Software as a Service (SaaS) has revolutionized the way enterprises acquire and use software applications. The subscription-based model allows organizations to access software applications and tools on a pay-as-you-go basis, with no upfront investment in infrastructure or licenses.

However, as the number of SaaS applications in use by organizations grows, so does the challenge of managing the associated costs. By taking a proactive approach to managing SaaS spend, you can ensure that you’re getting the most out of your SaaS investments while also reducing costs.

According to Gartner, by 2026, around 50% of organizations will centralize SaaS application management. This will include usage metrics of these apps using project management tools.

What is SaaS Spend Management?

SaaS (Software-as-a-Service) Spend Management refers to the practice of managing and optimizing the expenses associated with the use of cloud-based software applications. It involves tracking and analyzing SaaS expenses, identifying opportunities for cost savings, and optimizing the usage of these services to maximize the ROI.

Excessive SaaS Spending - How Companies Oversubscribe and Overpay for Too Many SaaS

Excessive SaaS spending occurs when companies oversubscribe and overpay for too many SaaS applications that they don't fully utilize. This can lead to wasteful spending, lack of visibility into the usage of SaaS applications, and potential security risks.

There are several reasons why companies oversubscribe and overpay for SaaS applications, including:

1. Lack of centralized management can result in multiple applications being purchased for the same or similar purposes, which can lead to overpayments and redundancies.

2. Without proper tracking of SaaS usage, it's difficult to identify underutilized or unused applications. This can result in the continued payment of subscription fees for applications that are not being used, leading to wasted resources.

3. When companies don't negotiate their SaaS contracts or don't take advantage of discounts or promotional offers, they may end up overpaying for applications that they could have obtained for a lower cost.

4. Businesses that don't have a clear governance framework for SaaS spending may find it difficult to control and optimize their SaaS investments.

Why Your Organization Needs SaaS Optimization?

As an organization's SaaS usage grows, managing multiple SaaS applications can become complex and challenging. SaaS optimization can help organizations manage their SaaS usage more effectively and efficiently. Here are some reasons why an organization may need SaaS optimization:

1. Cost optimization: SaaS applications are typically priced based on usage or subscription, which means that an organization can easily incur unnecessary costs if they're not monitoring usage. SaaS optimization can help an organization identify areas where they can optimize their usage and potentially reduce costs

2. Usage analysis: SaaS optimization can help an organization better understand how their employees are using SaaS applications. This information can help the organization identify trends and opportunities to improve productivity, collaboration, and efficiency.

3. Security and compliance: With multiple SaaS applications in use, it can be difficult for an organization to ensure that each application is being used securely and in compliance with relevant regulations. SaaS optimization can help an organization identify potential security risks and compliance issues and take appropriate action.

4. Integration: Integrating multiple SaaS applications can be challenging, but it can also unlock significant value for an organization. SaaS optimization can help an organization identify opportunities for integration and ensure that the integrations are working effectively.

6 Ways to Optimize SaaS Spending

Now that you understand the importance of SaaS optimization, let’s look at some of the ways you can optimize SaaS Spending-

1. Perform a SaaS audit: Conduct a thorough audit of your organization's SaaS applications to identify all the applications in use, their costs, and their usage. This information can help you identify applications that are not being used, are redundant, or are too expensive.

2. Use usage analytics: Use usage analytics to track how often applications are used, which features are most used, and which users are using the applications. This data can help you identify underutilized applications, opportunities for training or optimization, and users who may be able to use a lower tier of the application.

3. Consolidate applications: Look for opportunities to consolidate similar applications or features to reduce costs and simplify your application stack. For example, if your organization is using multiple project management tools, consider consolidating to a single application.

4. Negotiate contracts: Negotiate SaaS contracts to get the best possible pricing, especially if you are a long-term customer or a high-volume user. Negotiation can also help you avoid unnecessary features or services and get better terms for renewals.

5. Implement license management: Implement a license management system to ensure that you're only paying for licenses that are being used. This system can also help you identify opportunities to shift users to lower tiers or reduce overall license usage.

6. Regularly review and optimize: Regularly review your SaaS applications and usage to ensure that you're getting the most value from them. Consider conducting a quarterly review to identify opportunities for optimization, consolidation, and cost savings.

In summary, optimizing SaaS spending involves auditing and analyzing your SaaS applications, consolidating applications, negotiating contracts, implementing license management, and regularly reviewing and optimizing your SaaS usage. By implementing these strategies, your organization can reduce costs, increase efficiency, and get the most value from your SaaS applications.