In today’s software-dominated world, companies are increasingly recognizing the importance of SaaS spend optimization. This has become imperative due to several reasons that impact the overall efficiency and cost-effectiveness of utilizing SaaS solutions.
With the ease of purchasing software products through SaaS, individuals with buying authority often make decisions without involving IT departments. This can lead to the procurement of redundant or less-effective solutions, resulting in wasted SaaS spend.
A common scenario of SaaS waste involves the accumulation of unused tools and licenses over time. Multiple subscriptions with overlapping features contribute to unnecessary costs. According to recent research on SaaS spend, companies heavily invested in SaaS often waste over 40% of their budget on tools that are either underutilized or overlapping in functionality.
However, there is a solution. SaaS spend optimization, as one of the key IT cost optimization techniques, empowers companies to effectively manage their SaaS inventory and extract maximum value from their SaaS applications.
By implementing the best practices and common approaches of SaaS optimization, companies can efficiently optimize their SaaS spend, reduce redundant expenses, and maximize the value derived from their SaaS investments.
In this definitive guide, IT specialists will gain valuable insights into the strategies and techniques required to achieve SaaS spend optimization within their organizations. Through a comprehensive understanding of SaaS optimization, companies can gain a competitive edge and enhance their overall IT cost management.
What is SaaS spend optimization?
SaaS spend optimization is an essential process in managing and reducing the number of SaaS apps and licenses within a company. It ensures that contracts are appropriately sized and eliminates unnecessary costs, security vulnerabilities, and budget accumulation.
In recent years, there has been a significant shift towards SaaS solutions, as companies increasingly move away from traditional on-prem technology. This trend is set to continue due to the numerous advantages of cloud-based systems, including improved customer service, enhanced employee experiences, and a competitive edge in the market.
However, as the number of SaaS solutions grows, so does the complexity of managing them. Without proper SaaS management tools and spend optimization strategies, companies risk wasting their budget on unnecessary expenses.
One of the primary causes of SaaS waste is the lack of visibility into overlapping subscriptions, automatic renewals of under-utilized or unused tools, and unclear ownership. The absence of formal procurement rules for SaaS applications often leads to companies paying for redundant tools or continuing to pay for solutions they no longer require.
To regain control over IT spending and reduce costs, SaaS spend optimization provides several strategies. These strategies help companies keep track of their technology assets, optimize their spending, and ensure that every SaaS application is delivering maximum value.
By implementing SaaS spend optimization techniques, companies can effectively manage their SaaS inventory and achieve the most significant return on investment. This comprehensive approach empowers IT specialists to take control of their organization’s SaaS spend, leading to improved efficiency, cost-effectiveness, and overall business success.
Benefits of SaaS Spend Optimization
SaaS spend optimization brings numerous benefits to IT specialists, making it a critical process that requires engagement from IT, Infosec, and finance teams. By aligning these departments, companies can achieve significant results while maximizing the end benefits.
IT specialists have a crucial role in reducing SaaS waste. With the right tools and strategies in place, they can identify overlapping subscriptions, under-utilized tools, and unused licenses. By eliminating redundant software and optimizing their technology assets, IT teams can ensure that every SaaS application is delivering maximum value.
Finance teams have a strong interest in SaaS spend optimization, as it allows them to achieve cost-saving goals. By gaining complete visibility into saas spending, they can identify unnecessary costs and negotiate more favorable pricing plans or contracts. This helps companies optimize their spending, lower expenses, and allocate resources more efficiently.
Infosec, or information security, also benefits from SaaS spend optimization. By identifying and removing unnecessary access to SaaS applications, they can reduce the risk of unauthorized access and potential security breaches. This strengthens the overall security posture of the company and ensures that only authorized users have access to critical software.
Overall, SaaS spend optimization brings tangible benefits to IT specialists. It enables them to reduce waste, achieve cost-saving objectives, strengthen security measures, and optimize resources. By engaging IT, Infosec, and finance teams in the process, companies can unlock the full potential of their SaaS investments while maximizing their competitive edge in the market.
Lower SaaS spend
Lowering SaaS spend is a crucial task for IT specialists looking to optimize their company’s technology assets. With the right insights and strategies, they can effectively identify and eliminate unused or unnecessary SaaS applications. By removing redundant apps with similar functions and right-sizing SaaS licenses, IT teams can ensure that every software subscription delivers maximum value.
Accurate SaaS insights also provide the opportunity to negotiate more favorable pricing plans and contracts, ultimately reducing expenses and optimizing spending. This not only helps companies achieve their cost-saving goals but also allows for more efficient allocation of resources.
Moreover, optimizing SaaS spend has a positive impact on the company’s bottom line and sets the stage for running cost-efficiently in the future. By actively managing software usage and removing unnecessary access, IT specialists can strengthen the overall security posture of their organization, mitigating the risk of unauthorized access and potential security breaches.
