Optimizing your investments in SaaS with the 3R’s of SaaS Management...
The future is uncertain. From the pandemic to a possible recession on the horizon, you need to ensure that your business is ready for whatever the future may bring. It needs to be future-proof.
According to Entrepreneur, getting the most out of your tech investments is in the top three ways to future-proof your business. And that’s well and good, but how do you do that? The short answer is software cost reduction.
On average, IT and technology spending is typically the 2nd or 3rd largest expense for an organization. That makes it a natural place to start for businesses looking to cut costs. Due to the proliferation of SaaS in many organizations, IT and tech spending is filled with redundant and underutilized applications.
However, reducing costs in this category requires finesse. The pandemic showed us that technology is key for future-proofing your organization. That is why tech spending needs more than a simple reduction, it needs optimizing.
Why Software Cost Reduction Future Proofs Business
From reinvestment opportunities to business scalability. Software cost reduction offers a myriad of future-proofing benefits for any business that utilizes SaaS.
Maximize Tech Investment
The foremost benefit of software reduction is that it allows a business to maximize their technology investments. This means determining if you’re getting the full use out of your applications. Are you using all of the purchased licenses? And is everyone with a premium license utilizing the premium features? There may well be entire applications going unused or underused in your SaaS stack that are cutting into your budget.
Therefore, proper software cost reduction practices allow you to identify where spending is being wasted, so you can put every dollar to use.
By reducing the cost of your software, you free funds for other initiatives. This is a lesson that Brad Pollard, the former CIO of Tenable, learned early during the Covid-19 pandemic.
He shared this with us on SaaSMe Unfiltered.
When Pollard was walking around the office early in the pandemic, he realized there were a lot of unused phones on the desks. Everyone was using Zoom and Slack to communicate. And that put a bug in his brain that this was an opportunity.
“So, I went into your tool and I was looking at what is my adoption of my unified communications as a service.” Said Pollard, “I’m looking at what the bill is we’re paying – okay, where can I save money?”
What Pollard found was the customer service team was still using the service, but it was otherwise going unutilized. So, they moved the voice IP to Zoom Phone at a fraction of the cost.
“We ended up saving a ton of money we could then reallocate to other projects,” said Pollard. “So, we ended up staying flat on budget, not losing any functionality, and then having money to do innovation, do new projects.”
As we’ve said, the future is uncertain. If the pandemic taught us anything, it’s that the whole world can turn on its head overnight. Even now, we face an ongoing crisis with the global supply chain and a predicted period of low growth.
Reducing software costs allow businesses to prepare for such events by reallocating the savings to a financial buffer. The funding saved can create a healthy buffer to get through hard times. What’s more, a financial buffer can help protect your business from the regular ups and downs of the business world.
Avoid Budget Cuts
With the savings from effective software cost reduction solutions, businesses can avoid budget cuts in other areas of the business and can even avoid having to reduce headcount. That means that saving on SaaS could mean saving the job of one or more of your employees.
If your organization is strapped for resources, a managed services provider dedicated to SaaS can help significantly as well. For example, as a small team of two, the procurement organization at Talkdesk started leveraging Zylo’s SaaS Negotiator service to help support their growing volume of SaaS contracts.
“Our services manager has become an extension of our procurement team and has helped us save a lot of money,” said Lauren Pukacz, Senior Global Director of Procurement. “She accomplishes as much as a full-time employee — without us having to add additional headcount.”
Scaling Your Business
Scaling an organization is an iterative process, with many small changes made over time.
By establishing a SaaS management function and investing in solutions to support software cost reduction, a company can systematically and continuously optimize their tech investments. This creates a foundation for the organization to regularly identify waste and areas of optimization to create more effective systems to scale with company growth.
To put this another way, smart investments into technologies like SaaS management not only help you support company growth, but allow teams to do more with less.
“With growth companies, you can’t grow your IT staff linearly with the rest of the company,” said Brad Pollard on the CIO’s role in scaling a business. “You need to do more with less. And the expectations inside those companies is, ‘I have the same things that my biggest competitors have, but you have the fraction of the budget.’”
Tactics for Software Cost Reduction
Battling cost inefficiencies without cutting effectiveness requires a methodical approach.
Start with Visibility
Reducing software costs starts with visibility through SaaS discovery. This means finding and understanding exactly what SaaS is being utilized (or unutilized) across the whole organization, and determining what opportunities they offer for optimization.
Zylo’s 2022 SaaS Management Index found that organizations underestimate how many applications they have by 2 to 3 times. With a margin of error that large, it’s hard to know if you’re spending what you should because you don’t know what you do have.
SaaS spending is often miscategorized on expense reports and accounting systems, blending in with other costs, and never considered in the big picture. That is why Zylo’s Discovery Engine offers a solution to finding all SaaS across an organization. It utilizes machine-learning analysis to identify 100% of SaaS applications based on large volumes of financial transactional data.
This grants the necessary transparency and visibility into SaaS and its use to begin addressing inefficiencies.
After visibility comes rationalization. Every company’s application portfolio hides unproductive, outdated, and unnecessary tools. Application rationalization helps you identify these tools, and understand which are most valuable based on your organization’s needs.
Determine which applications should remain, be replaced, or eliminated based on their functions. This means consolidating duplicative and redundant applications. Thus, cutting SaaS stack down to its necessities.
Zylo’s 2022 SaaS Management Index found that organizations are only using 60% of their licenses. That leaves 40% unused, underutilized, and ripe for optimization.
SaaS optimization is the most important step a business can take for software cost reduction. Once you’ve determined an application is necessary for your business, you can then ensure you’re paying for exactly what you need.
For example, your business may well be paying for too many seats on an application that only a handful of your team uses. You could then seek to downgrade your subscription to that more appropriate number of seats.
Proactive Renewal Management
Many SaaS applications include subscriptions that renew automatically. In addition, the average organization has at least one renewal every business day, which can be a lot to keep track of. However, the default agreement will rarely be in your company’s favor. That is why Zylo offers the tools to leverage usage and benchmarking data to confidently negotiate the terms of your SaaS subscriptions. You can also easily track contract details in one place, and get automatic reminders about renewals.
We recommend starting your planning at least 90 days ahead of a renewal. This is the best time to negotiate for better prices, discover previously unknown discounts, and make informed decisions to benefit both the stakeholders and the organization. Don’t let yourself get caught off guard by renewals – being prepared will help you get ahead with better outcomes and higher cost savings!
Establish SaaS Governance
Proper SaaS governance means establishing a long-term approach to cost management and avoidance. These practices ensure oversight into application purchases that reduce software costs.
Brad Pollard shared his experience on the importance of conscientious SaaS purchases on our podcast.
“When a business unit wants a technology solution and then it’s not funded it’s not an IT problem,” Said Pollard, “It’s a business decision. – If you’re a responsible CFO, you have a budget and you’re keeping everybody to that budget.”
Your Guide to Software Cost Reduction
For more in-depth information about how you can reduce software costs, download our guide on controlling SaaS costs and risk. It will walk you through the Zylo SaaS Management Lifecycle, a flexible framework for controlling SaaS already deployed by hundreds of organizations.
Our guide will show you how to:
- Uncover Shadow IT in your organization
- Optimize SaaS applications and licenses for immediate savings
- Plan for SaaS renewals
- Ensure compliance by establishing best practices for SaaS governance.
What’s more, you can schedule a demo with us today and take a peek at the ways we help reduce software spending.
Discover how Talkdesk’s IT and procurement teams leverage Zylo to improve SaaS negotiations and cross-functional collaboration, while saving time and money.