In the modern era of digital transformation, software as a service (SaaS) has emerged as a cornerstone for businesses worldwide. From streamlining communication and project management to refining CRM practices and offering intricate data analytics, SaaS tools are now deeply embedded in business operations.
Our analysis indicates that an average midsized company utilizes around 92 different SaaS applications. While the integration of these tools has enhanced efficiency and productivity, it has also led to the uphill challenge of effective cost management.
Enter the realm of SaaS spend management.
Understanding the Essence of SaaS Spend Management
SaaS spend management can be defined as the strategic approach to monitor, analyze, and refine expenses associated with a company's SaaS subscriptions. Given the niche requirements and specializations of businesses, this management process narrows down its focus to software subscriptions. The urgency of this management becomes even more palpable when considering that, on average, businesses squander nearly 30% of their SaaS expenditure on unused or minimally used applications.
With the mushrooming of SaaS applications and the autonomy of different departments to choose their preferred tools, it's not unusual for organizations to find themselves in a maze of subscriptions. The pitfalls are numerous: unnoticed license duplications, overlapping functions across tools, and even continuous payment for tools that have long been abandoned. A systematic approach to SaaS spend management can be the beacon in this seemingly chaotic scenario.
Unpacking the Benefits of SaaS Spend Management
Economic efficiency: The primary benefit of SaaS spend management revolves around curbing wasteful expenditure. With comprehensive visibility into all active and passive subscriptions, businesses are empowered to detect, assess, and eliminate redundant tools. This is particularly significant considering research indicates that companies, without vigilant spend management, end up overshooting their SaaS budget by an alarming 40%.
Eliminating redundancies: Especially in sprawling corporate structures, it's not rare for multiple departments to unknowingly opt for identical tools, resulting in avoidable costs. An integrated spend management system can promptly detect such overlaps, paving the way for cost-saving consolidations.
Precise financial planning: An exhaustive grasp of SaaS-related expenses equips the finance teams to craft and execute budgets with unmatched accuracy. This foresight eliminates guesswork, fostering an environment of proactive financial decision-making.
Upholding security protocols: The phenomenon of "shadow IT," referring to the unauthorized or unsupervised usage of SaaS tools, can inadvertently expose businesses to potential security threats. A robust spend management system meticulously identifies such tools, ensuring that the organization's tech stack remains compliant and secure.
Augmenting productivity: A clutter-free, optimized SaaS ecosystem facilitates a streamlined workflow. When employees are equipped with the best-in-class tools tailored for their tasks, it not only amplifies their productivity but also expedites the onboarding process for new recruits.
Informed decision making: Advanced spend management platforms offer valuable insights into an organization's patterns of software usage. Armed with this data, businesses can judiciously decide on renewals, recognize the need for upgrades, or even discern the potential of newer tools that resonate with their evolving requirements.
Charting the Course for Effective SaaS Spend Management
For those eager to harness the full potential of SaaS spend management, here's a structured roadmap:
● Start with an audit. This is the stage of reconnaissance. Collate a comprehensive list of all active SaaS subscriptions. Delve into the specifics — cost implications, departmental allocations, and the tangible utility derived.
● Transition beyond conventional tools. While spreadsheets might serve as an initial makeshift solution, the dynamic nature of SaaS subscriptions demands more sophisticated platforms. Tools like LeaseQuery’s StackShine come equipped with a host of features, from real-time monitoring, to automated onboarding and offboarding, to integration capabilities with existing financial systems.
● Craft comprehensive procurement policies. To avoid future ambiguities, it's imperative to have a transparent policy delineating the protocols for new software acquisition. Parameters like authorization hierarchy, compliance checks, and utility assessments should be clearly defined.
● Adopt a cycle of regular revaluation. Given the rapid innovations in the SaaS space, a static approach can be detrimental. Periodic reviews, preferably on a monthly or quarterly basis, ensure that an organization's SaaS toolkit remains contemporary and optimized.
The integration of SaaS solutions has undeniably revolutionized operational efficiencies. However, this boon can easily morph into a bane without good oversight and continuous monitoring. Effective SaaS spend management transcends mere cost-cutting — it symbolizes a holistic approach to ensure every dollar channeled into software subscriptions is a strategic investment. As the SaaS paradigm continues to dominate, businesses must recognize that strategic spend management is not a mere accessory but an absolute imperative.
About the author:
As COO and president at LeaseQuery, Joe Schab is responsible for the alignment and prioritizations of investments and ensuring operational excellence. Joe brings a wealth of experience to LeaseQuery and has spent most of his career helping companies transition from startups to full-fledged, high-growth entities.