Explaining SaaS Spend Management: How It Can Help You Cut Spending
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Explaining SaaS Spend Management: How It Can Help You Cut Spending

Erik Kaminski
Erik Kaminski

Erik Kaminski

Software as a service, commonly known as SaaS is a term used to describe cloud-delivered business applications. Namely, organizations use cloud computing to streamline some of their business functions and avoid deploying apps on-premises.

SaaS tools are not purchased but rather hired from a cloud service provider. Companies subscribe to the service they need and pay for it as long as they are using it. This is why the costs for SaaS tools need to be managed and optimized to be cost-effective.

Defining SaaS Spend Management

In simplest possible terms, SaaS spend management is the practice of controlling the expenditures on SaaS tools. The processes in SaaS spend management include:

• Identifying the SaaS tools in your organization.

• Fitting the number of licenses and permissions to be cost-effective.

Reducing unplanned expenditures is most commonly associated with renewals.

Choosing the perfect plan for the SaaS applications your organization subscribes to.

In the past, the IT department was the one that would make the decisions about the tools the organization subscribes to. Nowadays, in many organizations employees from other departments subscribe to SaaS tools without even consulting with IT.

For example, the IT department recommends using Microsoft Teams and gets the license for it. However, the marketing team prefers using Slack and subscribes to it as well. This leads to a wastage of funds for multiple SaaS with the same functionalities that serve the same purpose.

The process of spend management begins with eliminating wastage. No organization should subscribe to multiple SaaS tools when only one is enough to get the job done. Despite duplicates, there are tons of other ways SaaS wastage is created.

To completely get rid of it, you have to clearly understand all of the processes (both hidden and visible) going on in your organization. You need to know which tools are used and by whom, so you’d know if they bring any additional value to your company.

Nonetheless, SaaS spend management provides other benefits in addition to reducing costs. Compliance is another segment that can greatly be improved by it. By decreasing the number of SaaS tools your organization is using, you make it much easier for a compliance audit to be performed.

Furthermore, the security of your organization can benefit from it as well. When a company is using too many applications to count and keep track of, it is easier to forget to remove the access of former employees. Thus, the company is at risk of a breach.

Biggest Spending Problems - How SaaS Can Help

There are three main challenges that anyone who wants to incorporate SaaS spend management in their organization faces.

• Lack of visibility.

Gathering data and analytics.

• Optimization.

If you have never managed the spending for your SaaS tools before, it can be quite a cumbersome task to even just get started. First, you will need to find out how many and which SaaS tools each and every one of your employees have subscribed to. Remember, you need to identify the tools they are not currently using, but still, have the license for.

Then, you need to perform an analysis and evaluate the usage of all of those SaaS tools. You must decide which ones you want to keep and which ones are redundant and can be canceled. To optimize the cost-effectiveness of your SaaS tools, you will also need to choose the perfect plans that fit the usage of your organization.

Without the utilization of SaaS spend management tools, this task is almost impossible. For companies that have up to 25 employees, spreadsheets might do the trick. Larger organizations, however, require a more modern approach. SaaS spend management is an ongoing process, meaning the spreadsheets will need to be updated every time a new SaaS tool has been subscribed to.

Another thing that SaaS spend management tools can help with is analyzing the value factor that SaaS tools bring to your company. They can allow you to incorporate metrics that will clearly present the usefulness of the tools and how much your employees are utilizing them.

Finally, SaaS spend management tools can alert you before a SaaS tool is being renewed. This way you won’t have to worry about purchasing a license you no longer have a need for.

Conclusion: How to Optimize Your Spend Management

At the end of the day, you have to spend money to make money. Interestingly enough, the best way to reduce the costs of SaaS tools is to subscribe to another SaaS tool. SaaS spend management solutions are an expenditure you can afford to invest in.

You can expect to see an impressive return simply by optimizing the costs of all the redundant tools your employees are using. Besides, the tool will remain useful by not allowing the continuation of useless apps and keeping your organization waste-free.

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