After payroll, software is typically a company’s second biggest expense. Finding ways to reduce their costs, therefore, sits high on every finance team’s agenda.
What’s more, the costs associated with software purchasing are trending upwards: on average, companies are spending 17.9% more on subscriptions than they did a year ago. Unsurprisingly, as costs rise, so does waste. In fact, data from Cledara shows that 27% of software spend is wasted on unused, forgotten, or duplicate subscriptions.
These numbers might send a shiver down your spine, but for savvy finance teams it’s actually an opportunity: Optimizing your software spend is a simple strategy to reduce your costs. Here’s how to get started.
What is SaaS?
We’ll reference the term throughout this blog, so before we jump in, what is SaaS?
Software as a Service (SaaS) refers to software programs you can access over the internet—from your HR tool to your accounting system. In the past, you had to purchase and install software on your computer. Today, using SaaS tools, you can easily access software remotely by paying a monthly or annual subscription.
SaaS management is the practice of managing all these software applications in a company—ensuring that subscriptions are good value for money, and that login details are well-organized.
14 Ways to Reduce Software Costs**
The proliferation of SaaS tools has bred best practices to manage SaaS sprawl—the phenomenon where a company has so many subscriptions, that employees lose track of them.
Here’s a detailed rundown of the ways you can take control of your software spend.
1. Audit your tech stack
Start with a thorough examination of all your company’s software subscriptions. This means cataloging all SaaS tools within your organization, along with their licenses, pricing, and usage information.
Having a full inventory of your tech stack makes it easier to spot where you can cut tools, whether that’s by eliminating redundancies, feature overlaps, or inefficiencies.
You can conduct your inventory audit manually, by making a note of subscriptions in a spreadsheet (here’s a handy template). However, if you’re taking this approach, you’ll need to make regular updates to account for new tools, employee turnover, renewals, and usage patterns.
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2. Track down shadow IT
A software inventory is a solid starting point to reducing costs. But it won’t give you the full picture of software subscription usage within your organisation. For that, you’ll also need to uncover shadow IT.
Shadow IT is the use of unapproved software applications within your company. It’s easy for employees to sign up for new subscriptions without asking the IT or security team about them first, so shadow IT can develop into an expensive problem.
Frustratingly, identifying hidden costs from shadow IT can be labor-intensive. If you’re doing this task manually, you may need to trawl through expense reports and chase your colleagues for invoices. Even after all this work, shadow SaaS can still slip through the cracks.
The simplest option to streamline this task is to use a SaaS management tool. These can uncover, monitor, and track instances of shadow IT in real time. Case in point: Jiminny’s finance team used Cledara to capture an extra 15% of subscriptions the business was paying for, but weren’t aware of. However you identify shadow IT, this is a vital step to avoid unnecessary costs.
3. Use a dashboard to manage software subscriptions
We’ve already mentioned SaaS management platforms, so let’s take a closer look.
Many unnecessary software subscription costs stem from the same root problem: a lack of visibility around which software your team uses. Purpose-built SaaS management tools like Cledara can solve this problem, helping you discover, track, and manage software expenses through a centralized dashboard.
This gives you:
- Visibility over your team's software usage—so you can see whether you’re paying for tools that aren’t being used, or tools that have similar functions.
- Real-time insights on your tech stack including alerts for renewals, and subscription optimization based on actual usage.
- A single place to manage subscriptions, cancellations, and renewals.
4. Identify who owns software subscriptions
To account for all your software subscriptions costs, you need to know who is responsible for signing off the budget for each tool. Enlist the help of team leaders to manually identify subscription owners by checking corporate card statements, or sharing spreadsheets where they track their department’s spend.
Unfortunately, with a reported 82% of SaaS spend owned outside of IT, this can be like herding cats. SaaS management tools solve this problem by giving you a comprehensive real-time view of who owns every subscription.
5. Cancel unused and duplicate subscriptions
A combination of shadow IT, rapid growth, and a lack of oversight means it’s common for companies to have two or more of the same subscription. Remember, over a quarter of SaaS spend is wasted.
Unused subscriptions are another silent budget drain. Subscriptions may lay unused for various reasons. A forgotten free trial has rolled on, employees have moved on, or teams have found a shiny new toy. When subscriptions are rarely used it’s important to cancel them prior to renewals and being locked into another payment cycle.
