28th June, 2021
TABLE OF CONTENTS
Though the term spends management is not new, SaaS spend management is! However curious companies are for new tools, they are equally curious to find ways to cut costs.
So when there are too many applications that are unused or have overlapping functionalities, it is definitely a matter to have a close look.
It's common for employees to sign up for apps with the goal of increasing their productivity or making a task easier. It might even be a free version that was signed up to become paid after a period of time.
So with this ease, they do it ruthlessly without knowing that they are causing severe app redundancy.
This is where you need SaaS spend management.
Simply put, it is controlling how much is spent on SaaS applications.
It includes identifying the SaaS application present in your ecosystem, right-sizing the number of licenses and entitlements for deriving the best value, and cutting unplanned costs due to surprise renewals.
Selecting the right plan for an application to cut extra costs also comes under spend management.
We have been using software for decades. But suddenly, there is a surge in spending on software—the reason being SaaS.
With SaaS, IT spending is growing every year, and we found through our "State of SaaS Management" white paper that SaaS occupies nearly 6-10% of the budget for 31% of IT decision-makers.
Now that we know that SaaS is clearly dominating the market, we should also know how the excess spending occurs on SaaS.
Another case is different departments using different tools to solve the same problem. They not only abandon the IT prescribed tool but tend to sign up for a variety of tools with the same functionality. This is the next watch out.
Since most of them use applications without the knowledge of IT, they are either hesitant or forget to inform the IT department. This leads to paying for unused apps.
When an employee leaves the company, it is the due diligence of the IT to revoke his licenses, but IT itself wouldn't know if they had subscribed to shadow apps. And the payments keep on going from the company credit card.
There are few applications that give the leverage of pricing for organizations that need more numbers.
For example: Say, the number of licenses per user costs $9, but for an organization with 100+ employees, the application is offered at $5 per license.
When employees purchase licenses on their own, they tend to spend excessively without knowing the purchasing power.
Earlier IT used to test each and every tool before rolling it out to the organization.
Now, with purchasing power in the hands of the employees, they tend to get applications without the knowledge of the IT department.
Say the marketing department finds Slack as an easy collaboration tool and informs the Product department about it. If they also shift to Slack, the IT prescribed Microsoft Teams is abandoned. But you still keep paying for the license.
This kind of similar apps with overlapping functionality is the first budget burner. This will ultimately lead to runaway costs and unmanaged spending.
You can save a great amount of your SaaS budget if you eliminate Saas wastage.
The very step is to check the apps in your inventory and figure out whether you should really be spending money on those; they are bringing your organization any value, and are these apps utilized by everyone.
Even though your employees get them to benefit your company, you need to ensure that there is no app duplication, abandoned applications, or underutilized applications.
What would you do if you needed to take an audit of all the SaaS applications that you are paying for? From where would you begin?
If you are maintaining a spreadsheet, you need to examine it carefully.
But how do you know whether it is up to date? What if your employees had purchased a new app recently and had forgotten to update it?
The next is checking the credit card statement, but that is also a very tiresome process. The final option is to call the department or team heads to discuss the applications they are using. But how do you know it is authentic?
Say you have a compliance audit and require the list of applications. As we saw above, compiling such a list will take a lot of time.
And moreover, you also need to have a closer look at whether these applications are safe and do not have any vulnerabilities. If you have all the applications with their compliance status in a single dashboard, you can be anytime ready to take up the audit.
Sometimes if you forget to cancel the access for your former employees, it may lead to severe data breaches and other security risks.
A former IT administrator of Lucchese, a boot manufacturing company, was fired, and he took his frustration out on the system by shutting down servers, deleting important files, and causing immense damage to the company's network.
Gone are the days when we used to install Microsoft office on computers using CDs. With SaaS emergence, prominent software like Adobe, Microsoft, Oracle, and many more have taken their products to Cloud-only deployments. Anyone can sign up for these and start using them.
Initially, there were just 5-10 tools that are distributed within an organization. But, with SaaS, there can be numerous tools for a particular function that can benefit a business unit or a department.
For example, a content writer in the marketing department would usually be given access to Microsoft Word. But now, with Microsoft Word, there is Grammarly, Ahrefs SEO, and many such tools to enhance a copy. So they would definitely want to invest in those.
