24 May 2024
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SaaS spend management (Image by Octobits)

Octobits Blog – As your reliance on SaaS grows, so can the complexity and costs associated with managing these subscriptions. That’s why SaaS spend management is becoming an essential part of any successful IT strategy.

DemandSage’s 2023 SaaS summary statistics show considerable growth in the SaaS market, from $31.4 billion in 2015 to an estimated $197 billion in 2023.

This indicates an increased reliance on these platforms for day-to-day business operations.

This growth highlights the necessity for effective SaaS spend management as an integral part of an IT strategy. 

But SaaS spend management is more than just cutting costs – it’s about ensuring every software investment delivers maximum value for your business.

With that in mind, let’s take a look at some of the concepts, tools and technologies associated with SaaS spend management. 

The Role of SaaS Spend Management in Financial Planning

Effective SaaS spend management isn’t merely an exercise in cost-cutting – it’s about aligning your software investments with your broader business goals and maximizing returns.

A Forbes article by David Prosser, reporting on procurement platform CloudEagle, found that companies now spend an average of $3,500 per employee on SaaS tools.

This emphasizes the potential financial impact of these investments if not carefully managed.

Unmanaged SaaS spending can quickly snowball, impacting your finances in several key ways.

Unexpected expenses can eat away at carefully crafted IT budgets, leaving insufficient funds for other critical projects like infrastructure improvements or cybersecurity measures.

Furthermore, every dollar spent on underutilized subscriptions or forgotten renewals directly eats into your profitability, limiting your ability to reinvest in strategic growth initiatives.

Finally, more visibility into SaaS expenditure patterns is needed to ensure accurate forecasting, making it easier to make informed, data-driven decisions about the direction of your business.

Integrating a well-defined SaaS spend management strategy addresses these challenges.

It provides the insights needed to allocate budgets strategically, ensuring software aligns with core needs.

Regular usage monitoring allows businesses to optimize their SaaS investments, maximizing ROI by identifying areas to renegotiate contracts, downgrade licenses for underused tools, or eliminate redundant services.

Most importantly, SaaS spend management restores a clear view of recurring costs, leading to more reliable financial forecasts and enabling confident, data-driven business decisions.

Key Components of SaaS Spend Management

SaaS spend management is a multifaceted process. In this process, we need to involve several key components crucial for maintaining financial efficiency and aligning SaaS investments with business objectives.

Here’s a look at its core components and the technical aspects involved:

  • Discovery: This is the foundation. You need a complete inventory of all SaaS subscriptions, including shadow IT acquired outside of established channels. SaaS management platforms and specialized discovery tools automate this process, often integrating with expense management systems or network monitoring to expose hidden usage.
  • Usage tracking: Visibility extends beyond just knowing what you have. Usage tracking is about monitoring how frequently and effectively each application is utilized. This data is used to determine if the investments in certain SaaS tools are justified based on their actual usage. It’s common to find underused or even unused licenses during these reviews, pointing to potential cost-saving opportunities.
  • Right-sizing: Usage data guides subscription adjustments. So, right-sizing involves adjusting subscription levels to match the actual needs of the organization. This means scaling down or cancelling subscriptions that exceed requirements, thus avoiding payments for unused features or capacities.
  • Vendor contract management: SaaS contracts require careful management and more than just handling renewals. Proactive negotiation, tracking renewals, and avoiding auto-renewals for unused tools are critical to cost control. 
  • Visibility and tracking: Centralized dashboards within SaaS management platforms provide ongoing visibility into subscription costs, usage patterns, and upcoming renewals. This allows proactive decisions instead of budget surprises.
  • Cost management and optimization:  The goal is to reduce costs without sacrificing functionality. This involves identifying unused licenses, considering alternative tools with lower price points, or consolidating redundant solutions.
  • Governance and compliance:  This ensures a secure and compliant SaaS environment. Establish policies for SaaS procurement, data handling, and access management. Many SaaS management tools integrate compliance checks and can streamline audits.

