Read more about SaaS optimization: How to Stop Being a Target of Vendor Upsizing

SaaS License Optimization: IT Asset Management for a New Age

7 min read Mansoor Ahmed

Getting the right technology for every employee is easy with SaaS, but what about getting rid of that technology? Adding seats to software subscriptions is so easy that they can eventually start to pile up, and every unnecessary license is one small bite out of the bottom line. That’s where SaaS license optimization comes in.

As roles, requirements, and permissions change, you find yourself tasked with the continuous monitoring and management of employees’ SaaS licenses, which seem to multiply before your eyes. Even the average small business uses at least 137 different apps, and experts estimate that companies used 10 times as many SaaS products in 2020 as they did in 2015. While all of this SaaS software has made businesses more streamline and productive, it has also ballooned the number of licenses that are purchased—and that ultimately go unused. The challenge ahead for IT managers is to figure out new ways to manage and optimize all those licenses… without losing their minds.

What Is SaaS License Optimization?

SaaS license optimization is the practice of ensuring that an organization’s software licenses are actually providing value. This includes not only deciding which subscriptions to cancel, but which can be downsized or renegotiated. 

Put another way: Software licenses can be thought of similarly to shirt sizes. Depending on the features and the number of seats your organization needs, you may be able to select a small, medium, or large subscription plan. As with shirts, choosing the correct size makes everything more comfortable. With too little capability, people might turn to shadow IT, but overpaying for excessive plans is a waste of money.

SaaS Optimization Is in the Eye of the Beholder

There are multiple groups of stakeholders involved in the process of SaaS license management, each with its own objectives and values:

  • For employees, it is important to have the best available products to amplify productivity as much as possible. While SaaS subscriptions make it easy to obtain this software, it also leads to “software sprawl” and shadow IT.
  • For finance, it is important to find cost-effective solutions and maximize returns. This often means finding the lowest cost tools within a specific category; but when it comes to subscriptions, it also means “right-sizing” the number of licenses and paid features.
  • For IT teams, the focus is on compliance and security. This means that things like app discovery and user login tracking are important.

Refined SaaS license management efforts take the needs of every stakeholder into account and ensure responsible software spending as they enhance the use of licenses.

Your IT team probably wants a single source of truth for software license compliance, which could require a SaaS management solution with invoice and contract processing. The finance team is also likely to appreciate having a single repository for all of your SaaS invoices. If they can set spend controls and track app consumption as they attempt to maximize controls, that’s even better.

5 Tips for SaaS License Optimization and Management

SaaS management is an ongoing process that requires consistent tracking, measurement, and analysis. Even so, there are steps to follow and mindsets to adopt when you want to ensure you have the appropriate software licenses.

1. Think in Terms of “SaaS Supply Chain”

SaaS license optimization has a lot in common with the process of streamlining a traditional supply chain. The primary goals include managing risk, gaining resilience, and ultimately achieving business goals. Optimizing the supply of SaaS licenses allows businesses to assemble interlinked software stacks that achieve their purposes effectively and eliminate wasted spending. As the consumption of software as a service grows, lean SaaS supply chains empower effective scaling.

2. Identify Redundant Licenses and Spending

Trim the fat by identifying which applications serve the same purpose. The best SaaS management tools can organize different products into categories, which helps identify redundant or unnecessary spending. Once you can have visibility into your software licenses by category, it immediately becomes apparent when your organization has multiple licenses serving the same purpose. For example, if you have enterprise licenses to three video conferencing apps and two email automation apps, you have found easy opportunities to eliminate waste from your technological supply chain.

3. Compare Software in Terms of ROI (Not Budget/Cost)

Since the subscription model requires companies to continue paying for their licenses on a recurring basis, it is important to approach SaaS license optimization from the finance perspective as well as the IT perspective. Business leaders with finance backgrounds often weigh their software investments against ROI instead of against the budget. That is, instead of simply determining the maximum dollar amount available for software licenses, consider how much ROI each investment produces to determine if it is worth the cost. 

For example, a more sophisticated piece of help desk software might be twice the cost of a competitor; but if it helps route tickets and gets them resolved more quickly, the savings and customer service could well justify the higher price tag.

4. Stop Paying for Shelfware

SaaS keeps getting delivered on an ongoing basis, whether or not you are still consuming it. And so, while SaaS has definite advantages in terms of new user onboarding, integrations with other SaaS products, scalability, and so on, the downside is that the payments are almost too convenient. Software that goes unused or gets abandoned, but that a company continues to pay for, is often referred to as “shelfware.”  Industry experts have estimated that as many as 25% of the SaaS products purchased are never used. Measuring consumption exposes unused licenses and applications.

One argument for unused licenses is that they are needed as a company grows, to make onboarding easier. But there is little benefit to keeping extra SaaS licenses on hand; it is typically possible to buy more and get instant access on an as-needed basis. True, the strategy of pre-paying for a set of unprovisioned licenses made sense when on-premises software was the norm, as it made onboarding quicker, and $100 spent today was the same as $100 spent 3 months from now. But with a subscription model, every unprovisioned software license represents unnecessary spend that generates no ROI.

5. Take a Deeper Look at Features to Rightsize Subscriptions

Cancellation is not the only option. If a subscription cannot be completely cancelled, it might still be downsized. Many SaaS vendors offer flexible plans with multiple options for feature sets as well as the number of seats. If the marketing team uses email automation software to send newsletters, but none of the other departments do, it likely makes more sense to buy a plan fit for a small team instead of one for the entire enterprise. If only two people on the team actually use the software, the plan can be downsized even further. There are also opportunities to reduce SaaS license costs by eliminating unnecessary features.

Enterprise SaaS management products offer the ability to track spend and utilization at a more granular level by establishing native connections with apps. These integrations help receive insights that go all the way down to how specific features get utilized throughout the organization. Discover which employees have premium licenses with access to features they never use. If only one or two employees are faced with language barriers, for example, there is no need to pay for the real-time translation add-on from Webex for anyone else. 

Where to Start With SaaS License Management

If your organization has a small number of applications and licenses, it is possible to manage them manually. A spreadsheet with applications and monthly spend, reconciled against a company expense card, might be all you need.

Once an organization gets beyond a dozen applications and a handful of employees, are more automated solution might be in order. Even smaller companies who have turned to these tools have come to learn that, quite often, they are spending much more than they believed or could see through casual observation.

We created Quolum to serve exactly those companies, no matter what their size. Our goal is to give companies impeccable control of their software spending and simplify SaaS license optimization. We offer multiple ways to discover SaaS apps and then visualize both spending and consumption. As you refine your approach to software license management, you can build and leverage custom rules on top of the included features. Reach out to us whenever you are ready to learn more, or when you want to experience our approach to SaaS management for yourself.

Feature image: Network engineer in a data center

About Quolum

Quolum is a full-stack SaaS Spend Management product. Its data-driven renewals, spend controls, license monitoring, contract oversight, and a buying concierge helps companies save millions of dollars in spending.
Quolum is ideal for companies that have hundreds of SaaS tools. Finance, Procurement, IT Teams, and departmental spend owners use Quolum to help manage SaaS sprawl and remove shelf-ware.
Talk to us to get a demo of the product. You can start seeing savings in just a few weeks. No spreadsheets are required.