SaaS Spend Management

The SaaS industry loses 30% of its $300 Billion value annually, to unchecked spending on unused, duplicate, or redundant subscriptions.

Businesses can save that money by employing intelligent SaaS spend management. This requires making centralizing purchase decisions, properly managing licenses, and standardizing the use of software, to start reclaiming lost revenue. Read on to learn how to use the top spend management strategies and tools to eliminate wasted spending. 

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What is SaaS Spend Management?

SaaS spend management is the process of monitoring and controlling cloud-based software budgets in a way that maximizes ROI. This includes managing software licenses, subscriptions, and renewals in a way that inhibits overspending while keeping you compliant with any applicable standards. Many businesses still struggle to control costs because they use general spend management, or even some outdated methods like spreadsheets, emails, or even paperwork to track their spending. SaaS spend management is different, it helps you control spend by addressing the following: 

• Solving The Shadow Spend Problem: Departments often subscribe to solutions independently without central oversight. This leads to multiple teams paying for the same tools or overlapping functionalities.
• Preventing a Software Acquisition Spree: The allure of free trials and always-on discounts can lead to a snowball effect, with subscriptions piling up without proper evaluation or justification.
• Reminding About Forgotten Subscriptions: Legacy projects or abandoned initiatives often leave behind unused subscriptions that continue to drain company finances.
• Halting Feature Creep and Encouraging Frequent Evaluations: Companies might initially subscribe to a tool for specific needs, but then find themselves paying for features they never use, simply because it's easier than switching.

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Why is SaaS Spend Management Important?

SaaS spend management helps you control software purchases and reduce SaaS sprawl, the accumulation of duplicate applications across different teams. It helps you prevent subscription creep by identifying and canceling unused or duplicated subscriptions, preventing recurring payments from spiraling out of control. 

Plus, with many SaaS products implementing usage-based pricing, proper management allows you to track actual consumption and ensure you're only paying for what you need, avoiding unexpected cost spikes. Finally, effective SaaS spend management often includes tools to assess security risks associated with different applications, helping you avoid costly data breaches and compliance violations.

Consider Watermark, an education technology company with around $1.4 million in annual software spend. Due to complex, siloed approval processes, Watermark realized they had more than six subscriptions from the same supplier. To fix this, they implemented a SaaS spend management platform to automate buying, combining contracts, simplify approvals, and help them make smarter decisions. This resulted in Watermark’s team saving over $300K in less than a year and achieving 100% internal compliance. 

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The Risks of Not Managing SaaS Spend

Poor SaaS spend governance can cost millions in unnecessary expenses, and expose you to serious risks. For example, losing track of subscriptions can lead to broken licensing agreements, and unauthorized SaaS applications may collect or store personal data without the user’s knowledge or consent, triggering hefty penalties and legal fallout. 

Without comprehensive SaaS spend management, your organization may unknowingly be in violation of consumer data laws like the General Data Protection Regulation (GDPR) or the California Consumer Privacy Act (CCPA), which require strict data security practices. 

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Best Practices for Effective SaaS Spend Management

To stop SaaS sprawl and make smarter purchases, follow these SaaS spend management best practices: 

• Centralize Control: Eliminate siloed budgets and disparate approval processes by bringing all acquisitions into a single, observable pipeline. Designate stakeholders, such as your IT, procurement, or finance team, to oversee SaaS buying and set up a clear line of accountability. 
• Conduct Routine Audits: Monitor application usage, contract compliance, and renewals to find opportunities for cutting costs and eliminating overlapping services. 
• Implement a SaaS Management Platform: Complete purchases faster, extract valuable insights, and reduce the risk of human error by integrating automation into your SaaS buying process. Leverage the latest technology to better track spending and generate reports to give you a complete picture.
• Negotiate Contracts: Don’t take auto-renewals for granted. When possible, negotiate contracts and your relationships with vendors using proven strategies and tactics to get yourself the best deal possible.

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Choosing the Right SaaS Spend Management Tool

When choosing a SaaS spend management tool, consider factors such as functionality, scalability, and user-friendliness. Look for features like real-time tracking, automated workflows, and smooth integrations with existing systems to minimize disruption. 

Assess each tool’s ability to meet your organization’s needs. For example, smaller businesses may prioritize simple tracking, while larger enterprises might require advanced analytics and customization. 

You will also need an easy-to-use user interface. A platform with a steep learning curve will likely face friction when onboarding staff.

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Key Features of SaaS Spend Management Tools

SaaS spend management tools help you see everything about your cloud spending - what you're using, how much it costs, and if you're compliant with applicable standards. Here are the top features of these tools and how they support SaaS spend oversight. 

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Subscription Tracking and Renewal Alerts

Without timely alerts ahead of renewals, your organizations face the risk of losing track of software subscriptions. SaaS spend management software monitors all active subscriptions to give you the opportunity to be aware of upcoming renewals.

Usage Tracking

The usage tracking features allow you to determine if a software tool is actively in use or if has become obsolete and should be decommissioned. 

License Management and Rightsizing

In SaaS spend management, license management features let you quickly adjust licenses to better match your requirements, this process is known as rightsizing. This prevents overspending without compromising the level of access your teams need.

Vendor Management and Contract Negotiation

It is standard practice for companies to stick with a vendor once one is chosen. However, these vendor contracts are often auto-renewed without negotiation or even reevaluation. The best SaaS spend management software gives companies vendor relationship features, unbiased price benchmarks, and negotiation services to secure better terms, and possibly even reduce costs.

Integrations With Enterprise Software

To achieve complete control over SaaS purchasing, you must integrate your spend management solution with your existing finance and procurement systems. By enabling data sharing across platforms, you can automate expense categorization and budget tracking, and you get the big-picture view of where your SaaS purchases fit into your broader financial strategy. 

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How to Implement SaaS Spend Management in Your Organization

Successfully implementing SaaS spend management requires strategic collaboration, streamlined processes, and transparent policies. While choosing the right platform is a crucial first step, establishing a framework for governance and team involvement is equally critical. 

Ensure that all stakeholders, including finance, IT, and procurement, have a seat at the table to promote communication and unify SaaS management. 

Create standardized policies that outline purchasing guidelines, approval workflows, and renewal protocols. Some spend management tools simplify this by providing a purchasing portal, a single URL where employees can submit and track purchase requests. With rule-based routing, these platforms ensure that every purchase follows the appropriate channels. 

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Getting SaaS Spend Under Control Is Key To Sustainable Growth

With software costs climbing, poor SaaS management can cost organizations hundreds of thousands of dollars in wasted resources and create serious risks. Untracked spending leads to redundant subscriptions, bleeding funds that could be invested elsewhere. Without clear approval workflows, employees make unauthorized cloud purchases, exposing your company to IT security threats and regulatory issues. SaaS spend management overcomes these challenges by unifying control, ensuring every software decision is strategic, secure, and compliant. 

Ready to take charge of your software spend? Schedule a free demo to discover how Tropic helps you make more intelligent, impactful SaaS investments. 

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