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How to Create a SaaS Spend Management Strategy

saas spend management strategy

A majority of organizations — from tech-start-ups to major enterprises and Fortune 500 companies — now primarily use cloud-based Software-as-a-Service (SaaS) to operate more efficiently, enhance collaboration, and work smarter.

In fact, we’re experiencing a SaaS boom, with Gartner forecasting end-user spending to surpass $171 billion in 2022.

We’ve seen SaaS adoption grow steadily over the past decade, fueled by trends like product-led growth and end-user acquisition, not to mention the fact that literally anyone with a credit card and email address can purchase a SaaS license in minutes. The pandemic further accelerated SaaS growth as organizations quickly adopted cloud-based tools to accommodate remote-work environments.

While these tools and software keep teams productive and connected, unmanaged SaaS spending quickly becomes unmanageable.

Why Do You Need a SaaS Spend Management Strategy?

Without a dedicated SaaS spend management strategy, keeping your software and technology spending in check becomes virtually impossible. Consider these stats on SaaS adoption and utilization, according to Zylo’s 2023 SaaS Management Index:

  • On average, about one in six employees will purchase a SaaS application using a credit card or expense reimbursement.
  • The average company spends roughly $4,600 per employee each year on SaaS software.
  • Nearly 44% of all SaaS licenses remain unutilized in a given 30-day period.

To optimize that spend and make the most of the investment, many organizations now deploy SaaS spend management strategies.

3 Steps to Creating a SaaS Spend Management Strategy

The key to establishing a robust SaaS spend management strategy involves understanding your organization’s complete SaaS inventory, making data-driven decisions for removing underused licenses and consolidating software with redundant functionalities, and forecasting future spend. Follow these steps to establish a SaaS spend management strategy.

Step 1: Discover

Let’s face it, there’s no way to manage what you don’t know exists. Proper SaaS spend management begins with discovering all software and tools across the entire organization, including each business unit, team, and department. This may seem like a simple process, but note that Zylo research shows the average large organization employs more than 600 SaaS applications, with many purchased unbeknownst to IT teams.

Several options exist for discovering and cataloging SaaS — manual spreadsheets, single sign-on tools, web browser plugins, and cloud access security brokers. Just note these tools often hinder full discovery, as they’re easy for employees to circumvent via a personal device, and self-reporting is prone to inaccuracies and requires continuous management to keep inventories up to date.

The ideal discovery process requires a complete and thorough analysis of all financial transactions, typically using spend management software or an intuitive SaaS management platform.

Step 2: Optimize

Once you’ve discovered all SaaS applications, identify ways to control your SaaS spend and increase efficiencies, such as:

  • Reduce underused licenses: When you consider how nearly 44% of all SaaS licenses remain unused over a 30-day period, you’ll likely find several opportunities to remove unused or underused tools. Also look for opportunities to downgrade premium licenses to free licenses, if possible.
  • Trim overlapping functionality: When individual employees purchase software, it often leads to organizations paying for redundant applications. Some of the most common types of redundant SaaS applications include training software, digital asset management, video conferencing tools, and team collaboration platforms.
  • Consolidate duplicate subscriptions: When multiple employees or teams purchase separate subscriptions for the same tool, it not only increases the per-user price for each license, it weakens your purchasing power to lower costs and gain additional features.

Step 3: Plan

A continually updated SaaS system of record provides a complete view of your software inventory, enabling you to use data to forecast future SaaS spend. To automate the discovery process and better forecast your future SaaS spend, consider using a SaaS management platform, which constantly analyzes usage data and trends.

Leverage Technology to Support Your Efforts

With a robust SaaS spend management platform, you can ditch the clunky spreadsheets and start making real-time, data-driven decisions to lower spend and get the most of your software investment. Just note that not all platforms offer the same functionality.

Here’s what you should look for when you consider SaaS spend management software:

  • Powerful discovery engine: Choose a SaaS Management platform that can uncover and tag the likely hundreds of SaaS purchases hiding in your organization. Remember, true SaaS management requires year-round, ongoing discovery, so look for a platform that automates these processes behind the scenes.
  • Key usage insights: Your system of record should include the functionality to uncover core usage insights, down to the individual license. The average 1,000-person company wastes $2.32 million on unused SaaS licenses annually, so ensure you only pay for the apps you need and functionality your team actually uses.
  • Actionable data: Look for SaaS management platforms that analyze usage data and deliver actionable insights and automate workflows to rightsize licenses, consolidate duplicative subscriptions, manage renewals, and ultimately optimize SaaS spend management.

Ready to discover and optimize your organization’s SaaS spend? Get started by requesting a demo of Zylo today.

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