SaaS Spend Optimization

Introduction

In a world where SaaS is the main way software is purchased, companies are experiencing a growing need for SaaS spend optimization. And the reasons are numerous. SaaS has made it extremely easy to purchase software as anyone with buying authority can purchase a solution that makes sense at the time.

This means that individuals outside of IT departments could purchase a technology they think they need without being aware of existing or better solutions. Not surprisingly, this leads to a serious waste of SaaS spend.

And this is how SaaS tends to be wasted: Over time, there is an accumulation of unused tools and licenses. App subscriptions with duplicate use cases overlap and generate more costs than necessary. In fact, according to recent SaaS spend research, an average company with heavy SaaS-use wastes more than 40% of wasted spend on overlapping or underutilized tools.

But this doesn’t have to be the case. As one of the IT cost optimization techniques, SaaS spend optimization can help manage your SaaS inventory and maximize the value you can get out of your SaaS apps.

Learn about the most common approaches and the best practices of SaaS optimization to effectively optimize SaaS spend in your company.

What is SaaS spend optimization?

SaaS spend optimization is the active SaaS management process to reduce the number of SaaS apps or licenses, and to right-size contracts in your company. It plays a vital part in avoiding SaaS waste, unnecessary security gaps, and cost accumulation by tracking all existing SaaS solutions and detecting over-licensed and under-utilized SaaS applications.

In recent years, SaaS has drastically changed the ways software is procured. Companies keep opting out of on-prem technology and this trend is very likely to continue in the future. After all, moving to the cloud or creating cloud-first environments has proven to deliver better customer service and employee experiences, ultimately resulting in a competitive advantage and increased profits.

However, the more SaaS solutions are purchased, the more unmanaged the cloud infrastructure becomes. And without proper SaaS management tools and SaaS spend optimization, the company wastes budget on unnecessary costs.

The main reason for SaaS waste is limited visibility into overlapping subscriptions, automatic renewals of unused or under-utilized tools, or unclear ownership. This is due to a lack of formal rules when it comes to the procurement of SaaS applications. Thus, companies end up paying for tools with the same use-case or keep on paying for solutions that are no longer needed.

In order to keep track of what technology is owned and used, SaaS cost optimization provides a number of strategies that help take control of IT spending and reduce it. In the following, learn about the benefits of SaaS spend optimization.

Benefits of SaaS Spend Optimization

Optimizing SaaS spend is a process that requires engagement from IT, Infosec, and finance teams, which also share the interest of the end benefits. IT is able to reduce SaaS waste while finance achieves cost-saving goals. As well, Infosec benefits when overlapping SaaS, and unnecessary access to SaaS gets removed.

Lower SaaS spend

With the right SaaS insights, companies can remove unused and unnecessary SaaS apps, remove redundant apps with similar functions, right-size SaaS licenses, and negotiate SaaS contracts using accurate insights. All these actions impact the company’s bottom line and set the path to run cost-efficiently in the future.

Superior security

Removing unused, unnecessary, and redundant SaaS apps closes security gaps that were left open by unmanaged SaaS stack growth. During the SaaS optimization process, IT can discover apps on which ex-employees still have access or apps that were only used for an old project.

At the same time, they can discover that employees across different departments use apps with similar functionalities on which sensitive data is stored—apps that are unnecessary.

How to approach SaaS optimization

To optimize SaaS spend in the best way possible, you need to evaluate all existing SaaS applications and SaaS users within your organization (using Application portfolio Management) and establish a logical prioritization. Instead of trying to optimize all applications in a massive cleanout, identify and prioritize SaaS solutions in the following four ways (which are not mutually exclusive):

1. By total investment – Create a list that captures the top 5 to 10 most pricey applications. You can also organize them in terms of the highest total spend. This method gives you an overall idea of the individual cost factors and helps you expose the solutions with the biggest cost reduction potential.
   
   
2. By renewal date – High costs occur when application subscriptions are being automatically renewed even though they might be unused or underutilized. As explained in the guide to SaaS renewals, focus on applications with an impending renewal date to make sure that their utility and pricing tiers can be discussed before your company gets locked into another period.
   
   
3. By the number of users – Some applications are widely spread across an organization and almost all employees have access to them. However, there is often a large number of individuals who are not actively using certain apps. So even though everyone has a license, an app could lead to a shadowy and wasteful existence.
   
   
4. By business function and value – While some applications are simply “nice to have”, others are integral to a company’s growth and success. In order to find out which apps are the most and least critical, it’s worth organizing them by how much business value they represent in relation to their overall cost.