For more details on SaaS integration, please read the article Is Managing SaaS a Headache? Let’s Streamline It with SaaS Integration.”

What is the SaaS Management Strategy?

A well-crafted SaaS management strategy provides a framework for proactively optimizing and controlling costs within your SaaS environment.

A SaaS management strategy is not a one-time project. It’s an ongoing process of monitoring, adapting, and optimizing to ensure your resources are being used wisely.

It goes beyond reacting to issues and focuses on ensuring alignment between software investments, business needs, and your overall financial objectives.

Then, the regular audits are the next essential step. A 2021 Productiv’s research indicates that a staggering 45% of SaaS seats go unused,  underscoring the potential for cost savings by identifying unused licenses, underutilized subscriptions, or opportunities for downgrading to lower-tier plans.

Another way to improve the strategy is to assign ownership for SaaS tools. Therefore, please read What is SaaS license management and how can it save your money? to get the perspective on SaaS license management as part of the SaaS management strategy.

When specific departments or teams take responsibility for the tools they use, it fosters a sense of accountability, encouraging careful management and optimal utilization of these resources.

This ownership helps in aligning SaaS usage with specific departmental goals and available budgets, making the process more targeted and effective.

The strategy is rounded off with clear communication and the establishment of policy guidelines that define the acceptable use of SaaS tools.

These policies are crucial as they help prevent misuse and ensure compliance with security standards, safeguarding the company’s data and technological assets.

Effective communication of these policies ensures that all team members are aware of the guidelines, which helps in maintaining a secure and compliant SaaS environment.​ 

Tools and Technologies for SaaS Spend Management

Choosing the right tools is vital for streamlining your SaaS spend management process, especially in complex IT environments.

Here’s a closer look at the types of solutions available, with some specific examples.

1. Zylo

This platform provides a comprehensive overview of your SaaS spend, utilization, and user feedback.

Zylo helps manage software renewals, optimize license usage, and reduce costs through detailed insights and benchmark data​.

Zylo also compares your SaaS costs and usage patterns with industry benchmarks. This helps evaluate the efficiency of your current setup and identify areas for potential further savings.

2. Octobits

Octobits stands out by focusing on delivering actionable data and insights specifically tailored to the needs of IT managers and finance professionals within mid-sized companies.

Octobits helps IT teams and department managers make informed decisions about SaaS investments.

By highlighting underutilized subscriptions, pinpointing areas for downgrading plans, and identifying redundant tools, managers can optimize resources without impacting productivity.

Octobits also provides the visibility and data required for accurate budgeting and forecasting of SaaS-related expenses.

Its focus on expense streamlining helps finance teams identify savings opportunities, control unexpected costs, and ultimately contribute to a healthier bottom line.

By tracking login frequency, feature utilization, and other metrics, Octobits builds a granular picture of how each subscription is actually used across your workforce.

Kindly contact the friendly Octobits team today to learn more, get free access to Octobits, and customize your needs.

Cleanshelf

Cleanshelf takes a focused approach to SaaS spending management, prioritizing the identification and elimination of wasteful spending.

The main focus of Cleanshelf is pinpointing unused licenses, underused subscriptions, or subscriptions with features that need to be utilized by your workforce.

This translates directly to cost-saving opportunities by downgrading, reallocating, or eliminating subscriptions.

Cleanshelf also can help spot overlapping tools that provide similar functionality.

This allows for consolidation, reducing complexity and often saving money through bulk licenses or fewer subscriptions overall.

In addition to the three tools above, there are a number of other SaaS spend management tools you can use. For reference, you can check out this LinkedIn review.

Conclusion

Smart SaaS spend management goes beyond just saving money. It’s about empowering your business to get the most out of your software investments.

By proactively managing your subscriptions, you gain tighter financial control, ensure every tool supports your goals, and create a more streamlined and efficient technology environment.

So, a well SaaS spend management allows you to reinvest resources into growth initiatives and confidently make strategic decisions about your software landscape.