The Blissfully Guide to SaaS Spend Optimization

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SaaS Spending on the Rise

Updated August, 2019

The growth of Software-as-a-Service (SaaS) has empowered team leaders to choose and purchase the technologies their employees need with minimal (or zero) oversight from an IT department. Clearly, that approach is resonating—the rise of SaaS has been astronomical, with no signs of slowdown. Both SaaS spending and the amount of subscriptions per company are projected to roughly double by 2020, and today, the average SMB spends $20,000 per month on SaaS.

SaaS product Spending and Growth per Company

With so much money pouring into SaaS, it is harder than ever for business and finance leaders to track exactly where that spend is going and forecast it into the future. There is a chronic lack of visibility. Arguably, the right SaaS tools can help scale a business and give its employees what they need to do their best work, but at a certain point in an organization’s life cycle, it becomes difficult to be strategic about SaaS spending, leading to wasted resources.

Even if it doesn’t seem like a serious issue today, uninformed IT spending could amount to over tens of thousands of dollars per month in waste that could have been added to the bottom line or reallocated toward another budget line item (or more effective apps!). Often SaaS spending isn’t completely visible until finance makes it a priority and discovers that the organization is being wasteful with dozens of un-or underused apps.

We’ll show you how to be proactive and strategic about SaaS spending as well as how to implement a more collaborative approach to IT at your organization.

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Changing IT = Lack of Visibility

Spend vs. Usage

If you rewound to a decade ago, you’d see a very different picture of IT than today. Centralized IT departments were responsible for sourcing hardware and software, and managing vendor relationships using a companywide IT budget. If finance ever had a question about IT spending, there was usually one person to ask—the IT lead or CIO. And, if a team leader needed certain software, the request would be managed by that same person or their team.

SaaS has given all employees access to these levers, and  made it a lot more difficult for IT to control its own budget across the organization. Today, team leaders are sourcing their own IT solutions and budgeting for them by expensing it with their credit cards, or treating it as a line item on their individual team budgets. This process redistributes IT spending and isolates IT’s knowledge IT. Everyone owns SaaS, but there’s no clear-cut stakeholder responsible for the overall IT budget.

When an organization has financial software such as Netsuite providing visibility into spending, costs for individual SaaS applications are  often rolled up into the greater software budget and granular data is lost.

All of this begs the question: if everyone owns SaaS, is it up to finance to manage the budgetary chaos?

Uncovering The Issues

In many cases, a first finance hire or someone assigned to dig into SaaS spending throws light on the dark corners of SaaS spending across an organization.

After this finance hire discovers an IT spending issue, one of two things usually happens:

IT, operations, or office management are empowered to solve the problem

IT, operations, or office management are empowered to solve the problem. In this case, finance will assign ownership of the issue to a single person or small team, who reports to finance on whether the organization is being responsible and strategic with app spending and utilization. This same person may find the issue of SaaS management runs much deeper than spending alone, into other areas including compliance, security, and employee onboarding and offboarding.

Finance tries to solve the problem themselves

Finance tries to solve the problem themselves. In some scenarios, finance will drive a conversation with individual team managers on the apps they’re using, asking questions about not only why these apps are in place,  but also how they’re being used, and by whom.

In either case, a lack of easy visibility between the team leaders buying SaaS and the stakeholders trying to solve the spending problem can lead to a lot of frustration. Manual processes such as repetitive one-on-one meetings and spreadsheets are the default methods used to discover and track information, which can become quickly out of date. Ultimately, you can’t improve what you can’t see, and a lot of time can be lost in the process of attempting to gain visibility into SaaS.

Company Stage Plays a Role in IT Approach

The issue of siloed IT and a lack of visibility can affect companies differently, depending on their size and stage of growth. Here are some examples of the pain points and IT maturity models at different phases of growth, as you move towards Collaborative IT.
SaaS/Cloud IT Maturity

Early-stage: In a startup phase, many organizations tend to be cost sensitive, so the investment in SaaS is relatively low. Employees are typically making their own SaaS purchases, but the small size makes visibility simple.. Whether you can shout across the room or send someone a Slack message, it’s relatively easy to maintain a baseline level of knowledge about the apps that are used company-wide.


At this stage, the IT approach is very informal, with spend optimization (and many decisions) taking place on an ad-hoc basis. The issue of IT spending is less critical, as the number of employees lends itself to increased visibility.