With complete visibility into SaaS spending and the right tools in place, IT specialists can drive optimization efforts, ensuring that every SaaS application contributes to the company’s success while minimizing unnecessary costs.
Superior security
Superior security measures go hand in hand with SaaS spend optimization. By removing unused, unnecessary, and redundant SaaS apps, IT specialists can effectively close security gaps that might arise from unmanaged SaaS stack growth.
During the SaaS optimization process, IT teams can unearth apps that have been left with ex-employees still having access or discover apps that were only used for an old project. By eliminating these potential entry points for unauthorized access, companies can bolster their overall security posture and mitigate the risk of security breaches.
But it doesn’t stop there. Through careful optimization, IT specialists also have the opportunity to identify instances where employees across different departments are using apps with overlapping functionalities and storing sensitive data. These unnecessary apps not only pose a security risk but also contribute to unnecessary costs. By consolidating the usage of similar apps and ensuring only essential and approved software is utilized, IT professionals can enhance security while optimizing spending.
By prioritizing superior security measures alongside SaaS spend optimization, IT specialists can safeguard their organization and gain a competitive edge in an increasingly complex digital landscape. Secure software usage and data protection should be at the forefront of any IT strategy, and SaaS optimization plays a pivotal role in achieving those goals.
How to approach SaaS optimization
When it comes to optimizing your SaaS spend, taking a strategic approach is key. As an IT specialist, you have the power to evaluate the existing SaaS applications and users within your organization using SaaS Management. But where do you start?
Rather than tackling all applications at once, it’s important to prioritize and categorize your SaaS solutions. Here are four effective ways to approach SaaS optimization:
- Total investment: Begin by identifying the top 5 to 10 most costly applications. This will give you a clear understanding of the individual cost factors and highlight the solutions with the highest potential for cost reduction.
- Renewal dates: High costs can arise when applications automatically renew, even if they are unused or underutilized. Focus on applications with upcoming renewal dates and initiate discussions about their utility and pricing tiers before committing to another period.
- Number of users: While some applications may be widely used across your organization, it’s common to find a substantial number of individuals who are not actively utilizing certain apps. Identifying these unused licenses can help eliminate wasteful spending.
- Business function and value: Different applications hold varying levels of importance to your company’s growth and success. Take the time to organize your apps based on their business value relative to their overall cost. This will allow you to prioritize the critical ones while potentially streamlining or eliminating the less essential ones.
By approaching SaaS optimization with a systematic and thoughtful strategy, IT specialists like you can not only enhance security but also optimize spending for your organization. So, evaluate, categorize, and prioritize your SaaS applications to unlock their full potential while maximizing cost savings.
Best practices to optimize SaaS spend
When it comes to optimizing SaaS spend, there are tried and tested best practices that you can leverage to achieve the best outcomes. Fortunately, you don’t have to reinvent the wheel and come up with your own strategies.
To begin with, it’s important to note that SaaS spend optimization is not about managing multiple spreadsheets. There are advanced methods and SaaS management tools available that seamlessly integrate with existing ERP, contract, or expense systems. This ensures that you have full visibility into your SaaS estate, encompassing all applications, whether managed or unmanaged by IT (shadow IT). By gaining a complete picture of your SaaS subscriptions, including users’ licenses, contracts, and spend, you can make informed decisions about renewals, potential cancellations, and future investments.
Another crucial step is to identify the owners of each SaaS app. Since many companies allow multiple employees to make SaaS purchases, assigning ownership to each app becomes essential. This allows you to take action on the optimization opportunities that arise during the process.
Monitoring SaaS usage is also vital. However, manually tracking app usage would be an impossible task. To overcome this, companies turn to SaaS management solutions that automatically monitor the SaaS estate and provide insightful metrics.
By following these steps, you can effectively optimize your SaaS spend. Embracing best practices and leveraging the right tools will enable you to make data-driven decisions, reduce unnecessary costs, and achieve significant savings.
Remove unused or forgotten SaaS apps and licenses
In the realm of SaaS optimization, a critical aspect is the elimination of unused or forgotten applications and licenses. This process requires creating comprehensive visibility, as mentioned before, to identify which ones are inflating unnecessary costs. Once you have gained a solid understanding of your SaaS landscape, you can focus on the following two crucial steps.
Firstly, it is imperative to remove SaaS applications and licenses that were procured by employees who have since departed the company. Oftentimes, these apps are neglected or forgotten about, causing them to continue accumulating costs. By identifying the owners of each SaaS app, you can ensure that these unused licenses are promptly canceled or transferred, preventing any lingering expenses.
Secondly, it is essential to eliminate any SaaS subscriptions that are not being fully utilized. Shockingly, research reveals that over 40% of licenses in a typical SaaS inventory go underutilized for various reasons. To address this, it is recommended to establish use cases and utilization benchmarks tailored to each application. By employing these benchmarks, you can identify which solutions are actively being used, as well as those that are rarely or never utilized. Armed with this information, you can quickly pause or remove the underutilized apps, freeing up valuable resources.
