Is your company’s software budget spiralling out of control?

You’re not alone.

As businesses increasingly rely on cloud-based solutions, SaaS expenses are skyrocketing, often without a corresponding boost in productivity. Many businesses find themselves paying for unused licences, redundant tools, or features they don’t need.

This unchecked spending isn’t just a minor inconvenience—it’s a significant drain on your resources that could be invested in growth initiatives or innovation.

Without proper management, SaaS costs can quickly eat into your profit margins and hinder your company’s financial health.

But here’s the good news: you can regain control of your SaaS spending without sacrificing the tools your team needs to succeed. This article will guide you through practical strategies to optimise your software investments.

So without further ado, let’s get to it!

How much do companies spend on SaaS applications every year?

The rapid adoption of cloud-based software solutions has led to a significant increase in SaaS spending across industries.

According to Zylo, the average company now uses over 100 SaaS applications, with larger enterprises often maintaining a stack of more than 600 applications.

Annual SaaS spending varies widely depending on company size and industry, but here are some key figures to consider:

1. Small businesses (1-100 employees): $20,000-$200,000 per year
2. Mid-sized companies (101-1000 employees): $200,000-$2 million per year
3. Large enterprises (1000+ employees): $2 million-$20 million or more per year

These numbers are expected to grow as businesses continue to embrace digital transformation and cloud-based solutions. With such substantial investments in SaaS, it’s crucial to implement effective management strategies to optimise spending and maximise returns.

More in Nexalab’s blog: SaaS Spending Blindspots: How Much Money Was Wasted on SaaS Spend?

Why it’s important to effectively manage SaaS spending

Effectively managing SaaS spending is not just about cutting costs; it’s about driving value, efficiency, and innovation across your organisation. Here’s why it’s crucial:

• Financial Impact: Managing SaaS spending helps control costs. This allows you to allocate funds to other important business areas.
• Operational Efficiency: Overlapping or redundant SaaS tools can lead to workflow inefficiencies and data silos. Streamlining your SaaS stack ensures that your teams are using the right tools for the right tasks, boosting productivity and collaboration.
• Security and Compliance: Managing your SaaS ecosystem helps control access, protect data privacy, and ensure regulatory compliance. This reduces security risks and potential penalties.
• Scalability and Innovation: As your business grows, so does your SaaS footprint. Effective management allows you to scale your software infrastructure in a controlled and cost-effective manner.
• Vendor Relationships and Negotiations: Understanding your SaaS usage and spend puts you in a stronger position when negotiating contracts and renewals with vendors.

How to Reduce Your Business SaaS Spend

1. Conduct a Comprehensive SaaS Audit

Start by gaining full visibility into your SaaS ecosystem. This audit forms the foundation for all subsequent cost-saving strategies.

To conduct an effective audit:

• Use financial tools to track SaaS transactions.
• Survey employees to uncover shadow IT.
• Implement SaaS discovery tools.
• Create a centralised inventory.

A thorough audit reveals your entire SaaS landscape, including official purchases, shadow IT, and premium tools.

Documenting each application’s vendor, cost, number of licences, and renewal dates will give you a clear picture of your current SaaS usage.

While this can be done manually, you can always consider a SaaS spend management tool, especially when your company size is large or if you have a complex SaaS environment.

This comprehensive view allows you to identify potential areas for optimisation, redundancies, and unused subscriptions, setting the stage for informed decision-making and targeted cost-reduction efforts.

2. Optimise Licence Management

Effective licence management is crucial for reducing unnecessary costs and ensuring you’re getting value from your SaaS investments.

To optimise your licences:

• Implement real-time licence tracking.
• Regularly review utilisation data.
• Adjust licences based on usage.
• Consider role-based access control.

Closely monitoring licence usage can help you identify underutilised or unused licences quickly.

This allows you to downgrade or remove licences for inactive users or those who don’t need full feature sets. Implementing role-based access control makes sure employees only have access to the tools and features necessary for their job functions.

These strategies help right-size your SaaS subscriptions, significantly cutting costs without impacting productivity.

3. Consolidate redundant applications

As organisations grow, it’s common for different departments to adopt similar tools independently, leading to unnecessary overlap and increased costs.