6. Regularly review licenses and seats
Make time to periodically review the number of licenses and seats in use on your software subscriptions. If you’re paying for a tool you still need, but you have fewer employees using it, you can adjust seats to lower costs.
Unused seats can easily mount up, particularly in high-turnover teams like sales. When a LinkedIn premium license alone costs ~$80 per seat, it pays to be vigilant on this.
After the team at Impala Studios implemented a SaaS management platform, they realized they were overspending by $10,000 on duplicate software and extra seats they didn’t use.
7. Cap cards with a maximum spend
Virtual cards empower you to be proactive and take control of your spend. If you have the option to do this easily, put every new software subscription on a different virtual card.
With Cledara, for example, every software subscription is automatically assigned a unique virtual card. You can charge each card with the exact amount you need to pay for a tool, making it easy to cap spend.
You get peace of mind knowing there’s no need to worry about compromised cards. What’s more, you can cancel subscriptions with a single click. It’s a game-changer for controlling software subscriptions costs.
8. Consolidate tools and platforms
93% of CXOs say they’d like to consolidate SaaS vendors as a way to reduce subscriptions and control SaaS expenditure.
Along with removing redundant software, you should identify versatile technology that combines the functionality of multiple tools in a single platform. This strategic move not only cuts costs, but simplifies SaaS management and improves security.
What3words Financial Controller, Charlie Maynard, successfully undertook this process with Cledara. “We’ve reduced our software spend by over 10% because we have caught a lot of subscriptions that did the same thing and we don’t need anymore.”
9. Implement lightweight approvals
If you have no visibility over your SaaS purchasing, you may have to wait until budget reporting reason to spot unexpected or unauthorized purchases.
To proactively nip this in the bud, implement a lightweight approval flow into the software purchasing process—make it easy for employees to request new tools, and get them approved by Finance and IT.
This isn’t about Finance deciding which tools teams need. Instead, it’s a simple way to maintain control and oversight of your spend, while empowering budget owners to pick the software they want.
10. Use benchmarking
Periodically benchmarking software costs against industry standards will help identify potential cost savings.
Benchmarking tools are a simple way to ensure your expenses are in-line with similar companies in your sector.
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If you discover you’re paying above the market rate, it’s time to drop your software supplier an email…
11. Negotiate with vendors
Software vendors are loath to lose business so the option to negotiate your SaaS agreement is usually on the table. Explore volume discounts, key features, longer-term contracts, and customized packages tailored to your specific needs.
Using benchmarking to come into negotiations with data to support your case increases the likelihood you’ll be able to cut a deal.
12. Track renewals
Automatic renewals are a budget killer. It pays to regularly review software renewals, or use Saas subscription automation to set up reminders.
By keeping tabs on contract renewals you can proactively contact vendors to renegotiate, upgrade, downgrade, or cancel your subscription as appropriate before you’re charged.
13. Implement SaaS onboarding and offboarding
Employees coming and going is a lesser-considered but hefty SaaS cost. Over the course of their employment, your team will each sign up to multiple SaaS tools. Although a number of these will likely be authorized tools, some may be unaccounted-for shadow IT.
Once an employee has left, it’s even more difficult to track down and cancel these tools. Create a process to regularly review and terminate accounts for former employees, or use a platform with built-in onboarding and offboarding.
14. Breed better SaaS culture
Often, employees aren’t fully aware of the software at their disposal. This leads to unnecessary purchases, or underused tools your company could be making more of. Just by increasing visibility of the software subscriptions available in your organization you can create immediate wins––both in terms of savings and productivity.
Company-wide visibility and accountability over who owns a subscription ultimately creates a more responsible culture around software usage, helping reduce your costs.
Take Control of Your SaaS Costs**
SaaS tools empower every team in your company to do better work. Aggressively cutting your software subscriptions to reduce costs would be counterproductive.
But ignoring creeping subscription spend will also damage your business. Especially when there are practical measures you can take today to reduce SaaS waste and costs.
Follow the steps outlined in this blog post and you’ll quickly trim excess costs, while also gaining long-term visibility and control over your company’s future SaaS spending.
