As more businesses shift to using software that runs on the cloud, known as SaaS (Software as a Service), managing costs has become tricky.

SaaS tools make work easier, but without the right strategies, you might end up paying for software you don’t need or use. This wastes both money and time.

In this guide, we’ll look at the common challenges in managing SaaS costs and provide practical strategies to help you spend smarter and get more out of the software you use.

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

Common Challenges in Managing SaaS Costs

Managing SaaS expenses can be overwhelming, especially if you’re not keeping a close eye on things.

Here are two key challenges that often lead to overspending:

Shadow IT and unauthorised subscriptions

One of the most common problems businesses face is “shadow IT.”

This happens when employees subscribe to software without going through your company’s official process for approving and tracking tools.

While they often do this to work faster, it can create hidden costs and risks.

Here’s why shadow IT can be a problem for you:

• Security risks: Unauthorised software may not meet your company’s security standards, putting sensitive data at risk.
• Difficulty tracking costs: If you don’t know what software is being used, it’s hard to keep track of how much you’re spending.
• Duplicate tools: Different teams may end up using similar tools without knowing it, leading to wasted money on redundant subscriptions.

Overlapping Features Between Different SaaS Tools

Another issue many companies face is paying for software that does the same thing.

You might have several tools that offer similar features, like project management, communication, or customer relationship management (CRM).

While it’s easy to think you need each one, using multiple tools for the same job usually leads to inefficiency and wasted money.

This kind of redundancy means:

• Unnecessary spending: Paying for multiple tools with similar functions increases your SaaS costs.
• Confusion for your team: Using too many tools can make things complicated for your employees, slowing down their work.
• Missed savings opportunities: Instead of spreading your budget across multiple tools, you could consolidate and negotiate better deals for fewer, more comprehensive solutions.

More in Nexalab’s blog: Top 5 SaaS Spend optimization Platforms to Maximise Your Budget in 2024

Strategies for Optimising SaaS Spend

Now that we’ve looked at the common challenges, let’s explore some strategies you can use to cut down on unnecessary spending and make the most of your SaaS budget.

Here are some of the strategies you can consider, according to AvePoint.

1. Eliminating redundant and unused subscriptions

The simplest way to save money on SaaS tools is to get rid of subscriptions you don’t need or use.

It’s easy to overlook software you signed up for months ago but stopped using—or tools your teams don’t need anymore.

Regularly reviewing what you’re paying for can uncover a lot of savings.

Here’s how you can do it:

• Do a software audit. Take stock of all the SaaS tools your business is currently using. Identify any tools that are underused or have become redundant.
• Talk to your teams: Ask team leaders if the software they’re using is still necessary. Sometimes, what was useful last year may no longer be needed.
• Use SaaS management software: There are platforms designed to help you track all your software subscriptions. Tools like Blissfully or Zylo can highlight which tools are underused, so you can decide whether to cancel or downgrade them.

After clearing out unused tools, your tech stack will be simplified and ultimately will cut down on unnecessary expenses.

2. Negotiating with SaaS vendors

Many companies assume SaaS pricing is set in stone, but that’s not always the case.

You’d be surprised how many vendors are open to negotiating, especially if you’ve been a customer for a while or if you’re subscribing to several products from the same company.

Here are a few ways to negotiate better deals:

• Compare vendors: When your contract is up for renewal, mention competing tools that offer similar features at a lower price. Vendors may be willing to match or beat the price to keep your business.
• Bundle services: If the vendor offers multiple products, ask if they can provide a discount if you bundle them together under one contract.
• Ask for long-term discounts: Many SaaS providers offer discounts if you commit to an annual or multi-year contract. If you know you’ll be using the software for a long time, it’s worth locking in a lower price.
• Negotiate volume discounts: If your company has a lot of employees or plans to scale up, ask the vendor for a discount based on the number of licences you’ll need.

Effective negotiation can help you reduce your SaaS expenses and get more value out of the software you’re already using.

3. Consolidating SaaS Applications

Another smart way to reduce your SaaS costs is by consolidating your applications.

Instead of using multiple tools that offer similar features, look for one platform that can do the job of several.

This reduces the number of subscriptions you need, simplifies workflows for your team, and may even lead to discounts for higher usage levels.

Here’s how you can consolidate:

• Identify overlapping tools: Review the software your teams use and check for tools with similar features. For example, you might have more than one project management or communication tool that serves the same purpose.
• Find all-in-one platforms: After identifying overlap, look for tools that can combine multiple functions into one. Platforms like Zoho, Microsoft 365, or Salesforce offer a wide range of features, reducing the need for extra tools.
• Use SaaS spend management tools: Tools like Octobits by Nexalab can help you see your full list of software and spot where you can consolidate. They track usage, show where you’re overspending, and help manage your SaaS subscriptions, making it easier to reduce costs.

Consolidating your tools not only saves money but also makes it easier for your employees to stay organised and work more efficiently.

4. Implementing Tiered Access and Rightsizing Licences

Not everyone in your company needs access to all the features of your SaaS tools.

In fact, many companies overspend on premium licences when a more basic plan would do the job just fine. By giving employees only what they need, you can cut costs without sacrificing productivity.

Here’s how you can optimise access and licences:

• Rightsize your licences: Review the features each team or employee needs. If some employees don’t use advanced features, downgrade their accounts to a cheaper plan.
• Revoke unused accounts: Regularly check if there are any inactive accounts that you can cancel. SaaS management tools can help automate this process by flagging unused licences.
• Set role-based access: Many SaaS tools offer role-based access, meaning you can give employees different levels of access based on their role. This ensures that you’re not paying for features that some employees don’t need.

Adjusting access levels will make sure that everyone has the right type of licence. Ultimately, this will cut down on unnecessary expenses and improve efficiency.

More in Nexalab’s blog: SaaS Spend optimization: 5 Proven Strategies for Leaner Budgets

Conclusion

Optimising your SaaS spend requires a proactive approach to eliminate waste, consolidate tools, and ensure you’re only paying for what your teams truly need.

Addressing issues like shadow IT, redundant tools, and underutilised subscriptions will help you significantly reduce costs while maintaining productivity and efficiency.

Regularly reviewing your SaaS stack and making smarter decisions about subscriptions will keep your software spending in check.

A tool that can help streamline this process is Octobits by Nexalab.

Octobits is a powerful SaaS management platform designed to give you complete visibility into your subscriptions, track usage, identify redundant tools, and rightsize licences across your organisation.

With its intuitive interface and advanced analytics, Octobits makes it easy to manage your entire software stack, negotiate better deals with vendors, and optimise your SaaS spend.

Contact Nexalab today to learn how Octobits can transform your software management strategy.