key to keeping control of your SaaS spend management process is to keep an eye on things and make changes when you need to.
This means checking in on how the software is being used, keeping an eye on when contracts are up for renewal, and making sure each cost to serve SaaS is still worth and safe to use.
As business needs and technology change, the SaaS landscape will keep on changing too, so organisations will need to adapt their spend management strategies to keep up.
The sources say that SaaS spend management isn’t a one-off project. It’s an ongoing process that requires you to be on your toes and adapt to make the most of your SaaS investments while keeping financial risks to a minimum.
For another reference on SaaS management, kindly read “Tired of SaaS Surprises? Take Control of Your SaaS Spend Management“
Best Practices for Effective SaaS Spend Management
The other thing we need to do beyond the SaaS subscription management process guideline above is build up good relationships with our suppliers.
And the main priority is getting to know your vendors, building a good relationship with them, and understanding how they price their products and renew their contracts.
If businesses keep the lines of communication open, they can negotiate better contract terms, get discounts, and get early access to new features or updates.
Another key strategy is to put in place solid employee training and onboarding programmes.
This makes sure that employees know why each SaaS application is useful, how to use them properly, and why it’s important to stick to security protocols and governance policies.
Good training programmes can cut down on shadow IT by making sure that employees know which apps are approved and what they can do, so they don’t have to look for unofficial options.
It’s also a good idea for organisations to regularly review and update their SaaS inventory using Octobits.
Octobits is a SaaS management platform designed to make software ecosystems work better for businesses.
So, Octobits is a one-stop shop for software management. With features like centralised billing, easy integration with major IT systems, and comprehensive reporting.
This means checking whether each application is still relevant and useful, looking at how it’s being used, and changing the policies if necessary to keep up with changes in the business and new security threats.
If you keep your policy management up to date, you can make sure that your SaaS usage is still in line with your business objectives, security standards, and regulatory requirements.
And you can get Octobits for free until December 2024. This helps you to manage your overall spending more effectively.
In Closing
To manage SaaS spending effectively, you need to take a holistic view by considering lots of different factors.
That’s why Octobits is here to help you take control of your software spending and make sure it’s in line with your overall business goals.
Because the key to making long-term savings and improving efficiency is to put a good SaaS spend management process in place.
