Introduction
A very common pain point, really a set of connected pain points, is poor (or no) management of Software as a Service (SaaS) spend. Lack of governance in this area can lead to a much higher spend than is needed – essentially wasted money, that could be put to better use.
We all know that it’s a software-centric business world, and you can’t NOT invest in tools and technologies to effectively run the business. That said, many companies unknowingly overspend on software. In this blog, we cover the most common culprits of wasted SaaS spend.
Signs Your Company Is Overpaying for SaaS Licenses
These are more or less in order of how common they are, but it’s not uncommon to see companies that suffer from many or all of these.
1. Unused Licenses
If you are paying for more licenses than employees are using, you are wasting money. Regularly (at least quarterly, if not monthly) conduct a review to see if the number of purchased seats is higher than active users.
2. Unoptimized Subscription Plans
Most SaaS providers offer tiered plans. If an enterprise-tier plan seemed to make sense at the time of purchase, but you find you only use basic features, a downgrade could save money.
3. Duplicate Software Purchases
When there is no SaaS purchasing policy, or the policy isn’t followed, an organization may have different teams buying similar tools for the same function (e.g., multiple workflow, project management, or communications applications). This also happens after an acquisition, where costs of duplication will be high until a rationalization exercise is completed. Any areas for consolidation to a single tool per category will reduce costs.
4. No Annual Review of Long-Term Contracts
SaaS applications that have long been part of your workflow often have contracts renewed year after year without stopping to evaluate new vendors or insisting on a renegotiation ahead of the renewal. This review, assigned to an accountable “SaaS Asset Management” role/function, needs to be part of your renewal process, and cost savings should be tracked to reinforce the importance of the exercise.
5. Paying for Premium Features That Go Unused
Similar to paying for a higher tier of SaaS than you are using, many companies buy higher-end features but then fail to implement them. A quick audit should uncover this, and it could be a quick and easy cost savings.
6. Hidden Costs You Might Be Missing
- Auto-Renewals and Forgotten Subscriptions: SaaS licenses that auto-renew will stealthily drain your budget if not regularly reviewed for validity.
- Maintenance and Support Fees: Some SaaS products come with complex support models, and sometimes, additional support costs aren't included in the base price.
- Scalability Costs: Some platforms have usage-based pricing that scales up quickly as your company grows, leading to unexpected spikes in spending.
Regardless of the size of your organization, it is actually fairly easy to put basic governance in place to ensure you are not spending more than is needed on SaaS licenses. If you explain why the new processes and reviews are being implemented and track and report on the savings, the adoption of spend governance can happen quite quickly.
Take the SaaS Governance Assessment
Interested in learning more about SaaS governance? You can take this 5-minute assessment to understand where your organization ranks with respect to its SaaS Governance efforts. Whether your organization is just starting to get a handle on your spending or has strong policies and tools in place, our assessment will tell you where you stand and provide personalized steps to help improve your SaaS Governance Management.