Employees adopt SaaS without considering any centralized procurement strategy as the cost of a single license is very low.
But if one employee procures a license at $7.50, it wouldn't make much impact on the budget. But if hundreds and thousands of employees do the same, it would severely hit the budget.
Also, these employees don't leverage enterprise buying power while signing up for these applications.
For example, look at this pricing of Trello:
Say a business unit of yours has opted for the Business class plan, and there are other business units that have also opted for the Business class plan.
In this case, both of them together can opt for the enterprise plan, which will get them more features and cut the overall cost by leveraging the buying power.
These vendors offer great discounts if you purchase these licenses in bulk.
If you are one of those who rely on robust spreadsheets to track your SaaS apps, you must know that there are few downsides to it. Spreadsheets are fine until you are a small organization with less than 25 employees. But when your company scales, so will the number of SaaS applications.
You need to constantly update your spreadsheet or tell people to update it as and when new apps enter your SaaS landscape. Also, the pricing of apps changes, and that also needs to be updated.
When there are more users, it gets difficult to track who is using what application and how long they have been using it.
The IT should be alerted when a new SaaS tool is purchased, but with shadow IT, even that is rare.
The spreadsheet approach is extremely tiresome and time-consuming, and there is a need to nag IT, team members for data and can sometimes lead to human errors.
It is imperative to check the user engagement metrics before proceeding to renew an ongoing subscription. User engagement means how a user interacts with an app and uses most of its features, getting value for your business. It should be considered as an important factor for spend management. You don't need to waste money on applications that are not used (Features not being used to their full potential).
By measuring user engagement, you can determine the ROI fetched and the applications that your company will need the most.
To calculate the user engagement metrics, you need a tool that can monitor SaaS applications. Zluri integrates with your SaaS landscape and informs you who is using what applications, which features are they consuming the most, and how often do they use it. This data can help you understand whether an application is valuable to your organization or not.
Have open communication and innovation that empowers employees to collaborate with IT to find user-friendly, safe, and secure solutions. The central IT department should tighten its partnership with business units and departments to know the applications they require in daily operations and inquire about their current tools' satisfaction.
You can create an employee feedback channel where they can regularly express tech needs, concerns, and ideas.
If you do a centralized procurement for applications, you can get bulk discounts from vendors. For that, you need to know who needs which department needs which applications. After making a note of that, you can get the required number of licenses with the leverage of getting discounts.
Another way to cut costs is canceling unnecessary subscriptions with overlapping functionality during renewals. It is necessary to decide whether you need an application prior to the renewal date, or you may end up getting locked due to auto-renewals.
Also, look for price negotiation opportunities or discounts in the upcoming renewals.
With SaaS management software in place, you can set renewal notifications that alert you before a renewal due.
If you wish to switch to some other software that you think would be a better option, some vendors on-purpose increase the switching costs making your stay. They have understood the logic that higher costs for switching from one software would make you less inclined to move away from them.
They wouldn't bother about how costly or big the implementation is as they are sure that it is the only way to make you stay. Worst of all, some vendors even increase the renewal pricing as they know that you are trapped in a high-switching cost scenario.
A SaaS spend management tool audits your whole SaaS landscape and informs you on overall spend, how much is spent for an application, and who is using it. You can also see how efficiently it is used and whether there are any other tools with overlapping functionality. This way, you can find where there is SaaS wastage and excessive spending and cut it off.
With a SaaS spend management tool, there can be nothing like surprise renewals. You will be alerted days before your renewal. With the above-mentioned capabilities, you can decide whether you want to continue using an application or cancel your subscription.
Also, while doing budget allocations, you will be notified of how much would be spent and the upcoming expenditures through a Spend Management tool. A forecast of expenditures can keep you proactive and helps you do an effective budget allocation.
A spend management tool can discover and categorize the applications available in your SaaS landscape.
The SaaS app info
Name of the app and its vendor
Its primary use and what is its function for your organization
The expense and spending details
The total value of the contract that includes platform and implementation fees
The frequency of billing
Who bought the app-business unit/department/ employee?
