With cash flows tightening, organizations are placing a much higher priority on saving money across the board and, in particular, on SaaS apps.
Key Takeaways
- Significant Waste: Up to 30% of annual SaaS spend is wasted, often totaling millions for mid-sized companies.
- Visibility is Key: You cannot cut costs on software you cannot see; SaaS management has become a strategic bottom-line priority.
- Common Waste Areas: Excess spend typically stems from “shelfware,” inactive users, duplicate applications, and unoptimized license tiers.
- Modern Solutions: SaaS management platforms provide the real-time monitoring and usage data necessary to eliminate “forgotten” subscriptions.
Businesses can no longer neglect SaaS management––it has become strategically important for their growth and bottom line. Coronavirus has only accelerated the need to identify and cut excess spending.
After all, how many times have you discovered someone in your organization using software, and you were unaware? While SaaS has many advantages over on-premise software, it can be hard to find and manage. And you can only cut costs from what you can see.
Although you’re saving money on computing resources in the cloud, your software subscriptions still represent a considerable investment. Subscriptions for most major cloud apps are based on Named User licenses, meaning that you’re paying for every user who needs access.
In some cases, you might even be paying double or triple for single users. Salesforce, for instance, requires a Named User license per user per Org. If a single user needs access to three different Salesforce Orgs, that user will require three different Named User licenses.
Back when people actually bought software or developed it themselves, it could be depreciated as a capital expense. Not SaaS, which remains an unending, EBITDA-eating operating expense.
That becomes a bigger issue in slowdowns— tough to cut—or when you try to sell your business. Ever try to migrate from one SaaS solution to a rival? It’s excruciating—deliberately so—because you house none of the data. Expect to spend big on a consultant to make it happen. It also has a tendency to grow.
What starts as a reasonable cost for a small company can be a big deal a decade down the line. Even “free” productivity software like Google’s suite of products can pull you on to an escalator of costs thanks to storage milestones that require you to spend more—or risk stalling your operations.
How does uncontrolled SaaS spend spread?
Uncontrolled SaaS spend snowballs when teams buy tools independently and renew them by default—while a lack of visibility hides duplicate or idle licenses.
In traditional workplaces, the IT department has full ownership of new software that’s introduced. This centralized approach means that adopting a new tool can go through the long process of validation, approval, introduction, and most likely will be long, tedious, and not-at-all transparent.
In modern companies, employees embrace SaaS subscriptions to access a wide range of specialized tools, including:
- Communication tools
- Text and video editors
- Software development tools
Types of excess SaaS spend
Excess SaaS costs usually show up in four common patterns:
- Extra Licenses (Shelfware):Â Often, contracts stipulate several licenses. But when they do not, additional users can add up, and make ideal cost-cutting targets.
- Inactive Users (Including Former Employees):Â Some people never use the software purchased. And if IT does not manage the app, some employees could need to be de-provisioned. This even happens sometimes when an employee has departed months or years ago.
- Duplicate Apps Or Multiple Instances:Some employees or departments decide to get their apps, despite the existence of corporate subscriptions for similar apps. Likewise, sometimes employees start separate accounts for an app that’s already been purchased.
- Unoptimized Licenses And Off-The-Shelf Pricing:Some licenses cost more than others, offering access to more advanced features. But what if not everyone accesses these premium features? Those people should use less expensive licenses. Without visibility into actual application usage, these cases can be hard to find
Controlling SaaS Spend
SaaS management platforms are increasingly becoming essential to manage, govern, and secure SaaS applications. Measuring product adoption by users is critical for SaaS and Cloud companies, as this is the most telling indicator of the value customers are getting from products and services.
- Discover: Identify every SaaS app in use across your organization.
- Audit: Compare licenses paid for vs. licenses actually used.
- Right-size: Remove unused seats and move users to the right license tiers.
- Automate: Standardize provisioning and de-provisioning so access is removed when roles change or employees leave.
- Monitor: Track usage and spend continuously so waste doesn’t creep back in.
SaaS management platforms provide HR and business managers with granular visibility, including:
| Data Type | Scope |
|---|---|
| Usage Metrics | Company-wide or employee-specific |
| Application Examples | Outlook, Skype, Teams |
| Work Environment | In-office or remote tracking |
Once you have that audit in place, a great place to look at is how do you identify or eliminate the above types of excess SaaS spend? For example, a company might find they have subscriptions that they’re still paying for employees that left the company.
Now you have these dormant subscriptions still being paid for every month or even annual basis that have no usage. The SaaS audit can help you identify those by identifying ways to have subscriptions, but if you ask around the company and nobody claims it, that is an excellent way to cut excess spend.
New Pressure to Cut SaaS Costs
The wasted spend on “forgotten” or “no-ones” subscriptions can be eliminated with more real-time monitoring of business spend, one of the critical features of Augmentt. This will make it much easier for you to forecast your company’s spendings and make strategic decisions on how to spend your company’s money on SaaS.
- Track trends
- Review renewals
- Benchmark usage
Still, for most companies, SaaS is simply a part of life now—for good and bad. The trick is to avoid complacency and inertia—the core of the SaaS business model. Make it someone’s job to keep an eye on SaaS spending company-wide. Ask them to watch long-term trends—not just spikes—in costs. Don’t budget for the present; a model for growing usage over a long period of time. And remember, sometimes the best “door lock solution” for your company is just a lock on the door.
Frequently asked questions
How does uncontrolled SaaS spend spread?
Uncontrolled SaaS spend typically spreads when:
- Employees or teams buy tools outside standard procurement or IT review.
- Licenses are not reclaimed when people change roles or leave the company.
- Duplicate tools are purchased across departments for the same use case.
- Renewals happen by default without regular usage and tier checks.
Platforms like Augmentt help by improving visibility into subscriptions and usage so you can find and remove waste faster.
What is SaaS subscription management?
SaaS subscription management is the process of tracking, governing, and optimizing your organization’s software subscriptions so you know what you’re paying for, who is using it, and where you can reduce costs without disrupting work.
How can good subscription management save my company money?
Because up to 30% of annual SaaS spend can be wasted, good subscription management can quickly reduce costs by eliminating unused licenses, removing access for inactive users, consolidating duplicate apps, and right-sizing license tiers. Tools like Augmentt can support this with ongoing monitoring so “forgotten” subscriptions don’t quietly renew.
Which metrics should I track to keep SaaS costs under control?
- License utilization (paid seats vs. active users)
- Inactive users (including former employees)
- Duplicate applications (overlapping tools across teams)
- Spend by application (and, if possible, by department)
- Renewal dates and contract commitments
How often should we audit our SaaS subscriptions?
At a minimum, take a monthly snapshot of subscription usage and spend, and do a focused review at least 60 days before any major renewal so you have time to right-size licenses or renegotiate.
