How to Build the Case for SaaS Management During a Spending Freeze

Due to the current uncertainty in the economy, many organizations are looking to cut costs, if not implementing spending freezes altogether. Sure, the goal and common directive from CFOs is to save money where you can. While a spending freeze will halt new spending, it doesn’t necessarily equate to savings. However, this gives you an opportunity to solve a lingering problem that provides tangible savings. Sometimes, you have to spend money to save money.

SaaS Management makes a very strong business case by saving you money.  No doubt, launching a SaaS Management strategy requires buy-in from your IT and procurement teams. But in a spending freeze, the CFO needs to be a key — if not the number one — stakeholder to champion the cause.

Consider these data points to make the business case for SaaS Management:

• Companies are likely overspending on SaaS by 25%, according to Gartner.
• 51% of all SaaS licenses go unused in a 30-day period, and the organization wastes $18M on unused SaaS licenses annually. 
• More than 51% of all SaaS applications found by Zylo’s Discovery Engine are not categorized as software purchases.

Whether your organization practices SaaS Management, or you’re looking to put a practice into place to reduce spiraling software costs, read on for tips to lower your SaaS spend, even during a spending freeze.

Get Executive Buy-in

The first step to establish an effective SaaS Management strategy requires executive buy-in, notably your CIO and CFO. A top-down strategy helps to ensure alignment across teams on this important initiative and can also placate employees who push back due to a perceived lack of bandwidth. It also provides the green light to allocate additional resources during a spending freeze. 

Executive sponsors can explain the reasoning behind the need for SaaS Management and how it’s going to positively impact the business. In addition, they can also make the decision to reprioritize other projects and initiatives.

Use Data to Bolster Your Cause

More likely than not, your CIO and CFO already know or at least expect there’s a need to rein in SaaS costs. Use your existing SaaS data to bolster the case.

Start by considering your company objectives. In an uncertain macroeconomic environment, both cost avoidance and cost savings prove critical. Zero in specifically on the goals that align with profitability, forecast, and departmental needs. 

Also perform a line-item analysis of your operational expenses (OpEx), aka the day-to-day expenses your organization pays to run the business. After all, it is the most controllable part of your budget. With many companies now treating SaaS as an OpEx, this is where you can find the most opportunity to reduce costs without impacting headcount.

Map these findings back to SaaS and determine how much of your OpEx is devoted to software, the total number of apps, and how app selections align with company goals. Then use your SaaS Management platform to mine data and conduct a spend visibility exercise.

If you don’t use a SaaS Management platform, follow these steps:

• Examine OpEx data and quantify the percentage devoted to SaaS.
• List all known apps, then double that number. Zylo data shows most organizations underestimate their SaaS inventory by two to three times.
• Consider how Zylo data shows 40% of apps go unused or underutilized in a given month, while 12% of all SaaS applications in a large organization are the result of duplicate purchases.
• Account for the number of apps listed as line items in your OpEx budget.

Connect Findings Back to Your Organization’s Objectives

CFOs will want to see how the data ties to the organization’s financial goals, and how you plan to optimize the investment moving forward, especially the strategy for ongoing cost savings and avoidance. Remember, SaaS is typically the highest OpEx, second only to headcount.

CIOs are more concerned with SaaS performance metrics. Zero in on key data, including adoption, innovation, utilization, and security. Take the opportunity to help them understand opportunities for optimization, rationalization, and the tools driving the highest adoption. 

Finally, help the CFO and CIO understand the operational costs and administrative overhead of running an ongoing SaaS Management strategy. For instance, renewals take approximately eight hours per application, and the average organization sees about 200 renewals per year. That means you’re looking at 1,600 hours each year. In contrast, a full-time job is a little more than 2,000 hours per year. Does your organization have the bandwidth to manage the process? You’re likely better off partnering with a procurement resource, like Zylo’s Managed Services.

SaaS Management Drives Quick Savings

In uncertain times, businesses need a quick solution to reduce costs, ideally without impacting headcount. An effective SaaS Management strategy does both, helping organizations potentially save millions of dollars.

Take a look at some of these real-life examples:  

• Versapay saved 4% of their total SaaS spend in the first 3 months and 16% in the first year using Zylo’s SaaS Management Platform and Managed Services. 
• Biogen set a goal to save a million dollars in the first year of partnering with Zylo. “I’m happy to say that we’re well on track to hit that in our full first year of the implementation,” said Keith Sarbaugh, Vice President, IT Infrastructure, Architecture, and Operations.
• Momentive canceled 222 applications and saved $7 million over three years.

Ultimately, Zylo’s SaaS Management Platform and Managed Services help organizations see an average 6X return on investment. Ready to start saving? Reach out today for a personalized demo.