Analyst Report: Software Is The Silent Killer Of Your Budget

Analyst Report: Software Is The Silent Killer Of Your Budget

digital transformation

Digital Transformation: Reaching Across The Aisle

This content was originally posted on HR.com

The summer of 2022 could be coined the summer of layoffs. Cutting staff, hiring freezes and rescinded job offers have plagued a variety of industries, impacting companies like Netflix, Twitter, Compass and more. It seems like, every time I log on to LinkedIn, someone else in my network is announcing that they lost their job.

Even amidst this climate, HR leaders continue to fight the war for talent, using their bag of tricks and tools to attract and retain top performers. However, doing so against a backdrop of cost cutting and capital preservation requires working doubly hard. According to a Gartner survey, over half of CHROs reported the shortage of critical talent as the number one trend impacting organizations, yet only 19% said their organization is prepared to bridge the gap.

At the same time, as the pace of digital transformation continues across the enterprise, companies are also working to ensure that the right technology and tools are in place to remain competitive.

While these two competing priorities might seem like a natural source of tension within the executive suite, there is an opportunity for CHROs and CIOs to rethink the way they plan and budget. Working together, this duo may be a strategic weapon in the era of responsible growth.

So, where should HR leaders begin?

Understand the Inextricable Link Between People and Software Budgets

People and software are often a company’s biggest line items. While it used to be that companies hired people and bought software, today there is an inextricable link between the two domains. When a people or technology strategy goes awry, the impact on time, money and employee productivity can quickly skyrocket.

Today there is a blurring of lines between people and tech as every new hire also means new tech requirements. Hiring is no longer just a salary decision for companies; they also must consider the cost of software licenses or tools that each new employee may require – think Zoom, Gmail, or Slack.

It is, precisely, because of this intersection that a partnership between CHROs and CIOs may be one of the most important ways to ensure that capital flows to the organization’s highest priorities. Instead of battling for resources, HR leaders should use this moment to engage their technology counterparts as collaborative partners in budget discussions.

Examine Your SaaS Contracts and Think About Opportunity Costs

Work with your CIO to evaluate your software contracts and the people policies around them. Just knowing what you are spending is one of the most important steps for identifying ways to reduce spend. It can be a daunting task as most companies rely on and manage at least 100 different software tools, but it is an essential step. Knowing how many tools and software platforms your company actually have is just a starting point.

However, beyond just the numbers, make sure you are working with your colleagues to understand the fine print, especially when contracts are up for renewal. The devil is often in the details and nobody wants to be caught off guard by a big cost or unexpected auto-renewal, especially if it comes at the cost of headcount.

I learned this the hard way when I was working at Microsoft. One of our biggest customers was struggling to meet their business priorities and they were coming up for renewal. Of the 300 products they were paying for, I discovered that most of them were not even being used. When their request to review their deal and find the funds to meet the terms of their contract was denied, they had little choice but to lay off staff.

This was a tradeoff I could not abide by, so I resigned from Microsoft and started my company Tropic that same day so that more businesses didn’t need to choose between their people and their tech.

Be Part of Getting Software Spending Under Control

Coming off the recent growth frenzy, it is understandable how software spend has so gotten out of control. Companies sought out best-in-class technologies as a way to compete, but this came at a high cost, and not just financially. For example, there were instances of employees purchasing new software on their personal credit card, without any knowledge of related policies, opening up their companies to serious cybersecurity risks.

In some cases, businesses were signing contracts for platforms they never ended up even using or without knowing when auto-renewals were set to kick in. Our data has shown that on average, companies can wind up overspending on software by up to 30% without the right processes, data and people in place.

With companies throwing away an estimated $40 billion a year on SaaS tools they do not need or use, it is difficult to bring the amount of software waste and overspending all the way down to zero. However, CIOs and CHROs can work together to put clear processes in place, leaning on automation and dynamic workflows to centralize the purchasing process.

In addition, these leaders can survey their employees to understand which tools are being used and which ones are not, and perhaps more importantly, which ones are providing the most value.

What we have also found at Tropic is that companies may actually learn some interesting things about their workforce when they look at their software utilization figures. This data can provide businesses with insights into engagement levels, headcount trends and who is making the most of the SaaS tools at their disposal, ultimately helping them make smarter decisions about where they allocate their resources.

Make Tough Choices as a Team

With a collaborative partnership and newly found SaaS savings in place, encourage your CIO partner to make tough choices with you as a team. I have led the move away from siloed budget cuts, where some amount of cuts need to be made in both headcount and tech spend to move the needle on your business goals.

Before making the tough decision to cut people, work with your CIO to find room to optimize the way you are using your company’s software. Remember that you can always procure new software licenses at a future date, but top talent will be much more challenging to replace, not to mention the damage layoffs can do to morale and culture.

In the present economy, as CHROs continue to focus on talent recruitment and retention and CIOs examine ways to fuel innovation and growth through technology, cost-cutting mandates remain top of mind.

At Tropic, I encourage continued conversations between HR and IT to make sure that any decisions we make around our people and tech investments are not being made in a vacuum. And when the economy eventually improves (as it always does), I strongly believe that this advanced foresight and collaboration will help prevent companies from cutting too close to the core such that they are not able to bounce back.


We make SaaS manageable by putting in the hard work.