How do companies keep track of the thousands of dollars they spend on dozens of software contracts every year?
Without using spend management software, they don’t: almost one third of SaaS spend is wasted.
Looking to avoid that waste for your own company?
Here are 12 questions that a spend management platform can (and should) help you answer about your software consumption – so you can spend less money while getting more value out of your IT budget.
What is SaaS spend management?
SaaS spend management refers to the processes involved with purchasing, licensing, renewing, and canceling SaaS subscription contracts. When you use spend management software, you can view a single dashboard that shows all of your software subscriptions and gives you full visibility into how much you’re spending, who’s using each tool, and if there are unused licenses.
From a financial perspective, spend management practices help companies purchase software that are in the best interest of the bottom line, while also improving efficiency. By organizing and tracking your software use, you can gain insight into which vendors are helping your business the most and then strengthen those relationships.
12 questions your spend management software should answer
1. How much money are we spending on SaaS?
Spend management software gives your company visibility into your entire SaaS tech stack and serves as a record of all of your vendors, contracts, and licenses.
You might be surprised at how much you’re really spending. It’s important to choose a vendor that can show you historical data trends. Graphs and charts help you continue to stay on top of your annual budget as new tools are adopted.
2. Are we getting the most out of our tools?
There are three measurements that spend management software tracks that can tell you if you’re using everything your applications have to offer. If no one is logging into a tool or half the features aren’t being used, you’ll know.
- Licenses: Many software subscription services charge a monthly license fee, sometimes attached to an annual contract. Your software should tell you how many licenses you are paying for in each application and the per user per month pricing.
- User logins: Keep track of how many users are logging into each tool on a regular basis and which users aren’t using their licenses at all. If you’re paying for licenses and they are currently unassigned, find out which teams need more user access. (Side note: logins are one indicator, but often aren’t enough to signal usage. Check out our Zoom optimization guide for more info.)
- Features: Some software providers bundle their features into pricing tiers. The starter tier will have basic features while the Enterprise tier has every feature the software has to offer. If you’re paying for additional functionality, spend management software can help you track the features that your users are actually using.
3. Are we wasting money on tools no one is using?
Sometimes we buy software with high hopes about how it will improve our business. Unfortunately, some of this software becomes shelfware, applications that were never deployed or were abandoned by the business.
This can happen when the person who’s responsible for the contract leaves the company and the contract is never reassigned to a new owner. It’s wasted money and takes up budget that can be used elsewhere.
Some shelfware comes from shadow IT, software purchased independently, without the knowledge of your IT department. Perhaps someone entered their company credit card into a free trial and forgot about it. You may even find multiple accounts with the same vendor. Your spend management software can identify these tools. This is a quick way to cut down on spend.
4. When will our contracts renew?
The average small business has 102 different applications that renew each year. By visualizing your renewal dates in a central calendar, you can plan ahead and make any changes you need before your auto-renew kicks in – and you’re locked into another annual commitment.
Spend management software can automate renewal approvals, help you cancel contracts before deadlines, and provide you the insight to adjust your licenses, address low usage, and schedule a meeting with your vendor’s sales rep.
5. Are we accounting for employee churn?
Unused user licenses are also a form of wasted money. When someone leaves the company, their license needs to be reassigned to another team member. One way to make sure you’re using all licenses is to rebalance the way your licenses are distributed.
For example, if your frontend engineers have a contract for 20 licenses but only use 10, and your backend engineers have a contract for 10 licenses, but are rapidly hiring, you can simply reallocate ten licenses to the backend team without spending or wasting money.
6. Who in our organization has purchased new applications since our last SaaS tool audit?
Wouldn’t it be nice if you could organize all of your SaaS contracts, spend, and applications once and never have to collect that information again? Sure would. Unfortunately, that’s not realistic since growing companies change frequently. Identify new tools that you’ve procured since your last tool audit, especially if they were purchased outside of your governance processes.
7. Does the tool tag invoices for reconciliation?
Tracking SaaS costs and usage is one thing; reconciling them with accounting is another.
Be sure to use a tool that allows you to tag individual invoices by category or business unit so everything remains clearly categorized as you go. This feature may seem simple, but it will help you understand how much each team is spending in specific SaaS categories and reflect all SaaS payments, whether it’s via credit card, bank transfer, or something else.
8. Are there other opportunities to save more money?
Downgrades are another way to save money. When you look at feature and license use, see if you’ve purchased a “sports car” when you really just need a “sedan.” Some features may be nice to have but if no one is using them, or needs them, you can bump down your license tier at your renewal date.
9. Do our SaaS tools meet our IT security standards?
Spend management software can help you understand the financial and legal risks that come with each application. If your company handles healthcare data, you must use software that’s HIPAA compliant. If you process credit card information, your software must be PCI compliant.
When people purchase new apps without your IT security manager’s oversight, you open your company up to risks like data breaches. A central view of all your tools means that one piece of software won’t slip through the cracks.
10. Who is buying software at our company—and should they be allowed to?
By putting a SaaS spend governance plan in place, managed within your spend management platform, you limit the number of people that are allowed to purchase new software on behalf of your company. If an employee purchases a tool without permission, your spend management software can identify this, allowing your IT, finance, and legal team to remedy the situation immediately.
11. How can we identify opportunities to negotiate price?
The best time to negotiate your existing licensing subscriptions is at your renewal date. By collecting data on usage metrics like user logins and feature use, you can come to the renewal table with the insights you need to ask for better pricing or additional services.
For example, if you have 20 licenses with a vendor, and everyone is using it sparingly, this is a chance to negotiate for free training or support packages to improve your engagement with the software. If you know you will need to double your licenses in the coming year, use that information to negotiate a better bulk rate at your renewal.
12. Is there a way to avoid free product trials converting to paid accounts without our knowledge?
Lots of SaaS services offer free short term trials. If you have to enter your credit card information to start testing the software, it’s critical that you track the cancelation deadline. You might not get a notification from the vendor when the free trial automatically converts to a paid account.
Trustworthy vendors don’t bank on you forgetting about deadlines so they can lock you into an agreement for months, or even a full year. Before activating a trial, read through the terms and conditions to see what happens when the trial is complete.
The takeaway: You need to be able to answer these questions
It’s becoming increasingly difficult to manage all of the software applications that businesses use today.
With the rapid increase in SaaS adoption over the last few years, it’ll soon be impossible to oversee your SaaS spend without a spend management tool. To learn more about how Quolum can help you with purchasing and managing your SaaS tools, check out our spend management solution.