Are you ready to cut software costs in a way that doesn’t upset users?
How about justifying every penny spent on applications?
Probably not. But, that expectation is approaching fast.
Whether you watch your 401k, cable news, the latest CPI update, or the price for a pint at your local pub, you know that we’re in a spiral of economic uncertainty.
While it is discomforting, it’s also an opportunity. Companies and departments that cultivate a culture of resilience and efficiency will come out ahead.
And in times of economic uncertainty, spend management is the place to start building that resilience.
Note: In this article—4 Critical Spend Management Steps for Your SaaS Stack
- Reduce SaaS Waste
- Eliminate Surprise Contract Renewals
- Reduce SaaS Operations Cost
- Reduce Risk Exposure and Costs
Related: SaaS Spend Management Explained
What is(n’t) Spend Management?
To understand Spend Management, let’s first define what Spend Management is not. Spend Management is not the indiscriminate cutting of costs. After all, savings for savings’ sake might lower your expenses, but it can also undermine your company’s ultimate mission.
Think of it like making your home an open concept. If you take down all the walls without understanding which are load-bearing, your HGTV fantasy home probably won’t turn out well. Likewise, your business won’t last long if you cut the applications people need to do their jobs.
Instead, Spend Management is a balanced and multi-faceted method of uncovering what expenditures are essential, which are not, and then acting on that information. It requires understanding both the true cost and the value of any expense.
SaaS Spend Management Examined
SaaS Spend Management is that mentality and actions applied to the world of cloud applications.
Cloud apps (SaaS) are notoriously difficult to justify and manage.
We know that applications are valuable in aggregate. But, understanding if an individual application is worth its particular price tag is an arduous task.
Why Decentralization Makes Cost Calculations Difficult
But why does cloud app justification feel so difficult?
It’s primarily due to a phenomenon known as decentralization.
You experience decentralization as the constant discomfort, ambiguity, and complexity it adds to your daily work because everything feels siloed and fractured.
Instead of doing our job, we get stuck in a series of scavenger hunts for pre-existing data and knowledge. Whether in compliance, procurement, IT, Finance, or somewhere else—you know it’s true.
Individual employees and teams add apps and integrate them freely while contracts, invoices, and connections are spread throughout the organization without any single source of truth.
That’s decentralization, and it makes the monetary cost of software difficult to tally. But, to truly tackle SaaS Spend Management, we must go deeper. First, we need to understand the true cost of software.
The True Cost Trap
The true cost of software isn’t just understanding how many units of currency appear in the invoice. It means understanding every way that application steals our valuable resources.
A valuable resource might be money, but it also includes attention, liability, and all the time you wasted with that useless chatbot on an app’s support site.
And herein lies the trap of true cost.
The underlying costs are hidden and add up—out of sight.
And then, our calculus can’t stop with true cost; we also need to know if the application contributes value to the organization. Does it contribute to revenue goals? Employee satisfaction? Time savings? Enhanced security? Or something else entirely?
Whether we are talking about cost or value, SaaS Spend Management hinges on one critical thing—visibility.
The Visibility Imperative
Visibility is the ability to see what is actually happening within your company’s SaaS stack. Not what is assumed or self-reported.
That means knowing every single app that exists in your company (both sanctioned and unsanctioned apps—i.e., Shadow IT), which apps have redundant functions, identifying which apps and licenses are used vs. left idle, which apps are trending up in usage (vs. down), and much more.
All of this information exists; it just needs to be surfaced. That’s visibility.
In your SaaS Spend Management efforts, every subsequent step is built upon a foundation of data. If that app, usage, and cost data is incomplete or questionable, your spend management efforts will be equally flawed.
Once you have this prerequisite visibility, it’s time to take action.
There are four ways to take action with this visibility.
4 Critical Spend Management Steps for Your SaaS Stack
1. Reduce SaaS Waste
Earlier, we mentioned the complexity of SaaS Spend Management relying on weighing the true cost vs. value generated. But, before we get there, let’s start with the basics.
If true cost vs. value is the boss fight, this first step is like syncing our controller with our game console.
We want to start with the low-hanging fruit, eliminating obvious waste.
That’s it. No complex calculations are needed. We’re on level one. But, by accomplishing this first step, you will put your company ahead of 80% of your peers.
