SaaS applications have become integral to driving productivity and innovation in modern businesses, with almost 80% of businesses using at least one SaaS application in their operations, according to SaaS Academy.

However, the rapid adoption of these cloud-based solutions has led to a surge in subscriptions, often resulting in uncontrolled spending and operational inefficiencies.

The unchecked growth of SaaS usage can strain budgets and create security vulnerabilities. Many organisations find themselves grappling with expensive contracts for underutilised tools or a complex web of subscriptions spread across departments.

SaaS spend management offers a path to regaining control over software expenses. By implementing effective strategies and leveraging specialised tools, you can optimise your SaaS investments and align technology spending with your broader business goals.

What is SaaS spend management?

SaaS spend management is a systematic approach to overseeing, optimising, and controlling an organisation’s expenditure on cloud-based software applications. It covers a range of activities, including:

• Tracking and monitoring all SaaS subscriptions across the company
• Analysing usage patterns and identifying underutilised or redundant applications
• Negotiating favourable contract terms with vendors
• Implementing approval processes for new software purchases
• Optimising licence allocation to ensure efficient resource utilisation
• Managing renewals and cancellations to avoid unnecessary costs

The primary goal of SaaS spend management is to ensure that an organisation derives maximum value from its software investments while minimising unnecessary expenses.

You can make educated decisions about which apps to keep, optimise, or remove by obtaining visibility into SaaS usage and costs.

Challenges in SaaS Spend Management

While the benefits of effective SaaS spend management are clear, many organisations face significant hurdles in implementing a comprehensive strategy:

• Lack of visibility: With departments often purchasing SaaS tools independently, it’s challenging to maintain a centralised inventory of all subscriptions.
• Shadow IT: Employees may bypass official procurement processes and purchase software without IT department approval, leading to hidden costs and security risks.
• Complex licencing models: SaaS vendors often use intricate pricing structures, making it difficult to compare costs and identify the most cost-effective options.
• Rapid changes in the SaaS landscape: The constant introduction of new tools and features can make it challenging to keep track of the most suitable and cost-effective solutions.
• Dispersed purchasing: When multiple departments have the authority to buy software, it becomes harder to negotiate volume discounts or standardise procurement processes.

More in Nexalab’s blog: How to Detect Shadow SaaS Sprawl in Your Organisation?

Strategies for Effective SaaS Spend Management

To overcome these challenges and implement a robust SaaS spend management strategy, organisations should consider the following approaches:

• Centralise SaaS procurement: Establish a single point of control for all software purchases to improve visibility and negotiating power.
• Implement a SaaS management platform: utilise specialised tools to track subscriptions, monitor usage, and automate renewal processes.
• Conduct regular software audits: Periodically review your SaaS portfolio to identify redundant or underutilised applications.
• Establish clear approval processes: Create standardised procedures for requesting and approving new software purchases.
• Negotiate flexible contracts: Seek agreements that allow for scaling up or down based on actual usage and business needs.
• Educate employees: Train staff on the importance of following procurement policies and the risks associated with shadow IT.

5 Best Practices for SaaS Spend Optimisation

1. Monitoring usage and adoption

One of the cornerstones of effective SaaS spend management is closely monitoring how employees use various applications.

You are able to determine which tools are underutilised and which are valuable by monitoring utilisation numbers. Data-driven analysis enables informed decisions about membership renewal or cancellation.

Consider implementing user adoption programmes to ensure employees are making the most of available software. This can include training sessions, creating internal champions for specific tools, and regularly soliciting feedback on software usability and effectiveness.

2. Eliminate redundant applications

As organisations grow and evolve, it’s common for multiple departments to independently purchase similar tools, leading to redundancy and unnecessary costs. Conduct a thorough review of your SaaS portfolio to identify overlapping functionalities.

For example, you may find that different teams are using separate project management tools when a single, enterprise-wide solution could suffice.

Once redundancies are identified, work with stakeholders to consolidate licences and migrate users to a standardised set of applications.

This not only reduces costs but also improves collaboration and data consistency across the organisation.

3. Use Volume Discounts

Many SaaS vendors offer significant discounts for bulk purchases or longer-term commitments. Sometimes, you can negotiate better terms if you centralise subscription management and purchasing. Don’t hesitate to ask vendors about volume pricing, multi-year discounts, or enterprise-wide licencing options.

However, be cautious about locking into long-term contracts for unproven tools. Balance the potential savings against the flexibility to adapt your software stack as business needs change.

4. Automating Renewal Management

Manual tracking of subscription renewals can be time-consuming and error-prone, often resulting in missed opportunities for optimisation or unintended auto-renewals. Implement a system to automatically track renewal dates and trigger review processes well in advance.

This proactive approach allows time for usage analysis, stakeholder consultations, and negotiations with vendors before renewal deadlines. It also helps prevent the continuation of subscriptions for tools that are no longer needed or have been replaced by other solutions.

5. Aligning SaaS spending with business goals

Effective SaaS spend management goes beyond just cutting costs; it’s about ensuring that your software investments align with and support your organisation’s strategic objectives.

Regularly review your SaaS portfolio in the context of your business goals and growth plans.

Consider creating a technology roadmap that outlines how different software tools contribute to specific business outcomes. This can help prioritise spending and justify investments in critical applications while identifying areas where costs can be reduced without impacting strategic initiatives.

More in Nexalab’s blog: How to Overcome SaaS Sprawl and Optimise Your IT Infrastructure

Octobits: Best Tools and Technologies for SaaS Spend Management

While the strategies and best practices outlined above form the foundation of effective SaaS spend management, implementing them at scale can be challenging without the right tools.

This is where Octobits by Nexalab comes into play, offering a SaaS Management Platform (SMP) designed to simplify and optimise your software management processes.

Octobits provides a centralised dashboard that offers complete visibility into your SaaS ecosystem. Key features include:

1. Automated discovery and inventory of all SaaS applications across your organisation
2. Detailed usage analytics and adoption metrics for each tool
3. Licence optimisation recommendations to eliminate waste and reduce costs
4. Renewal tracking and automated alerts to prevent unexpected auto-renewals
5. Integration with financial systems for accurate cost allocation and budgeting
6. Security and compliance monitoring to identify potential risks associated with SaaS usage

With Octobits, IT management and business owners can make sure that every dollar spent on software contributes positively towards organisational outcomes. The intuitive interface is powered by powerful analytics to make decisions for data-driven portfolio optimisation towards maximum efficiency and ROI.

Contact Nexalab today to learn how Octobits can help your SaaS spend management strategy.