One important way to improve an informal IT policy is to implement rudimentary policies around licensing, vendor, and software management. By developing these processes now, at this early stage, you will be able to quickly and easily monitor how they function, make quick changes, and most importantly, have them integrated into company culture from the start. It’s easier to have good habits than to start them, so start them now when you’re small and manageable.

Scale: Organizations that are in the midst of scaling are inherently less sensitive to cost, and in many cases are willing to do whatever it takes to meet aggressive growth goals in revenue, user acquisition, or other benchmarks set out by company boards and leadership teams. In this phase, visibility begins to get lost, and spending on SaaS can grow exponentially without any real strategy behind why or how. 


As a business grows, teams require a more rigorous IT approach. Processes that worked at 10-30 employees will break when applied to 80. As your team grows and matures, different processes become more important. The speed of change is the biggest difficulty. As departments grow, the tools they need will change, Some tools will be used long-term, some will be short-term solutions, but no matter what you need a system that is flexible enough to handle both and the speed of change in a scaling organization. Security becomes important as your business will be going through audits and needs a documentation trail. License management also becomes more prominent as a company grows. Having these processes solidified ensures that your SaaS spending and costs, remain under control as you grow.


Enterprise: At maturity, organizations are controlling IT spend in a variety of ways. They typically have someone in IT/Tech Operations, as well as someone in finance focused on the problem. These employees are trying to find and eliminate overlapping, unused, and/or underused apps. This is where a lot of cleanup happens, leaving stakeholders with a big job to do.
With this many employees license management becomes very complex. Companies of this size often have a variety of different licenses with different levels of access across the same product, and need to be able to differentiate them in terms of spend and usage.

At this stage, a dedicated IT manager and a centralized approach is most common. IT owns SaaS spending optimization and reports to finance on spend across the entire organization. Unlike informal IT, command & control IT has centralized processes around procurement and approval and IT is the primary gatekeeper to adopting new technology. This is useful for security but can also result in red tape and wait times for new tools. The more open and collaborative the process, the more flexible it can be.

The most salient issues in enterprise IT are surrounding data security. At a large organization, the risk of insider threats are numerous and the potential losses are large, so it’s necessary to implement processes around software de-provisioning, compliance, and security. This is also a time when decision-making can slow down as the organization grows. Keep an eye on staying flexible and empowering team leaders to get the tools they need without losing any essential visibility, ensuring that you get the best ROI out of your SaaS tools.

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Top Three Issues with SaaS Spend

Regardless of the stakeholder investigating the issue or the company size, we see the same three issues with SaaS spend tend to emerge across the board.

1. Unused/underused licenses and forgotten subscriptions: This issue tends to crop up if the billing owner changes and visibility over the app no longer rests with the team leader (often when billing is shifted to finance). For example, the team leader may buy an app in 2017, discover there’s something better in 2018, but continue to pay for the 2017 app, an employee may leave without reassigning their license to a new owner, or, a team leader may sign up for a free trial with a credit card and decide not to subscribe. Meanwhile, the free trial converts automatically to a paid subscription, with the app going unused in the process.

Alternatively, teams could be spending hundreds or thousands of dollars a month on apps that aren’t used to their full potential. Maybe there are one or two power-users on the team, and the rest of the team isn’t using the app at all. Or, only a third of the app’s functionality is being used, meaning that the team could drop down a subscription tier or two. In some cases, a better app altogether could be found to meet more team members’ needs.

Having a record of all invoices along with any usage notes is important to solving this issue.

2. Redundant Apps: Sometimes, teams are using multiple apps that have overlapping functionality.  For example, a sales manager purchases videoconferencing licenses, but the individual reps are using free apps because they’re simpler or better. In other cases, product functionality changes, making certain tools suddenly redundant. SaaS tools are rarely static. Or the CRM software you are using gets the ability to manage email communications added to it. In some cases, paid apps can be eliminated altogether in favor of free software, allowing budget to be reallocated elsewhere.

3. Renewal errors: The moment of contract renewal is an important chance to review your business’s relationship with a SaaS vendor, but for many organizations it comes as an afterthought. Key to a smart renewal process is full visibility. Your businesses need to know when a renewal is coming up and be able to evaluate their usage of the product with enough time to make an informed decision. It’s not uncommon for organizations to receive a renewal warning from a vendor just a week before it occurs, leaving them without the time needed to find other solutions and migrate to them before having to recommit to a contract.

How Companies Spend on SaaS

Optimizing SaaS Spend

Optimizing SaaS spend and instituting collaborative IT sounds great, but where do you start? Getting proactive about app spending starts with having the right people and processes in place. 

