SaaS spend optimization for finance departments
How finance can carry out stress-free SaaS spend optimization
For medium and large scale businesses, tracking SaaS spend and building an agile framework for SaaS spend optimization is a task that might keep the finance team up at night. But if SaaS management and spending optimization are not done properly, your organization is going to waste money. SaaS management software can help finance scale through this easily.
As your organization grows, two things happen:
1. You onboard more employees and create new teams.
2. You onboard more clients.
These translate to adding more SaaS apps and subscriptions to your SaaS stack to meet business needs. More SaaS subscriptions mean more numbers for finance to track.
For small businesses, oversight on SaaS spends is simple. But for medium and large scale organizations, the finance department has to stay on top of this if business resources must be effectively utilized.
Your organization’s SaaS spend will increase by the year
The average SMB spends $20,000 per month on SaaS. SaaS spending and the number of app subscriptions per company are expected to double. Your organization is not exempted from this.
The alarming part of these numbers is not in the increase in SaaS adoption, but in the wastage by most businesses. It’s been estimated that 15 to 20 percent of SaaS spending is wasted in the form of:
- Duplicate, and
- Abandoned SaaS subscriptions
This calls for an air-tight SaaS spend optimization strategy by finance.
Where do you start with an annual software budget?
Check out our webinar: Jumpstart your SaaS budgeting
What is SaaS spend optimization?
SaaS spends optimization refers to all the steps, schemes, and procedures put in place by finance to ensure your organization does not waste a dollar on SaaS licenses.
SaaS spend optimization ensures your organization pays for (only) what you need, and your team members use what you pay for.
For large organizations, keeping track of SaaS spend can be a hassle.
A well-equipped finance department can help eliminate SaaS spend wastage in your organization. If done properly, this can save your organization tens of thousands of dollars annually.
Related: 8 finance SaaS tools to upgrade your tech stack
Why finance must implement an air-tight SaaS spend optimization strategy
When properly done SaaS spend optimization:
- saves your organization thousands of dollars in SaaS spend,
- increases work productivity and SaaS subscription utilization
- ensures teams have all the apps they need,
- renewals are not forgotten, and
- more accurate SaaS spend forecasts are made.
A robust SaaS management system translates to a more efficient workplace, increased productivity and an increase in your organization’s overall bottom line.
What happens when finance fails to implement a proper SaaS spend optimization strategy
Without a robust SaaS spend optimization strategy by finance, organizations tend towards the proliferation of SaaS apps in your organization which translates to:
- Overspending on abandoned SaaS products
- Payment for underused SaaS apps
- Servicing of duplicate and overlapping SaaS apps
- Security and compliance loopholes
Why finance is finding SaaS spend optimization difficult
In the past, organizations had centralized IT departments; that was responsible for company-wide sourcing, licensing and managing of software usage in accordance with company needs, budgets and policies.
This meant finance had just one place to go for information on software expenditure and usage- the IT department. This made tracking tech spend and making all needed adjustments and forecast very easy.
With SaaS, that is long gone. Every team is its own IT department. Anyone with a credit card can pay for any software they want, when they want it, and abandon when they want to, without consulting IT, with or without the knowledge of finance.
While this has greatly reduced the work on IT (almost eliminating IT departments in most SMEs), this has led to a lot of security, compliance and spending problems for large organizations, making SaaS subscription management very hard for finance.
This proliferation of IT within organizations has led to 100s of SaaS apps (many underutilized or abandoned) with different pricing and contract models, all in use at the same time, often undetected.
Related: An entrepreneur’s guide to TAM, SAM, and SOM: De-risk your startup for investors
Finance has a great deal of work to do in SaaS spend optimization
The more SaaS apps your organization uses, the more difficult tracking them becomes for finance.
How does finance track SaaS spend for the entire organization, know what app is being purchased and by who, which is being used and which to completely remove?
Key areas finance should look to
The size of your organization is a major factor in SaaS spend optimization; the larger your company the larger your SaaS stack- therefore requiring a more equipped finance department to track and manage SaaS spend.
In carrying out SaaS spend optimization, finance needs visibility into the overall SaaS usage in the organization.
This insight will show what SaaS products are being used by each team and each member. Data such as how much each SaaS license costs, is it billed monthly or yearly, how many people are using it, the dynamism of the price, is it auto-renewed or renewed manually?
Further insight into how well these apps are used is also important:
- Are the SaaS subscriptions maximized by the teams they were purchased for,
- Are they bringing the right ROI to the organization,
- Are there features, or seats, that are paid for that are not being used,
- are there two or more apps doing the same thing?
Typically, this data is stored, usually in a spreadsheet, followed closely, and updated continuously as SaaS changes occur.
With data from this sheet, finance can now make appropriate SaaS spend forecast for each department, know which subscription to cancel or downgrade, make prompt renewals, and ensure team members have all the needed apps and are within budget. But handling all of the above via a spreadsheet can quickly become overwhelming.
How finance can carry out SaaS spend optimization
Finance has to collaborate with IT and the team leaders to carry out effective SaaS management and optimize SaaS spend in the organization.
From here, finance needs to work with team leaders and other stakeholders to gain visibility into their organization’s SaaS graph.
Finance has to meet team leaders, IT and procurement to get a concise list of all their SaaS usage and spending. This data is kept and monitored on a spreadsheet.
From here, needed subscription adjustments are made, renewals are tracked, onboarding and offboarding of employees on the company’s SaaS stack is carried out, and forecasting is done.
Imagine tracking SaaS spend and usage for over a thousand employees, each using at least 30 SaaS subscriptions on a spreadsheet. You could end up spending half of your finance team on this.
With Vendr, finance (and all stakeholders) have a streamlined SaaS management system that acts as a single and reliable source of truth on all SaaS spend in your organization
Vendr provides an automatic, quick and easy view into all the SaaS apps and subscription in your organization, and tracks them down to individuals and teams using them, for what and how effectively, how much is being paid, and the renewals.
Vendr also proactively generates easy-to-read real-time reports on SaaS spend and usage in your organization.
This reduces the work of finance to simply reading the reports provided by Blissfully and making all the needed adjustment, and forecasting.
This puts SaaS control back in the hands of finance, allowing for fast SaaS spend optimization, budgeting, and SaaS usage forecast.