Today, any business that operates online relies on a growing number of SaaS applications. In fact, a study showed that the average business uses 137 SaaS applications on average. These services are essential since they automate repetitive tasks, reduce workload, and streamline processes. Often so this convenience comes with hefty price tags. However, many pitfalls related to SaaS costs can be avoided with the implementation of a few SaaS cost optimization tips and eventually reduce spend.
In essence, SaaS cost saving entails evaluation of SaaS applications usage and identifying cost optimization opportunities. In other words, cutting unnecessary costs. Note that cutting these costs does not in any way reap you the benefits of SaaS applications. Conversely, it saves you money and increases your Return on Investment, ROI.
Table of Contents
- Reasons for High SaaS Costs
- How to Save and Optimize SaaS Costs
Reasons for High SaaS Costs
You might not have noticed, but nowadays most SaaS providers offer subscription-based rather than perpetual software licenses. This is meant to give the customers more control over their license purchases. Even though subscription-based licenses are much cheaper, they could potentially also be costly over time. Here are some of the reasons why;
Specialization of SaaS applications
The increasing demand of specialized software for any type of business processes has seen the emergence of even more and more optimized SaaS solutions. Consequently, enterprises have been forced to acquire specialized licenses—and for good reasons. For instance, marketing departments usually use a variety of different tools manage their email marketing campaigns. This approach calls for multiple SaaS applications, hence increasing billings per cycle.
Shadow IT SaaS acquisition
The use of IT assets that aren’t approved or vetted by the IT department is known as shadow IT. With the ease of deployment that these SaaS pose, certain departments in enterprises have accumulated several of them. In return, this has raised the SaaS expenses. More so, these unverified purchases could come with avoidable hidden costs.
Underusage of SaaS licenses
When a SaaS application is acquired without proper evaluation, it could go underutilized, as employees won’t adopt it to a sufficient degree. Remember that during this period of underutilization, subscription fees won’t be refunded or pushed forward by the service provider. With repeated instances of underutilization, the business incurs huge losses. Also, failure to use a SaaS application to its full potential is somewhat unproductive
Using SaaS and on-premise systems simultaneously
When you decide to go ‘cloud,’ do it for all areas in your business. Yes, cloud services could be expensive, but using them alongside data centers is even more expensive. Having other systems in the data centers will still require staffing, which will add onto your expenses. The benefits SaaS comes with such as agility, reliability and scalability are worth the investment.
How to Save and Optimize SaaS Costs
1. Learn how employees utilize SaaS applications
You could do this by surveying employees to find out the applications they under-utilize. Once you find out about the most- and least valuable ones, you can adjust. If only a small number of individuals are using a SaaS tool, then perhaps it’s time to look for an alternative that increases adoption or to fully cancel the under-utilized subscription.
Additionally, if a team is utilizing a tool they favor, but there’s a much less expensive application providing the same functional ability, a cost-saving opportunity would be to re-negotiate the existing contract or suggest switching to the less expensive tool.
2. Discover and evaluate Shadow IT
Shadow IT occurs when software and systems are utilized and managed without the stakeholder’s and IT leaders’ approval. The situation can also occur when the same software license has been purchased twice, for instance, by both a company and an employer.
Having proper visibility of the organization’s software stack can provide a great opportunity for savings as duplicate licenses together with orphaned subscriptions can be discovered more quickly.
3. Find and eliminate overlapping products
Overlapping functionality in SaaS products often occurs when different teams use a variety of collaboration tools especially in the project management, file sharing and storage categories. It’s recommended that you list and compare every department’s SaaS inventory to identify products with overlapping functionality and decide to move forward with only one solution to save on spend.
Organizations often possess a variety of tools that do more or less the same thing. It’s therefore wise to always obtain user input before making decisions, to understand if one subscription is better than another.
4. Plan according to future SaaS needs
To ensure that your spending stays wrangled in the long run, you should inspect spending processes to find out how you came to obtain unused and duplicate applications, to begin with. You could discover that you still paid for licenses belonging to former employees or team members and hence plan to set up a workflow to effectively offboard users from their apps.
You could also be anticipating significant growth in the near future and realize there will be a higher SaaS adoption rate coming along with it. Planning will, therefore, help by saving you time and money, especially when communicating your needs.
5. Make use of SaaS management software
SaaS management software integrates with your SaaS tools and provides insights into usage and spending of each tool. Like this you can easily track
For instance, if you set up a direct integration with the CRM tool, you could see all the provisioned users and those who haven’t logged in in the past month and have access to data showing how the remaining users interconnected with the product.
6. Reduce license waste
Unutilized licenses typically comprise a high percentage of wasted spending. Increased visibility into the SaaS stack helps you identify your active subscriptions and who is using them. Better transparency enables a re-distribution of the licenses currently in use and lets you determine their future use.
A clear view of license use also allows for informed negotiations of contracts to reduce excess licensing. To do this, you’ll need to identify tools and applications with wasted spend before the contract negotiations, ensuring unused licenses are not renewed.