How many users
Total number of licenses procured
Cost of one license
License start date
Zluri is a SaaS management platform that does all the tracking for you.
It not just manages your spending but also tracks the applications in use, how much does it cost, and within a week of signing up, it understands your SaaS ecosystem and starts giving you recommendations for cost-effective and better SaaS apps.
Unlike spreadsheets, you no longer need to keep updating the pricing plans when it keeps changing. Zluri keeps getting updated now and then when a new SaaS tool is being onboarded and when there are pricing changes happening in the existing subscriptions.
There are no more surprise renewals with Zluri as it alerts you prior to renewal due, giving you ample time to decide whether to discard or continue a particular application.
You can eliminate all the SaaS-related challenges such as app redundancy, unused applications, shadow IT, and security issues that have been taunting you until this moment.
One of the major reasons businesses decide to shift to the cloud is to save the money they spend on maintaining on-premise software. But the ease with which one can procure SaaS in today's world, ironically, can burn a big hole in your pocket if this SaaS cost is not kept in check.
There are other SaaS spend management tools like Zluri:
Blissfully: It offers you great visibility over your SaaS applications by keeping them organized in one place. It lets companies track and manage their SaaS spend. It has a spend optimization feature that keeps track of your software spending and usage data to help you maximize your ROI.
Its SaaS System of Record gathers data across your organization, integrating with your email, HRIS, finance systems, and other software tools, including your spend data, compliance data, and vendor.
Intello: It is one of the best SaaS management and SaaS Spend optimization providers that integrate with your existing cloud software and leverages a proprietary browser extension to offer companies real-time visibility into all of their SaaS data. It provides you with full visibility of your SaaS spend by identifying every purchase in real-time.
Productiv: Productiv is a SaaS Management Platform that offers application engagement analytics and insights that help you understand how users engage with software to collaborate and complete tasks.
It works to process login data and assess what happens after a user logs in. It does real-time smart decision-making through timely renewal alerts and smart license allocations. It can be a great asset to your organization that can increase your SaaS value.
Torii: Torii simplifies the SaaS management process and helps you regain control over your environment without being invasive to users. It transforms a company's cloud software stack into easily readable through its user-friendly dashboard that focuses on visibility, workflow, and automation to improve your SaaS management.
Its workflows will prevent your employees from opting for tools that have the same functionality. It manages your SaaS subscriptions and tells who has access to what data. It also keeps your data secured from offboarded employees.
Zylo: Zylo is a SaaS management platform that focuses on spend management and shadow IT. It optimizes SaaS licensing, contains costs, keeps away shadow IT, and helps in renewal negotiations.
Zylo's platform uses your login information and mainly financial integrations to derive your SaaS software data. This gives you insights into who uses the app, its usage, and how much is spent on each app.
10% of company revenue is spent on SaaS. It’s a staggering metric, and a high percentage of income is wasted inefficiently on business tools. In comparison, companies spend, on average, 15% on employees annually.
With this explosion of SaaS at companies, there arise SaaS challenges caused by apps getting out of your control. These SaaS challenges varies in three dimension: spend management, security and complance risks, and various SaaS operations tasks like automating SaaS procurments, renewals, employees onboarding and offboarding.
‘Muda’ is used to describe any activity that uses resources but doesn't generate value. It is the Toyota system for identifying and eliminating waste in all forms. It is the same thing that helps Toyota sell more cars than Ford, General Motors, and Honda at a higher margin.
An obese SaaS stack leads to SaaS wastage. It's a disease! It not only causes financial issues but also gives you security and compliance problems. That's why you must keep tight control on your SaaS stack. And it begins with managing your SaaS vendors.
In this post, we've discussed 7 symptoms of an unoptimized SaaS stack and solutions to optimize the same.
Though the ITAM solution from SolarWinds is a useful tool for managing an organization's assets, it has a steep learning curve.
Software asset management (SAM) in the SaaS world is very different from traditional on-prem software asset management. Traditional SAM was focused on tracking and optimizing the software licenses.
David speaks about his passion for ITAM and SAM and his interest in the industry. He also talks about the changes ITAM has undergone in the last 12 years of his career. He also highlights how the SaaS landscape has made our lives easier and gives valuable insights into managing SaaS applications.