This article was originally featured in Forbes on December 8th, 2022.
I recently opened a new bank account, and before transferring all my funds over, I thought it would be a good opportunity to trim some subscriptions I no longer needed. I did this the manual way, and my mind was absolutely blown.
Left over were:
- A subscription to a financial magazine I used at a sales job in 2014 ($187).
- A subscription to a wellness application, which I hadn’t used in at least 12 months ($199).
- A subscription to legal services from when I LLC’ed my consulting firm in 2017 ($329).
This is in addition to countless death-by-1,000-papercuts subscriptions (old gyms, etc.), collectively adding up to about $1,000 per year. We no longer live in the world of single-time payments for the products we rely on daily. If I’m burning $1,000 each year in subscription costs I no longer use, can you imagine how much money a business with hundreds of software subscriptions is wasting?
The concept of auto-renewal started out as a win-win for consumers and businesses alike. It often starts under the guise of a “free trial.” Companies know that the psychology of canceling a subscription is much more taxing than signing up for a free month. Not surprisingly, auto-renewal practices have been making waves—and for all the wrong reasons.
According to one survey, “Almost one-third (30%) of the people underestimated by $100 to $199 and nearly a quarter each underestimated by less than $25, $25-$99, and $200 or more.” Even worse, “a significant minority (42%) admit that they’ve stopped using a subscription service(s) but forgot they were still paying for the service.” Many auto-renewal agreements are not read—one study by Deloitte found that 97% of people between the ages of 18 and 34 do not read terms of service before agreeing to them—and the fine print is where consumers are subject to price increases and multi-year commitments that most cannot afford.
As with many consumer challenges, tech stepped in to save the day—and prevent consumer wallets from shrinking in the process. Companies like Rocket Money (formerly Truebill) were founded to tackle this issue head-on, detecting and monitoring recurring subscriptions.
Auto-Renewal At The Company Level
Now imagine this magnitude of wasted auto-renew dollars for companies and their tech stacks. Instead of receiving a $75 box of frozen meals every month, imagine getting a bill for $40,000 for a piece of software that, while once critical to the business, is no longer necessary or has been replaced.
Software contracts continue to eat up company budgets at virtually every level of an organization. Particularly in high-growth companies, tracking and managing subscriptions can be an afterthought, resulting in unnecessary spending. Really driving home G2’s assertion that SaaS waste is a $40 billion-a-year problem and making it increasingly clear that businesses need someone in their corner to keep costs under control.
Keep in mind that a company failing to cancel its software contract can have much steeper consequences than an individual forgetting to cancel their streaming service. Unintended costs are only the tip of the iceberg, with companies losing hours managing the subscription mess and mitigating cyber security risks related to unsanctioned software purchases. Failure to manage the plethora of SaaS vendors, platforms and apps—and their associated subscriptions—could literally mean having to choose between paying for an unwanted contract or laying off a valued team member. With the recent uptick in layoffs, one has to ask how many people would still have their jobs if everyone’s software was properly tracked.
So, what’s the alternative? It’s clear subscriptions are here to stay, but at a minimum, businesses today need a plan that allows them to gain control over unfavorable contract terms—auto-renewals and multi-year commitments, to name a few.
Solutions For Enterprise SaaS Subscriptions
The good news is that there are a variety of solutions that bring the convenience and savings of the Rocket Money/Truebill concept to businesses and their software. These technologies help take the guesswork out of the SaaS model so that businesses don’t end up with subscriptions they no longer need or use. Moreover, they can provide businesses with complete visibility and proactive notifications well in advance of renewal dates so that there is adequate time to explore alternatives, lock in better pricing or just cancel if the tool is no longer important.
Regardless if your business is large enough to warrant investing in such a type of solution, there are some simple steps you can take to get started on understanding the size and scope of your SaaS sprawl. Start by documenting all the tools your company is using. I’ve seen companies do this on a simple spreadsheet and go from there. Next, you’ll want to collect and organize all the contracts for each of the associated tools. This may mean reviewing email chains, Google Drive folders, invoices and any other documents. Then you’ll want to undertake a quick analysis to understand some pretty straightforward questions. Are we using all the software we’ve bought? Did we pay a fair price? Do we have any tools that essentially do the same thing? These simple steps and questions will help paint a clearer picture of your tech stack and any opportunities to reduce spending, boost productivity and eliminate waste.
As the saying goes, there’s an app for that. Imagine you had one app that gives you full insight into your tech stack. It’s out there waiting to help your org. As companies emerge from a “growth at any cost” mindset, it’s understandable that even the best companies are carrying extra SaaS bloat. Use this opportunity to not just trim the fat but also leverage these savings to reinforce your company’s true strategic advantage. We may not have chosen to enter the world wherein everything is rented instead of bought, but on the other hand, it means that everything your team uses is constantly being worked on and improved. With new players entering the software space every day, it’s time to make SaaS buying your strategic advantage.