By proactively addressing unused or forgotten SaaS apps and licenses, IT specialists can significantly contribute to the optimization and cost-effectiveness of their organization’s SaaS ecosystem.
Remove redundant SaaS apps
SaaS redundancy is a common challenge that many companies face, often resulting from employees making independent SaaS purchases without proper communication. This flexibility, while beneficial in some ways, can come at a high cost when companies end up paying for duplicate apps or apps with similar features and functions.
When reviewing your SaaS inventory, it’s important to pay close attention to certain application types that tend to have higher levels of redundancy. For example, file-sharing tools like Dropbox or Sharefile, as well as project management platforms like Trello or Basecamp, are often found to have multiple subscriptions within the company. Additionally, companies may discover subscriptions to various educational online training platforms or multiple messaging tools like Slack or Teams.
Once you have identified functional overlaps within your SaaS inventory, it is crucial to begin the consolidation and standardization process. Utilization metrics can be used to make informed decisions about which applications are non-approved or unnecessary. However, it’s important to note that the outright removal of redundant apps may not always be the best approach.
In some cases, multiple similar apps can actually add value to a business if certain teams prefer specific solutions for valid reasons. If you do decide to standardize solutions, it is essential to introduce them across the organization and provide proper training opportunities to ensure successful adoption.
By removing redundant SaaS apps and optimizing your inventory, you can effectively reduce costs and streamline your IT infrastructure, ultimately improving efficiency and driving greater value for your business.
Right size SaaS apps and licenses
The flexibility of SaaS and cloud services is one of their greatest advantages. It allows for easy scalability and a “pay as you go” model, leading to cost savings. However, as the number of SaaS solutions grows and employees become less informed, you may find yourself paying for more than you actually need.
To ensure the right sizing of your SaaS licenses, it is crucial to closely monitor SaaS usage. Utilization metrics provided by your SaaS management tool can give you valuable insights into which apps are being underutilized. For instance, if an employee hasn’t logged into an app for an extended period, it may be a sign that their license can be downsized at the next renewal.
By setting benchmarks and understanding SaaS utilization, you can also identify users who no longer require a license or the premium features that vendors often offer for an additional cost. Once you have identified the top 10 opportunities for licensing rightsizing, it’s time to take action.
Start by removing all unused licenses or reallocating them within your company to prevent duplicate purchases in the future. However, be sure to review the contractual agreements to avoid cancellation penalties. For existing under-utilized licenses, familiarize yourself with the specific offerings of each vendor. Many SaaS providers offer free basic versions of their products that may meet your needs. If the premium features are unnecessary, consider downgrading the SaaS licenses to a lower tier or plan.
Right sizing your SaaS apps and licenses not only saves costs but also ensures that your resources are allocated efficiently. By monitoring usage and making informed decisions, you can optimize your SaaS spending and maximize the value your organization derives from these applications.
Negotiate SaaS contracts
SaaS solutions offer IT specialists immense flexibility, which can be leveraged to maximize value. Don’t assume that contracts and prices are set in stone – there is room for negotiation based on factors like loyalty, volume, usage, terms, and future promises. Take advantage of your company’s reputation and logo power to negotiate with smaller SaaS vendors looking to establish themselves as leaders in their industry.
Having a solid SaaS renewal strategy in place is essential. Begin negotiation efforts as early as possible and, if already locked into a contract, wait until the renewal date. The competitive market allows you to compare vendors and rates, giving you the opportunity to negotiate a better price with your current SaaS provider. Vendors understand the long-term value of client contracts and are often willing to go the extra mile to secure your business.
To optimize SaaS contracts, utilize the utilization metrics provided by your SaaS management tools. By knowing exactly what you need, you can effectively communicate your terms to the service provider and create an environment where vendors compete for your business. Remember that most SaaS rates are based on endpoints, so accurately determining the number of users ensures you are not overpaying. Negotiating SaaS contracts is an essential skill that can save your company valuable resources while maximizing the benefits of SaaS solutions.
Conclusion
In conclusion, neglecting your SaaS landscape can result in missed opportunities and unnecessary costs. Without proper SaaS spend optimization and management, overlapping features and unused tools can accumulate expenses that could have been avoided. However, by implementing a proactive approach and leveraging SaaS management tools, you can take control of your SaaS inventory and optimize expenses. By removing, consolidating, and right-sizing licenses, you will not only enhance your SaaS ROI but also ensure the security and competitiveness of your organization. It’s crucial to integrate SaaS spend optimization into your overall IT optimization strategy, as it will provide valuable insights and cost-saving opportunities. Don’t overlook the power of optimizing your SaaS investments – it can make a significant difference in your bottom line. Stay ahead of the game and maximize the benefits that SaaS solutions have to offer by prioritizing proper SaaS spend optimization and management.
