Is Your SaaS Spend Recession-Ready?
Note: Feeling lost? Download our ebook—What Your SaaS Spend Says About You to find your way to better SaaS Spend Management
There’s no denying it: we’re in a time of widespread economic uncertainty. As inflation rises and markets grow more unstable, there’s collective anxiety about the global financial system and how it will affect our workplaces. Some companies are already reacting to this uncertainty by enacting layoffs, rescinding employment offers, and introducing major cuts to things like employee benefits. In short, it’s not a fun time for anyone.
We don’t know exactly what the future holds or how long this downturn will endure. But we know this: SaaS spending is one of the most overlooked areas of potential cost savings. And it’s made worse by decentralized app adoption.
As users and groups add more and more apps outside of IT, more of those costs remain hidden within Shadow IT. But, some basic steps can help IT, Procurement, and Finance uncover the hidden apps and their costs.
By being proactive in streamlining and systematizing spend now, many companies can save themselves unnecessary pain in the future.
Here are some general guidelines for how to get a handle on—and systematize—your SaaS Spend Management.
Get A Full View Of Saas Spend
First things first: you can’t fix what you can’t see. So priority number one in understanding any company’s SaaS spend is understanding how that money is spent.
This is often easier said than done, and getting a handle on who’s using what is much easier for small and early-stage startups. As companies grow, however, so does the problem of Shadow IT, where employees outside of a company’s IT department purchase and use technology, apps, and software without the IT department’s knowledge.
Shadow IT introduces many potential problems, including security holes and duplicate signups. But within the context of SaaS spend, the biggest problem Shadow IT presents is a major blindspot into where money is funneled.
Doing a SaaS spend audit is a great way to get the lay of the land. You can do this manually with a spreadsheet (fair warning: this can be very time-consuming and still leaves room for apps to be missed), or you can enlist the help of an automated tool that helps audit, aggregate, and organize SaaS spend data.
Be Honest About What’s Needed
Once you have visibility into where exactly your company’s SaaS spending is going, it’s time to be relentless about figuring out what apps and licenses are essential and what needs to go.
This process is more complex than simply cutting budgets and license counts. Companies depend on a multitude of apps to innovate. Therefore, you owe it to yourself to evaluate each app according to criteria. This process is called app rationalization.
Two guiding pillars of app rationalization are identifying duplicate apps and evaluating license management. It’s worth it to group SaaS into categories and see where there’s overlap and extra licenses. For example, you may uncover that you’re paying for both Monday.com and Asana—two productivity and collaboration-focused apps—and that you have far more licenses than active users. You may also see that a formerly popular app has been quietly overtaken by a similar tool.
Generally speaking, you should be able to tie each app or software service to a team’s overall goals or your company's bottom line. Likewise, you should be able to trace each existing license back to a currently active user.
License auditing is essential since a static number of seats is often purchased and then auto-renewed after some time. Putting a process in place where licenses are reviewed regularly (well before the renewal date) can go a long way in right-sizing your account and ensuring you’re not paying for unused seats or apps that provide too much overlapping functionality.
For IT, Finance, and Procurement—Take Back Control
While it’s great to empower employees to explore tools that will help them be more efficient and innovative in their work, there needs to be a locus of control to keep SaaS spend from sprawling.
Once you’ve audited your current spend situation, you may find it helpful to categorize your spend persona. This will help you decide a course of action to systematize things moving forward. Every company is at their own place in their overall growth journey, and SaaS spend patterns will reflect that.
The goal in systematizing SaaS spend should be to give IT, Procurement, and Finance greater visibility into what exactly the company is spending money on and how it’s impacting the business's bottom line. This does not necessarily mean a single group should have the ultimate power to approve or deny each app, but it does mean these groups should have a real-time, birds-eye view of what’s being spent and why.
Once you’ve gained visibility into where SaaS spend is going and have used that visibility to eliminate any unnecessary apps and licenses, you can put controls in place to keep Shadow IT illuminated in the future.
With continued visibility, stakeholders can continue to improve the organization’s understanding of which applications are valuable and which are not.
The best SaaS spend approach is a balanced one
As our ebook on SaaS spend personas points out, it can be hard to find the right approach when it comes to purchasing new apps. You want to be controlled enough to avoid a “Wild West” situation, but open-minded enough to let business leaders do their job with the tools that make a real impact without tanking your budget.
Regardless of whether a recession occurs or how long it asks, there are real steps you can take today to put you and your organization in the best possible place with regards to SaaS Spend Management. Here are 4 steps to improve your SaaS Spend Management:
- Reduce wasted SaaS Spend on duplicate licenses and redundant applications
- Eliminate surprise contract renewals
- Reduce SaaS operations costs
- Reduce risk exposure and cost
Looking for a little help on your journey towards SaaS Spend Management?
Download the ebook below.
What Your SaaS Spend Says About Your Company