Are you struggling to keep your software expenses under control? Managing costs for SaaS can be a daunting task.

Many companies find themselves drowning in a sea of subscriptions, unused licences, and inefficient processes.

The result? Wasted resources and strategies budgets that eat into your bottom line.

But there’s good news. There are strategies to optimise your SaaS spending. With these tips, you can turn this challenge into an opportunity for significant savings and improved productivity.

Without further ado, let’s get to it.

What is spend optimization?

SaaS spend optimization is the strategic process of managing and streamlining your software expenditures to maximise value and minimise waste.

It’s not just about cutting costs; it’s about ensuring every dollar spent on software contributes to your business goals.

Think of it as a thorough digital spring cleaning. You’re not just throwing things out; you’re organising, prioritising, and making sure every tool earns its keep in your tech arsenal.

Effective SaaS spend optimization involves:

• Gaining complete visibility into your SaaS ecosystem
• Identifying redundancies and consolidating tools where possible
• Eliminating unused or underutilised licences
• Negotiating better terms with vendors
• Implementing robust approval processes for new SaaS purchases
• Continuously monitoring and optimising your SaaS portfolio

More on Nexalab’s blog: How to Reduce SaaS Spend? 7 Proven Strategies to Slash Your Costs Without Sacrificing Productivity

How to approach SaaS optimization

Tackling SaaS optimization requires a systematic and ongoing strategy. Here’s a step-by-step approach to get you started:

• Conduct a SaaS Audit: Start with a comprehensive audit of your current SaaS landscape. Identify all the tools your company uses, who uses them, their costs, and their purpose. This inventory will serve as the foundation for your optimization efforts.
• Analyse usage patterns: Once you have a clear picture of your SaaS ecosystem, dive deep into usage patterns. Are there tools that are underutilised or redundant? Could some functions be consolidated into fewer platforms? Use data-driven insights to make informed decisions.
• Standardise and Consolidate: Based on your analysis, standardise tools across departments where possible and consolidate redundant applications. This not only reduces costs but also improves collaboration and data consistency.
• Optimise Licences: Right-size your licences based on actual usage. Many companies overpay for unused seats or higher-tier plans they don’t need. Downgrade or remove licences that aren’t delivering value.
• Negotiate with Vendors: Armed with usage data and a clear understanding of your needs, you’re in a strong position to negotiate better terms with vendors. Don’t hesitate to ask for volume discounts, longer commitment discounts, or custom plans that better fit your usage patterns.
• Implement Governance Policies: Develop and enforce clear policies for SaaS procurement, usage, and management. This includes approval processes for new purchases, regular review cycles, and guidelines for employee usage.
• Continuous Monitoring and Optimization: SaaS optimization is not a one-time event. Establish a process for ongoing monitoring and regular optimization reviews to ensure continued efficiency and value.

Best Practices for SaaS Spend Optimization

SaaS spend optimization is crucial for businesses to manage their software expenses effectively. By implementing these best practices, companies can streamline their SaaS portfolio, reduce costs, and maximise the value of their software investments.

1. Centralise SaaS Management

Create a single point of control for all SaaS purchases and renewals. This prevents duplicate subscriptions and gives you leverage in negotiations. Assign a dedicated team or individual to oversee SaaS management across the organisation.

Another thing to consider is using a SaaS spend management platform. This kind of software can help your centralisation efforts since it provides real-time visibility into all SaaS expenses and usage, allowing for better decision-making and cost optimization.

2. Implement a SaaS Management Platform

Leverage tools like Octobits from Nexalab to automate the discovery, management, and optimization of your SaaS portfolio. These platforms provide real-time insights into usage, costs, and potential savings opportunities, making it easier to make data-driven decisions.

3. Regularly Audit Your SaaS Stack

Conduct quarterly reviews of your SaaS inventory. Identify unused or underused licences, and don’t hesitate to cancel or downgrade subscriptions that aren’t delivering value. This ongoing process ensures your SaaS stack remains lean and efficient.

4. Optimise Licence Management

Implement a system to track licence usage and adjust accordingly. This might involve reassigning licences from inactive users, downgrading underutilised premium accounts, or upgrading high-usage free accounts to paid versions for better features and support.

5. Negotiate Smarter Contracts

Don’t accept list prices at face value. Armed with usage data from tools like Octobits, you’re in a stronger position to negotiate better terms. Consider multi-year contracts for discounts, but be cautious about long-term commitments for new or unproven tools.

Impact of Unmanaged SaaS Costs on Businesses

Ignoring SaaS spend optimization can have serious consequences for your organisation.

1. Financial Drain: Uncontrolled SaaS spending can quickly spiral, eating into your budget and reducing funds available for other critical initiatives. This can hinder innovation and growth opportunities.
2. Reduced Productivity: An overabundance of tools can lead to confusion and inefficiency as employees juggle multiple platforms. This tool sprawl can result in decreased productivity and employee frustration.
3. Security Risks: Unmanaged SaaS tools can create security vulnerabilities, potentially exposing sensitive data. Each additional SaaS application increases your attack surface and the risk of data breaches.
4. Compliance Issues: Lack of oversight in SaaS usage can lead to non-compliance with industry regulations, resulting in hefty fines and reputational damage. This is particularly critical in industries with strict data protection requirements.
5. Missed Opportunities: Without a clear view of your SaaS ecosystem, you might miss opportunities for tool consolidation or fail to leverage the full potential of your existing software investments.

Common Sources of SaaS Waste

Understanding where waste occurs is crucial for effective optimization. Here are the most common culprits:

1. Shelfware: paying for licences that aren’t being used. This often occurs when licences aren’t properly offboarded when employees leave or change roles.
2. Duplicate Subscriptions: Different departments purchase the same or similar tools, resulting in unnecessary overlap and increased costs.
3. Overprovisioning: Buying more licences or higher-tier plans than necessary, often due to overestimating needs or failing to adjust as requirements change.
4. Shadow IT: Employees purchasing SaaS tools without IT or finance approval, leading to uncontrolled spending and potential security risks.
5. Missed Renewal Opportunities: failing to renegotiate or cancel subscriptions before auto-renewal, often resulting in continued payment for unused or underutilised services.
6. Inefficient Tier Usage: Not optimising the use of tiered pricing structures, such as paying for premium features that aren’t utilised.

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

Conclusion

Effective spend optimization is no longer a luxury—it’s a necessity. Implementing robust SaaS management practices can lead to significant cost savings, improved efficiency, and better alignment of your software investments with your business objectives.

Remember, SaaS spend optimization is an ongoing process, not a one-time event. It requires continuous attention and adaptation as your business needs evolve and new tools enter the market.

If you feel that your SaaS usage is complicated and starts to become overwhelming to manage, you might want to consider a SaaS management platform.

Octobits by Nexalab is a SaaS Management Platform (SMP) that provides the visibility, control, and optimization 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.