When should your company invest in a SaaS spend management tool?

Chris Alto, Jul 9, 2019
Over the past 10 years, the size of a company's software stack has grown substantially. Okta's Business at Work 2018 report found the median number of apps across their global customer base, which ranges from SMBs to Fortune 100 companies, has grown 24% from 2015 to 2017. The average Fortune 500 company now has more than 300+ SaaS products in their software stack.

And this makes sense. With the rapid pace of technological change, there are new tools available for every challenge a stakeholder faces. While they can and do each help stakeholders become more efficient, if departments are adding 2-3 tools per year, one day an IT leader may wake up and realize that they have hundreds of tools and have completely lost control of their software stack.

Additionally, more technology means more spending. Blissfully's SaaS Trends report found that the average organization spent an average of $343k in 2018 on software, up 78% from 2017. With auto-renewals and license-based contracts, a company’s software spend is a compounding problem--it grows with each additional headcount. As companies continue to grow headcount, the software spend can begin to double year-over-year.

So what does this mean?

While IT leaders of the past had full control over software purchases, implementations, and renewals, today it’s changed. Now the control lies in the hands of team leaders and even individuals. It’s the price of a rapidly growing company and flat IT headcount. As a consequence, leaders have little control and visibility into knowing what their team is using, why they’re using it, how secure it is, and how satisfied the team is with the technology.

This is a costly problem, and ultimately, it's up to finance and IT leadership to fix it. 

How do you know if your organization is suffering from this problem? And if you are, how do you go about finding a solution? 

1.) Lack of process for purchasing and renewing software

With so many departments and the ease to implement a new piece of software, many organizations lack a streamlined buying process for new software or renewals.

Since every stakeholder manages and negotiates their solution in their own way, critical steps and information might be missed that could have meant big time and cost savings.

When proper processes are in place, IT leaders can build in steps like exploring alternative solutions, which can help justifying a switch, or negotiating a better price. Even if you decide to go with the original vendor, education and willingness to switch to the alternatives can become the ultimate leverage. 

2.) Stuck in a spreadsheet

Many companies, even big ones, do not properly track the software that their company owns. This is generally due to the fact that companies allow lots of different stakeholders to purchase software and those stakeholders track their stack in isolation. 

Many of the companies who are tracking their software effectively, are doing so in a spreadsheet. The spreadsheet is traditionally used to track compliance and budget. This has become even more important with laws such as GDPR (you have to know the data protection requirements for each product). Even something as simple as an Excel spreadsheet that someone is responsible for can pay dividends, but evaluating the time cost of maintaining it can justify exploring a spend management tool. 

3.) Lapsed auto-renewals

Many SaaS solutions have a clause in the contract that calls for an automatic auto-renewal without written opt-out a certain number of days prior to renewal. If teams are not on top of their renewal dates, an auto-renewal will be triggered for a piece of software that the company isn’t using or simply doesn’t like. 

In one conversation we've had with an IT leader at a high-growth company, he had a piece of software his team stopped using months prior auto-renew for over $75k. His hands were tied and he was forced to pay for it.

This is an extreme case, but even if you are planning to renew, and auto-renewal can mean a missed opportunity to renegotiate your contract or could even cause you to lose your current discount and pay full price. Lapsed auto-renewals are a good indication of lack of control over the software stack. 

4.) Unknown employee happiness or engagement with a product

IT leaders should have a good gauge of what products their team likes and why, and how they support the function of individuals and teams and make them more efficient. They should also know the drawbacks of their major pieces of software.

When a renewal approaches, this information can be passed along to the vendor to help them enhance the product to your company's use case and grow ROI, or as negotiation leverage to get a better price. Poor satisfaction can also be used as an early indicator that the software could become obsolete in your company.

5.) IT or finance leadership is sinking days into managing software purchases and renewals

We’ve found that the average stakeholder spends 4-6 hours on a software purchase or renewal.

What does this mean in terms of days spent?

If your stack consists of 200 technologies, that comes out to 1000 hours a year. 

If you assume an 8 hr work day, this comes to over 41 business days per year that IT, finance, engineering, or whoever else is negotiating the renewal, could be spending doing much more business critical work.

6.) Security/legal backlog

Stakeholders each think that their need is the most important. Therefore, they consistently ping legal for updates on a given deal. This wastes time and resources, creates a bottleneck, and ultimately slows down the whole procurement process.

Ok, so now what?

If even one of these challenges resonates with you it might be time to explore a SaaS spend management tool and how it can help get control back. 

Luckily, there are new solutions that help to solve many of these issues, and they are known as SaaS Spend Management Software. Here is a good list.

These solutions are software to track your software. When an organization is spending almost $350k/yr on software on average, a small additional investment can really pay off.

The benefits of a SaaS spend management tool: 

- Centralize visibility over SaaS subscriptions and outline their utilization

- Compare usage to spend to identify areas to cut costs

- Allow users to give administrators feedback on the tools to better understand user satisfaction

- Identify overlap of tools so duplicates can be cut

Once an IT leader has a better grasp on their software stack, further cost savings can be found during net-new purchases and renewal negotiation.

This is where we help. Often times, IT, finance, and procurement leaders are great negotiators, but their time is better spent in more business critical areas. 

Let us take care of that so you can get more time back in your day to help your business thrive.