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If you manage your SaaS inventory, licenses, or renewals, you are generating many individual activities that aggregate to a material financial impact. Understanding what those events are and how to quantify them is a key aspect to tracking your savings.
Your savings victories are a win-win for your company and you. Tracking SaaS cost savings helps prove the value of your SaaS management program and funnels cash back to your bottom line. On a personal level, it can influence and propel your career. ‘SaaS Savings Superhero’ has a nice ring to it, right?
Let’s dive into what savings activities – or events – you should be tracking to report on your program’s effectiveness. But first, let’s define cost savings vs cost avoidance.
SaaS Cost Savings vs Avoidance
Cost savings typically have stricter tracking criteria. They specifically happen at the time of renewal, where an actual reduction in spend has occurred.
Cost avoidance captures instances where you would have otherwise had to increase or add new spend, but it was avoided. An example would be removing inactive users from a tool to make more seats available instead of buying more.
While it is not critical to draw this distinction, it might be helpful for your tracking. There are a few no-brainer activities you should track to measure savings.
7 Ways to Track SaaS Cost Savings & Avoidance
We see four savings activities that are table stakes to track: removing inactive licenses, downgrading licenses, canceling apps, and price benchmarking. Let’s take a look at each.
Removing inactive licenses
There are a few times where you may need to remove inactive licenses., This means taking a look at when someone last used a tool and determining if you can take that license back. Often, we see this being done proactively with monthly or quarterly audits of an app. Or, perhaps, it is more reactive and done right before renewal.
Regardless, keep record of the licenses you reharvest. It is helpful to know what your unit price is for those licenses, typically coming from the contract. To identify your total savings, multiply the number of licenses removed by the unit cost of those licenses.
For example, biopharmaceutical company AbbVie noticed a large number of Zoom licenses were not being used. At renewal, they rightsized the Zoom subscription, going from a 3-year term with 30k licenses to a one-year term with 7k licenses. In total, they achieved a $1.2M cost reduction.
Downgrading users to a more appropriate license tier
There are times where a user is actively using a tool, but not using features that require a paid license or a full seat. This is harder data to get, but understanding the requirements for each license, and reviewing users’ activity and comparing it to the requirements could result in downgrading them to a cheaper or free seat.
Zoom is a good example. A user may be in meetings every day, but they are not hosting any meetings over 40 minutes. This is an opportunity to downgrade their license, as they could get by with a free seat.
Canceling an app or contract
It happens. Sometimes a tool isn’t providing what you needed, or is not mission critical to your business. When you cancel an app or contract, track the total contract value you canceled.
A SaaS management platform gives you visibility and insights into what apps you could cancel. In total, all those opportunities can amass substantial savings.
“After three years, we canceled 222 applications,” shared Jon Alves, Sr. Technology Category Manager at Momentive, “which in aggregate is around $7 million in spend that we removed from our tech stack.”
Benchmarking what you pay
When you leverage benchmark data, whether from a service or even your peers, compare your current price to set a goal at renewal. Then, track the savings driven at renewal.
While these first four activities are table stakes to track, there may be other areas you want to keep tabs on. Here are a few other ways we see customers get creative tracking SaaS cost savings.
Canceling an application or removing users isn’t the only way to save on a contract. By bringing visibility to adoption of key features, many organizations decide to reduce the total footprint of what they buy for an application. By reviewing exactly what is used and the value features drive, we are seeing apps get renewed but with scrutiny on add-on features.
Managing your shelfware/buffer
Companies maintain a buffer of licenses to ensure they are accounting for growth and reducing overhead burden. Typically that eliminates the need to negotiate add-on seats or face true-ups.
But too many licenses results in waste. Our data shows that 44% of SaaS licenses sit unused in a 30-day time period. That equates to $17M a year!
By using tools that help reclaim unused licenses, companies aren’t having to maintain as much buffer as previously needed. As such, they’re reducing shelfware licenses and tracking those savings.
In addition to license optimization, AbbVie also keeps a close eye on managing shelfware.
“If you find that you’re using far less than what was purchased,” said Renee Turco, Technology Asset Manager, “it is certainly an opportunity to reduce that spend. And here at AbbVie, we start at the 50% threshold as a starting point.”
A significant amount of value is driven by the art of the negotiation. That makes it critical to track the extra impact a negotiation adds to savings. Of all the areas savings are driven, this is one of the biggest areas to show your personal contribution.
Zylo specializes in managing negotiations on behalf of customers with SaaS Negotiator. For instance, global martech pioneer Marigold partnered with Zylo services to save more than $775k over two years.
Marigold Uses Zylo to Save on Sprawling SaaS Costs & Streamline M&A Technology Integration
Discover how Marigold unlocked the door to nearly $1M in SaaS cost savings with Zylo, while undergoing a M&A tech integration and cutting software waste from their portfolio.
Tracking SaaS Cost Savings Is Critical to Showing Program Value
Savings are an important element to any SaaS Management program. That’s why we built Saving Center to be easy and flexible to track your saving with system captured and custom events.
Savings Center takes you from spreadsheet-driven tracking to a flexible AI-powered solution.
- Insights into all the available actions that can maximize your savings
- Automated tracking of every savings action you take
- Reports on savings to quantify program value
- Demonstration of the results of your efforts as a savings superhero
“With Zylo’s Savings Center, I can easily track all our savings and cost avoidance data. Its seamless consolidation ensures everyone in our company has access to the same information, enabling us to transparently demonstrate the immense value that procurement contributes to our organization.”
– Lance Le, Sr. Strategic Sourcing Manager at Redis
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