To consolidate effectively:

• Identify applications with overlapping functionalities.
• Evaluate effectiveness and adoption rates.
• Select preferred solutions.
• Plan and execute migration

Consolidating redundant applications not only reduces direct SaaS costs but also improves operational efficiency.

Identifying tools with similar functions will help you select the most suitable solutions for your organisation. This process may require some initial effort but leads to long-term cost savings and streamlined workflows.

4. Negotiate better contracts

Armed with usage data and a clear understanding of your SaaS needs, you’re in a strong position to negotiate favourable terms with vendors.

To improve your negotiation outcomes, you can do things such as:

• Review current contracts and usage data.
• Research market rates and competitor offerings.
• Prepare negotiation strategies.
• Consider multi-year or enterprise-wide agreements.

Effective negotiation can lead to significant cost savings.

With usage data and market knowledge, you can often secure better rates, especially for mission-critical applications.

Consider multi-year discounts for long-term commitments or enterprise-wide agreements for volume discounts. Don’t hesitate to shop around or use competitive offers as leverage.

Remember, vendors are often willing to offer better terms to retain valuable customers, so approach negotiations confidently and prepared.

5. Implement a SaaS Governance Framework

A strong governance framework prevents unnecessary spending and ensures alignment with business objectives.

To establish effective governance:

• Establish clear procurement policies.
• Create a centralised approval process.
• Set evaluation criteria for new tools.
• Schedule regular reviews of the SaaS portfolio.

A well-designed SaaS governance framework provides structure and consistency to your software acquisition and management processes.

With clear policies and a centralised approval process, you can prevent ad-hoc purchases that lead to redundancy or unnecessary costs.

Setting specific criteria for evaluating new tools ensures that each addition to your SaaS stack provides real value. Regular reviews of your entire portfolio allow you to continually optimise your SaaS investments, cancelling or downgrading subscriptions that no longer serve your needs.

6. Use Integration and Automation

Maximising the capabilities of your existing tools can often eliminate the need for additional software, reducing overall SaaS spend.

To make the most of your current tools:

• Explore native integrations between core platforms.
• Utilise automation tools for workflow optimisation.
• Consider custom integrations for critical processes.
• Train employees on advanced features.

With the integration and automation capabilities of your existing SaaS tools, you can often enhance their value and functionality. This approach can potentially replace the need for standalone applications, reducing your overall SaaS footprint.

Exploring native integrations between your core platforms can streamline workflows and improve data consistency. Utilising automation tools can increase efficiency and reduce the need for multiple specialised apps.

In some cases, investing in custom integrations for mission-critical processes can yield significant long-term savings and productivity gains.

7. Educate and engage employees

Your employees play a crucial role in successful SaaS spend management. Engaging them in the process can lead to better adoption of preferred tools and more conscious software usage.

To involve employees in SaaS optimisation:

• Provide training on approved tools.
• Encourage feedback on software needs.
• Foster a culture of cost-consciousness.
• Recognise and reward efficient SaaS usage.

Educating employees about the impact of SaaS spending and involving them in optimisation efforts can yield significant benefits.

With training on approved tools, you will make sure your employees fully utilise the software you’re already paying for, reducing the temptation to seek out new solutions.

Encouraging feedback on software needs helps IT teams stay ahead of emerging requirements and make informed decisions about new acquisitions.

More in Nexalab’s blog: How Much Do Companies Spend on SaaS? Unveiling the True Cost of Software Solutions

Conclusion

Effectively managing and reducing SaaS spend is a continuous process that requires attention, strategy, and collaboration across your organisation. We hope those seven strategies can help you make sure that your SaaS investments are driving real value for your business.

If you feel your business SaaS usage is overly complex and starts to become overwhelming, maybe it’s time for you to consider a SaaS management platform.

Octobits by Nexalab is a SaaS Management Platform (SMP) that provides the visibility, control, and optimisation tools you need to streamline your software ecosystem. With Octobits, you can centralise your SaaS management, automate licence tracking, and gain valuable insights to drive informed decisions about your software investments.

Take control of your SaaS spend and unlock new efficiencies with Octobits.

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