Large organizations are increasingly realizing they have a major problem around effectively managing their enterprise SaaS spend. The use of cloud services is constantly increasing but unlike with traditional on-premise technologies, few companies have controls in place to prevent overspending. And while SaaS applications were a lifeline for companies and workers when COVID-19 hit, the scope of expenses associated with so much cloud service sprawl is just now becoming clear.
That’s why SaaS spend management is so important. SaaS spend management is simply a company’s method of monitoring and controlling its spending on SaaS subscriptions. It has become essential for organizations as many are losing large amounts of money on SaaS applications including in the following ways:
SaaS app overlap
One top challenge is that many large enterprises simply don’t know what’s happening within their business when it comes to their SaaS solutions. For example, how many SaaS solutions does your company employ that overlap?
A major issue in large organisations is overlapping SaaS applications. This involves different departments using different tools to solve the same problem. They not only abandon the IT prescribed tool but tend to sign up for a variety of tools with the same functionality.
Decentralized SaaS buying decisions
Depending on your company’s structure, SaaS purchasing decisions may not be centralized to the procurement or IT department. In many organizations, end users in various departments are choosing SaaS suppliers and even negotiating agreements directly themselves. This is especially true now that more people are working remotely. Those end users are not usually full-time SaaS buyers and understandably may not be well-versed in your company’s contract and spend management.
As you may be aware, suppliers offer various SaaS pricing models that require regular review to avoid things like unused licenses or overcharges. It is most likely expecting too much that each end-user department will have the time and resources to manage those agreements.
Unused SaaS licenses
Part of SaaS spend management involves looking at your licensed users vs. active users for any solution. For example, is the organization paying for 100 users, but only 50 users are active? If so, you’re paying for 50 licenses your organization isn’t using.
The opposite of not enough active users is too many. Depending on the SaaS supplier and the agreement with your company, you may get bumped up to the next tier of pricing if more users are accessing the system than you planned on. Without real-time knowledge of this, you may quickly find the company over budget.
Renewals & cancellations
SaaS spend management goes hand-in-hand with SaaS contract management, and a big part of that is keeping up with renewal periods and cancelation clauses.
Many business are simply just auto-renewing their SaaS subscriptions annually without examining their usage or even pricing. This leads to also missed opportunities to reduce waste, negotiate better pricing, and update the agreement according to your enterprise’s current needs.
Similarly, the same is true for cancellation terms. With a large SaaS stack and ineffective (or lack of) spend management, you may try to cancel an agreement only to discover that you’ve missed the notice period and are now stuck paying for another year you don’t need.
How to Solve This Issue?
There is no doubt that SaaS management is complicated, particularly at enterprises with a large global workforce. However, these challenges can easily be solved by trusting a reputable TEM provider that specializes in SaaS expense and subscription management. Contact us to see how Veroxos can help you automate, validate and allocate all subscription usage and cost across your enterprise.