5 tips to get started with SaaS spend optimization

Roughly 33% of SaaS spend is wasted. Those are the latest findings in Flexara's state of ITAM 2024 report.

SaaS has revolutionized how companies deliver digital tools to employees, with the average smb managing over 150 SaaS and the average mid market averaging around 400. However, juggling multiple SaaS contracts can quickly lead to uncontrolled spending if not managed properly.

SaaS procurement and SaaS cost optimisation are relatively new practices at most companies. Although SaaS and Software are among the highest drivers of value in businesses, most  still use spreadsheets to manage their SaaS.

This combined lack of visibility, experience and processes can result in companies purchasing tools that overlap in functionality, tools that are redundant or not fit for purpose and also ending up with unitized licenses.

Preventing SaaS spend waste is actually fairly simple, but it needs to an always on function. The first step is understanding what SaaS wastage is and what causes it.

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What causes wastage and how do you address it?

SaaS wastage occurs when organizations spend inefficiently on software, often due to unused or underutilized subscriptions, over-licensing, or unauthorized purchases of SaaS tools (shadow IT). This results in unnecessary costs and reduces the overall effectiveness of software investments.

1.Lack of Visibility of your SaaS stack

Visibility over your SaaS stack is imperative to ensuring spend doesn't spiral out of control. This visibility needs to be distributed throughout your organisation so that anyone with the ability to purchase or even sign up to new tools has the ability to understand if there are SaaS applications already in place for specific use cases.

Managing your SaaS & software on a spreadsheet is a sure fire way to make sure no one in the business will have visibility over the different tools you use to address specific challenges.

To prevent this:

Having a SaaS management system or SaaS inventory management system in place can solve the majority of your visibility challenges. These tools track and automatically discover any SaaS application your company uses in realtime.

It also enables businesses to understand who has access to what tools, how much you pay for them, how many licenses you have, when renewals are and what tools are used for.

2.Lack of Alignment on Tech Strategy

When an organisations business strategy and tech / IT strategy aren't aligned, achieving business objectives becomes difficult because the same solutions that were supposed to help, often end up becoming a burdon

Ontop of that, the lack of alignment on a tech strategy alone can lead to it being difficult to plan technology purchases, resulting in a lot of wasted time and money.

To prevent this:

We recommend ensuring your organisation ensure alignment on a simple governing tech strategy. Here is an example of a basic IT / tech strategic plan aligned to some standard business objectives

3.Rogue Purchasing

A key challenge in SaaS procurement is rogue spending (caused by lack of alignment on tech strategy and poor processes), where individuals or departments bypass established purchasing processes to acquire software independently. This often leads to significant SaaS waste, as tools may be purchased that offer little to no business value. For instance, unauthorized spending can result in acquiring software that

Some challenges typically created by rogue purchasing:

1. Overlap in functionality between SaaS apps
2. New Apps might not be compliant with company info security policies
3. It may weaken your purchasing / negotiation power
4. Improper management often means the tools ultimately end up un utilised or only a small amount of value is extracted from them

To mitigate Rogue purchasing:

Having a SaaS procurement process and ensuring company wide alignment on your tech strategy is key. An example of a basic workflow for purchasing new SaaS apps:

1. Establish intake forms for purchase requests. Ensure the forms contain questions that make it easy to map priorities back to your Tech Strategy
2. Build these intake forms ontop of a SaaS management solution that contains all of the applications within your SaaS stack
3. When an employee submits a purchasing request, the form should contain checks to ensure an existing solution doesn't exist + how the new one fits into your tech strategy
4. Ensure an appropriate approvals process is in place (i.e department head => IT -> Secrurity -> Finance)

4.Poor Off-Boarding Processes

Even when organizations actively manage SaaS subscriptions for employees during their tenure, these accounts often go overlooked once the employee leaves. As a result, licenses may stay active, consuming resources unnecessarily or missing the chance to be reassigned to other staff. This oversight can accumulate, leading to significant wasted software spend.

To prevent this:

implement a structured employee offboarding process using SaaS management software. This tool will automate the assignment of offboarding tasks, set deadlines, and ensure every step is completed correctly, minimizing the risk of SaaS waste.

5. Know When to Ask for Help

Our data shows that 80% of companies don't even negotiate on all of their top 15 highest spend vendors at renewal, so it's highly likely the other hundred or so vendors in your stack are slipping under the radar.

Recognising the right time to seek support for negotiating your SaaS contracts is essential. Every dollar saved can make a substantial impact on your operational expenses and overall profitability.

Engaging a software negotiations service like VendorSage can deliver the support you need and drive significant results. Our experts bring extensive experience in procurement and SaaS negotiation to the forefront. They take charge of your negotiations, working closely with internal stakeholders and directly engaging with providers. With access at the contractor level and streamlined processes, they ensure seamless collaboration internally and effective engagement with providers.

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How VendorSage Helps with SaaS spend optimization

VendorSages SaaS management platform makes SaaS Discovery, SaaS procurement and SaaS management easy. SaaS Spend Optimization is easier when you've got complete visibility, price benchmarks and unique insights into your SaaS stack.

Vendor negotiation is essential for acquiring the right product at the best price. However, business owners and procurement leaders frequently report that their teams lack the time to negotiate effectively with vendors. This can result in higher costs, auto-renewals, and potential security risks.

Our team has extensive experience negotiating hundreds of millions of dollars in SaaS contracts, ensuring vendors agree to mutually beneficial terms. On average, we secure 1.5x more discounts for our customers than if they negotiated independently.

VendorSage's SaaS buying experts help businesses acquire the right amount of licenses within budget. They analyze your requirements and leverage price benchmarking data to ensure you get the right product at the best price.

Our on-demand negotiation experts provide insights into your usage, market trends, and competitive data. You can engage with them anytime and use their insights to negotiate directly with vendors.

Alternatively, you can leave the entire process to our team. We'll handle the negotiations, leverage benchmarks and discounts, and secure the optimal product at the best price. We've saved organizations over 1,000 hours in negotiations and realized millions in savings.

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Have any questions about an upcoming renewal or purchase? Speak to one of our team today.