Spreadsheets are costing your team: Time to ditch your manual vendor management system
After years of analyzing SaaS management software options, we've identified the costliest. Even though it's one of the most commonly-used platforms out there for managing licenses, it's also one of the most inefficient. Chances are you’ve used it or may still be using it in your organization right now.
It's the spreadsheet.
We know, there was a time when this system worked well. But now, you're sinking hours into spreadsheet management which means less time for high-value work.
A spreadsheet can't give you context for pricing, utilization, or contract status. It won't surface an expensive, unneeded tool that's about to renew. And unless stakeholders always update it (which, as we know, is unlikely), data decay is a constant issue.
And that's if no one messes with "custom sort."
It’s time to consider vendor management software.
Startups and spreadsheets
Spreadsheets may have been a low-friction way to track spend at one time. They're easy, don't have a learning curve, and they're shareable across departments. For a business with only a handful of apps and employees, it's an easy solution.
But startups grow. Hiring hits a hockey stick, and within a year or two, your 10-person team is 50, 100, or more. All those employees are using apps and services. Before you know it, the system isn't manageable anymore. It's taking up more time each week, and the details become less clear.
As the sole manager for this living document, you end up committing more time to maintenance. At some point, you may consider getting help to maintain this ever-growing dataset. But how you scale and manage SaaS contracts can have a big financial impact.
Keeping up a manual process can be costly in a few ways, some obvious, others less so. There are the “sunk time” aspects of manual vendor management, yes. There are costly issues like data entry errors, missed discounts and cancellations, and the increasing support for the manual system as the tech stack grows.
The downside of a manual vendor management system
Don't get us wrong. We love a good spreadsheet. It can help you contextualize and parse information in useful ways. If spreadsheets and databasing were dead, Airtable wouldn't be a unicorn, after all.
But for managing a complex technical stack with various renewal dates and contract requirements? You need a more robust solution.
Buying and renewal
As a company grows, its needs evolve as it adds software over time. This is the most obvious, "cleanest" form of stack growth. Teams add tools to support projects and departments identify specific business cases for apps. Adding these to the spreadsheet over time (if you're consistent) isn't a problem.
The challenge begins about a year (up to three) later, when the contract or licenses come up for renewal. If the spreadsheet is accurate and complete, a point person may be able to keep up with it for a time. If there are errors, omissions, or changes to seats or ownership, securing details and tying up loose ends becomes a large-scale project.
Even if your manual system is up to date, the renewal process still creates a need for better workflow management. Your point person must keep track of the process with stakeholders, approvals, signatures and legal compliance, and ensure that everyone is on the same page. This process takes time and attention, and may be duplicated across dozens or potentially hundreds of contracts and licenses.
Price changes and discount losses
If you're managing spend on a sheet — especially using auto-renewal — price increases can create budget leaks. These increases may not be obvious from the spreadsheet. When a company has many billing owners, finance may never get notice of the increase.
This presents several challenges. First, finance has no ability to forecast increases based on its renewals. These increases occur out of sight and budget creep continues undetected. Second, as a company grows, spreadsheets can't provide insight into volume pricing. The deal you strike with a sales rep at the beginning will continue. This means you could be leaving money on the table at renewal time.
The costliest software tools are those you no longer need.
With up to 70% of contracts auto-renewing, staying on top of renewals is critical. Waste spending (from all sources) averages $4m per year at an 800-person company, according to Cleanshelf.
That figure would have been eye-popping even before the pandemic. Now, a rise in remote-related SaaS spending runs concurrent to tightening COVID-era budgets. Finance departments keen to maintain profitability are looking for places to recover cash. Streamlined IT budgets are one area, making the need to manage SaaS contracts more important than ever.
What a spreadsheet can't tell you
Spreadsheets are a date-and-price document, almost like a receipt. They can tell you when a license came into service, when it's due for renewal, and how much it costs.
But there is data you can't get from a spreadsheet. It can't tell you how often users log into a service and what parts of the product see the most use. Without cross-referencing, you can't tell how many licenses make sense based on headcount. It can't point out abandoned subscriptions. It also won't reveal redundant vendors — unless you're familiar with every app.
A spreadsheet also can't provide negotiating data. What you know from past vendor experience is all you know. If other companies have successfully negotiated better rates or terms, it’s not surfaced. Using a vendor management platform gives you the benefit of seeing more than your own info. You gain leverage through historical software price negotiation data.
Vendor management options
At some point, reality sets in. You realize that maintaining all these sheets no longer works. The time investment per week is dragging attention away from higher-value tasks.
1. Build a team
Needing to relieve workload, this is where companies first consider a procurement team. But spreading the work on a spreadsheet-based solution isn't really solving the problem. Yes, this method gets more hands-on-deck but doesn't cure the underlying problem. You still have error-prone processes, complexity, and lack of visibility and data access. In essence, you're doing the work of vendor management software without experiencing the benefits.
Hiring is not a cost-saving measure, either. While the program itself has zero cost, the human capital spent to manage SaaS contracts can cost thousands in salary, training, and turnover. As complexity grows, the headcount to maintain this system grows with it. And you still don't know how stable your tech stack actually is.
If your company is ready for the strength of a procurement team, that excellent news. Let those professionals apply their skills to the most important work. For the rest, we have a solution.
2. Find a vendor management software solution
Maybe your company isn't yet ready for the step of building a procurement team. Or your team has bigger fish to fry than managing tail spend. In either case, it's time to ditch the spreadsheets. Here is where the right procurement software can far exceed spreadsheet management:
- Automated, manageable renewals: Don't stress about another missed cancellation window. Platforms give your company the visibility to proactively manage licenses and contracts.
- Data-driven decisions: Anticipating growth lets you align budgets and grow without guesswork. It lets you see the business impact and choose vendors to best meet your needs. This level of insight means you're investing in the right fit every time.
- Minimized waste spending: When you know what's working, streamlining is easy. Having a vendor management system allows you to see which licenses are working vs. idle. It lets you control resources and adjust your planning to actual needs.
Between messy purchases and renewals, missed price changes and discounts, and manual data updates, old school methods to manage SaaS are costing your team. Bringing on modern vendor management software to oversee every dollar spent gives you time back to focus on more important work.