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How to Address Tail Spend in Your SaaS Stack

tail spend

The average organization has well over 300 SaaS applications which equates to at least one renewal every single business day. With so many applications to track, it’s easy to focus on negotiating only the heaviest hitters. 

But what about the small purchases? 

Do not be fooled by the size of an application. The costs of small applications quickly add up, and including them in a management program can collectively lead to substantial savings. 

These small applications often fall through the cracks because, let’s be honest, how much time can you dedicate to negotiating every vendor agreement? With an average of 200 renewals a year, each requiring 8-10 hours to take care of, that’s upwards of 1,800 hours spent just on renewals. That’s time better served elsewhere. SaaS management is only one part of making your enterprise successful, and there’s only so much time and resources to go around. 

That’s why the hard truth is that you need a dedicated resource to successfully negotiate all of your SaaS contracts for favorable agreements to maximize your ROI. 

Tail spend encompasses all of the small SaaS purchases that fly under the radar while the heaviest-hitting SaaS is addressed. These applications often go unaddressed simply because enterprises lack the bandwidth to include them in their renewal programs. 

Addressing Tail Spend

Large and mature enterprises often have a dedicated procurement organization that owns SaaS negotiation. However, other enterprises see two other groups handle negotiation: individual stakeholders acquiring the solutions and corporate IT responsible for enterprise-wide solutions. 

Relying on these two groups can be difficult. Neither the individual stakeholder nor IT sees negotiating SaaS agreements as a strategic part of their role. In fact, negotiation pulls them from critical day-to-day responsibilities. You may have a handle on your big contracts through these groups. You may even have a stakeholder who enjoys negotiating them. However, small contracts can easily fly under the radar and add up fast.

Rather, you may enjoy freeing your resources with a strategic procurement partner to help you reel in your tail spend enterprises. It takes time and expertise to run a negotiation, and the right procurement partner can bring an insightful table on the quality of your applications.  

This is what Jon Alves from Momentive found while attempting to tackle his own company’s tail spend. He discussed with us how they could recognize the need to address tail spend at Momentive, but it was difficult to address. Thankfully, with visibility, they were able to build a plan to make it happen. 

“There were some one-for-one swaps,” Said Jon, “There were other cases where we added a couple of different solutions and maybe only took out one, but what this really came out to after three years was 222 canceled applications, which in aggregate is around $7 million in spend that we removed from our tech stack, and this is just the foundation that we built.”

However, what is an enterprise to do when they lack the bandwidth to handle these applications? They find a partner to handle at least some of their procurement. 

Taming Tail Spend with a Procurement Partner

SaaS agreements are always negotiable. No matter how small the application, vendors are willing to work with enterprises on their contracts. 

This is partly because almost all vendors have a typically high margin to work with, and are consequently willing to work with customers to find the right price point. 

By reeling in your tail spend and addressing the small applications in your portfolio affecting your bottom line, you pick up that money that’s usually left on the table. Zylo has found that companies across the board overpay on their licenses by at least 15%. Thankfully, you can get that 15% back without sinking resources and time better spent on main enterprise functions. 

A procurement partner, like Zylo’s SaaS Negotiator, will help facilitate your enterprise’s procurement process from end-to-end to ensure you get the right price for all your entire SaaS portfolio. We work directly with the vendor for you while adhering to your internal processes while handling as much or as little of the procurement process as you’d like – from administrative needs to the end-to-end facilitation of contracts. 

Zylo’s SaaS Negotiator service customers see an average of 6x ROI.

Why Bring on a Procurement Partner?

The reason to look for partners in SaaS negotiations is possibly best surmised as the goal of SaaS management as a whole: to effectively drive SaaS portfolio cost savings. 

Take Zylo customer VersaPay for example. Before even partnering with Zylo, VersaPay knew they had a big problem with their SaaS portfolio. 

“We were going into budget planning for 2022, and we believed we had an understanding of what the actual software budget needed to be, based on what we thought we were consuming,” said Ryan Johnson, VP of IT and Internal Systems at VersaPay. “But then we brought in Zylo and it ended up we were actually spending 30% more than we thought we were because of a lot of unaccounted spend happening throughout the organization.”

By leveraging Zylo’s managed services to identify and act on optimization opportunities in SaaS negotiations, they were able reduce that spend by at least 20% in the following months. Zylo also negotiated 75 of their contracts in the first year while also reducing the number of applications in their SaaS portfolio by 10%. 

What’s more, VersaPay saved 10 hours per week they previously spent on renewal management and was able to focus on the real strategic work of their company. 

All of this was made possible by working with an experienced SaaS management partner to tackle the problem, free company time, and obtain substitutional savings by addressing tail spend.

Get More Time Back

It’s one thing to know it’s time to act on your SaaS spend. It’s another thing entirely to act on it in its entirety. 

As we already discussed, addressing 200 renewals will take upwards of 1,800 hours to address. That’s nearly the equivalent of a full-time position. Zylo’s SaaS Negotiator service gives your enterprise that time back. 

Our experts work as an extension of your existing team, embedding themselves into your organization and processes. From there they can work in your interest to manage the process end-to-end, handle vendor communication, and facilitate approvals. 

Preserve the Relationship with Your Vendors

Maintaining a positive relationship with your application vendors is a necessary part of the program of SaaS management. Zylo’s procurement experts know this. That’s why our team is more than skilled negotiators, they’re vendor management experts. 

No Need for Extra Headcount

Again, outsourcing procurement keeps you from having to add to your headcount. Zylo’s negotiator service allows you to realize massive cost and time savings without bringing on new resources. 

Refocus on Tail Spend with Help from a Procurement Partner

At the end of the day, tail spend is the aggregate costs of the small applications spread throughout your organization. Naturally, you want to reclaim this spend. However, due to the sheer number of applications, this can be difficult for organizations to achieve without outside help. 

When this happens, you can rely on Zylo’s SaaS Negotiator service. Our SaaS experts can reclaim your spend and your time. Request a demo, and see how you can begin taming your tail spend today.