Step 1: Identify the Stakeholders

Since the days of IT having total authority over software are over, a more collaborative IT approach will ensure that the right people have visibility into the organization’s SaaS tools. This collaborative IT team should be comprised of the following people:

  • Team Leaders: Include the leaders of any team in the organization that is using SaaS.
  • Budget Stakeholder(s): This person’s main goal is to manage the overall IT budget, and could fall under any of the following roles depending on your organization—such as finance, IT, operations, or office management.
  • Security and Compliance Stakeholder(s): If your organization has a CISO or security lead, they would usually handle this task, but if not, engineering, IT, or senior leadership may assume the responsibility here.
  • Employee Stakeholder(s): An HR team lead, office manager, or operations manager may handle getting employees onboarded and offboarded to and from the right technologies when they join or leave the organization.

The outcomes of the assessments detailed in Step 2 should be shared with all members of the collaborative IT team to ensure visibility across the board. In organizations where there are no finance or IT roles, team leaders can allocate a budget stakeholder to manage the overall SaaS spend. 

Step 2: Check Your Work with Regular Evaluations

Now that you have the right team in place, it’s important to establish a process to regularly evaluate areas like SaaS budget, employee usage, and security. We break it down in the checklist below with an annual, quarterly, and monthly process for each responsible stakeholder on the collaborative IT team.

Annually

  • Budget Stakeholder: Create an annual budget forecast report based on utilization data (including which apps people are using and how).
  • Team Leaders: Share feedback on the apps employees are using most, or where there may be needs or gaps. This feedback can be gathered  in the form of a survey or a meeting, and given to the budget stakeholder.

Quarterly

  • Budget Stakeholder: Review actual spending vs. the annual budget forecast, and make adjustments based on whether teams are over or under the budget.
  • Team Leaders: Check if  there are any redundant apps on their teams, with an eye toward opportunities to eliminate apps with repeat functionality.
  • App Renewals:Both quarterly and monthly, it’s a good idea to stay aware of what app renewals are upcoming. The lead time will allow you leeway to make informed decisions.
  • Check for License Usage: And reassign any unused licenses as necessary.

Monthly

  • Budget Stakeholder: Check in on vendor invoices to ensure there are no anomalies, or that the services being paid for are regularly used.
  • Team Leaders: Conduct an app review, specifically evaluating unused or underused apps or licenses across teams.
  • Security and Compliance Stakeholder: Ensure that new vendors are meeting compliance and security requirements.
  • Employee Stakeholder: Hold onboarding sessions for new employees, giving them an overview of the tools they need to do their jobs. Offboard employees from technology that have left the organization on their last day.
  • Per Team Spending: Review each team’s monthly spending. This is valuable business data and will inform your future purchases.
  • App Renewals: As above.

Step 3: Establish a System of Record



With so much information to track and so many moving parts, the de facto standard is a spreadsheet. It’s a simple, low-lift solution that keeps all the necessary information visible in one place. But while a spreadsheet is a good start, the amount of shifting variables and the speed at which SaaS moves makes maintaining a spreadsheet impossible in the long-term. The best solution is an automated SaaS management platform.

A good SaaS system of record involves data that must be gathered from every department and from potentially hundreds of apps. A SaaS management platform with strong integrations and that pulls from various sources is another way to establish a clear, up-to-date record.

Establishing a process like the one above becomes much simpler when you have a platform in place to automate once-manual processes, such as app evaluations, budget forecasting, security and compliance checks, and onboarding / offboarding processes. 

The goal is to get your people, apps, and spending optimized in a single place, with real-time data about all your apps so teams don’t need to struggle to keep SaaS in check. 

Step 4: Set Up Workflows and Automations

Developing a trustworthy system of record gets you the data you need, but your organization isn’t standing still. Every day the data is changing and your system of record needs to keep up. Developing clear, established workflows that can be executed again and again for each task (onboarding, offboarding, vendor approval, etc.) is how your business maintains that system of record. And, when dealing with so many moving parts, anything that can be automated should be. All of the above works best when you can rely on systems and guardrails to guide your employees.

And, for more help managing SaaS, see our SaaS Management Guide.

How Blissfully Can Help

Blissfully gives you the visibility and tools to take control of SaaS across your organization. Featuring automated SaaS discovery, Employee on and offboarding, real-time data & insights into your tools, and customizable workflows, Blissfully provides both a system of record, and a central location for SaaS tasks and workflows.

Download the SaaS Spend Optimization Guide

Receive a free PDF eBook of the entire SaaS Spend Optimization Guide.