Scaling a business is incredibly challenging. Increasing headcount and customers equally is exciting, but it comes with lots of hurdles to clear. If you’re like most companies, software is absolutely critical to unlocking scale.
94% of organizations use cloud-based SaaS solutions. While SaaS is great for managing vast amounts of data and automating tasks, there’s a common misconception in most businesses about how to build the stack: the more apps, the better.
On average, companies are running around 34 cloud SaaS apps at once. Talk about “clouded” judgment. When you live in a “there’s an app for that” culture, you’re bound to have more than a few tools in your arsenal. The problem is by the time you realize your costs are growing, it has already become a monumental chore to renegotiate because your business is reliant on its tools. SaaS management becomes a huge time- and money-suck.
Businesses are wasting as much as 30% of SaaS spend. Another report states businesses waste $11 billion on idle cloud resources (as of 2020).
But things don’t have to be this way for your startup. Let’s review some of the ways you can get out of this clouded mess.
Rightsize Your Heavy Spenders
Which toolsare worth keeping around? Set aside your top 20% spend for now. Review the pricing tier in each of these contracts. Do you need the enterprise tier you’re using? For instance, most companies using Slack can get by with their Plus SKU, but many companies are purchasing Enterprise Grid extraneously. Audit the shortlist of your biggest spend questions. Send a Google Form to the stakeholders who own these contracts and ask them which features are mission-critical. From there, you can start a conversation with your vendor about right-sizing the agreement to its core use cases. You can also use Tropic for this. We have seen customers save 25% across their top vendors with this one-time practice.
Be sure to start the renewal process on these larger contracts at least 60 days in advance of the renewal, or you might be caught flat-footed.
Get Rid of Unused and Underused Licenses and Tools
SaaS tools often fall into the new and shiny camp, but they aren’t always actually useful to everyone on the team. Often, the person that implements the tool forgets all about it when the next new thing comes along, and software is not properly rolled out and becomes obsolete, or the free trial rolls into the paid version and no one even notices.
SaaS creep happens when you’re not careful about who gets a license and for how long. Sure, it makes sense to give a license to the marketing agency you hired to get your Salesforce workflow in line. And now that it is, you no longer need them, and they no longer need that license. Don’t forget to delete their profile and those of employees that are no longer with your business.
Doing basic housekeeping like this keeps your toolset clear of tricky webs that can snag you into a data breach situation. And you won’t have to worry about throwing money away on unused licenses.
Another option is to give a group or department access to SaaS tools under one license. Is there really a need for everyone in marketing to have a Sprout Social license, or can they all access reports via the project manager’s account?
Also, check around for accounts that weren’t logged into within the past month. If an account isn’t used at least weekly, then it’s likely not worth keeping around. Instead, they can ask other employees for what they need. For example, your salespeople don’t need regular access to Adobe Illustrator. They need your CRM tools.
Eliminate Doppleganger SaaS Tools
There are many ways you may end up with “doppelganger” SaaS tools in your tech stack. Some software you adopt and forget about and end up replacing with a very similar or identical platform. And others you may purchase for a unique purpose, without realizing it has the same features as another tool you have.
It’s also common for SaaS overlap to occur across departments. For instance, your marketing team may want a specific email platform, and your salespeople a sales tool that doubles over as a CRM. In this scenario, you have two platforms that you should consolidate into one. Not doing so wastes money and creates data silos that minimize the impact your team would make if they simply committed to a single tool for building their lead database and pipeline.
Keeping an eye out for these problems is usually the role of a procurement department. But if you’re operating without one, then you’re stuck doing things the old-fashioned way. This means manually going over all of your software to find the doppelgangers and eliminate them. And then prevent this issue from recurring when you set out to procure new SaaS tools.
To do this, you’ll have to gather lists from department heads and assess the tools they’re using, who needs them, and why. In a high-growth startup, this usually doesn’t happen as the perceived time cost to properly manage this spend doesn’t even come close to what savings you think you may realize by reducing a seat or two. There are only so many hours in the day, after all. The fact remains that this unmanaged spend ads up and most companies are overpaying across the board as a result. Of course, if this is a bit much, then you can partner with a turnkey solution like Tropic and avoid the headache.
Don’t Forget About that Sneaky Tail
Having unmanaged tail spend is like leaving a window cracked in the winter. You won’t notice right away all the heat you’re losing each day until your bill comes at the end of the month. Your SaaS procurement is subject to the same fate if left unchecked.
For those unfamiliar, tail spend consists of small purchases you make that don’t go through the official procurement process. They are generally too small to be deemed “strategic” and many times are made at an employee’s discretion with a corporate card. This can make up as much as 20% of a business’s total spend. These purchases seem inconsequential at first but add up quickly as you gather a larger SaaS stack.
You can prevent tail spend by working with a turnkey SaaS procurement team like Tropic. Doing so will create savings opportunities throughout your entire software purchasing pipeline and ensure that you’re maximizing the return on your spend. Goodbye, cracked window. Hello, growth.
Go for Enterprise Agreements vs. Single User Licenses
During the initial stage of a startup, everything you do is on a smaller scale. So at first, it makes sense to invest in smaller, cheaper SaaS tools. But then, as you scale up, your negotiated agreements become larger and more expensive. Of course, this isn’t necessarily bad since many SaaS vendors offer better rates per user for enterprise agreements.
And this is exactly what you should be gunning for now that you’re an established startup. But don’t stop there—go for enterprise agreements with multi-year discounts. Just make sure to assess how it’ll impact your growing organization moving forward as you don’t want to get stuck with a tool you’ll potentially outgrow before the agreement ends.
Ready to put a stop to overspending on SaaS?
Tropic enables high-growth companies to scale without the headache and wasted time dealing with SaaS vendors. Our procurement system analyzes every lever of each negotiation to create win-win scenarios for SaaS buyers and vendors.
Get in touch to find out how we guarantee your SaaS savings—or cut you a check for the difference.