The ITAM Review estimates that 35% of SaaS spend1 is wasted on unused or redundant licenses. You’ll see an immediate chunk of change returned by simply cutting waste.
If no one uses an app anymore? Cut it.
If a license hasn’t been used for 90 days? Reclaim it.
If you have 300 licenses and 178 users? Rightsize it.
Like exercise or a healthy diet—it’s easier said than done. That’s why developing the right systems and finding the right tools to make this cost-saving dream a reality is critical.
Once you’ve finished this first step, we’re ready for the next level.
2. Eliminate Surprise Contract Renewals
Surprises can range from good to horrific.
Sometimes, you find $20 in your back pocket. But, (more often), you find a Facebook message from a high school friend willing to let you get in on the ground floor of the latest pyramid scheme… I mean, entrepreneurship opportunity.
Getting a hefty bill for forgotten software is an equally unpleasant surprise.
Unfortunately, those surprise bills are a constant. Since application ownership is decentralized, procurement doesn’t have a great way to figure out which apps exist in their company, their usage, or when the contracts are up for renewal. Sometimes, the app owners don’t even work at the company anymore. And, when those surprises strike, procurement is left without enough time to evaluate the app and prepare for the negotiation. As a result, they’re left in a frustrating position, risking the cut of a critical tool or extending an unused one.
But this is preventable, and the first step is to initiate the proactive practice of SaaS Management.
SaaS Management for contract renewals means creating a dynamic renewal calendar that is centralized, visible, and notifies app owners in advance of contract renewal dates. So finance and procurement benefit, but so does every department head plagued by those pesky surprises.
Once this calendar is established, the next step is improving your vendor negotiation process.
Going into a contract discussion without data is like entering a chess match blindfolded.
You want to come prepared with usage data, adoption trends, and cost information.
Only then will you have the leverage to negotiate the best deals for your organization.
3. Reduce SaaS Operations Cost
Remember our analysis of true cost? There are a lot of hidden, non-monetary opportunity costs that turn valuable software into a time-sucking management waste.
If you want to reduce the true cost of software, you need to improve your operational efficiency.
You probably spend hours upon hours onboarding and offboarding employees to and from apps, managing licenses, and patching the holes in your security protocols from Shadow IT.
Operational efficiency means searching for better systems and processes to automate the repetitive yet important work so you can refocus your effort on more valuable work.
For example, Torii’s SaaS Management Platform (SMP) features a workflow tool that lets you automate common tasks like:
- Onboarding app provisioning
- Offboarding processes based on dynamic checklists
- Identifying and reporting when Shadow IT is adopted by a company user
- Auto-reclaim wasted licenses
Through more effective operational efficiency, you will save an incredible amount of time and sanity.
Learn more about how Torii’s (SMP) can improve your operations through automation
4. Reduce Risk Exposure and Costs
I know what you’re thinking “how is risk relevant to cost reduction?”
Ok—real talk—I know you’re not actually thinking that—because you know that few things are more expensive than security measures or recovering from a breach.
And you’re right.
We’ve arrived at the final level here. Security is costly—yet frustratingly—you have a budget to keep, and even security is part of that calculation.
That paradox makes our mindset about security equally crucial to our budget allocation.
You need to realize a few critical facts:
- Most cloud breaches aren’t due to malicious actors; through 2025, 99% of cloud security failures will be due to user errors2
- 76% of IT pros identified offboarding as a significant security threat due to incomplete access revocation3
- Your Shadow IT stack is probably (much) larger than you think4
- The average cost of a breach went up to $4.24M with an extra $1M where remote work was a factor5
If your goal is impenetrable security, then this sounds hopeless.
But your goals should focus on what you can control, requiring a realignment of priorities.
It means focusing on where those breaches occur. For example, in the shadows, during offboarding, and other user configuration errors. Once you know where those errors occur, we can address them head-on by improving our visibility and taking more intelligent actions.
It means identifying the risk profile of each application based on permissions, whether users outside the org can access it, and other risk vectors.
It means auditing and enforcing robust IT Governance with automation, so manual user errors are reduced or eliminated.
And, most critically, it means getting visibility into every application.
Whether an app is Shadow IT or sanctioned, leverage endpoint detection to gain a holistic picture of which applications exist and who uses them. Learn more about Torii’s Shadow IT detection here.
SaaS Spend Management Isn’t a Game, But It Can Be Rewarding
Remember, SaaS Spend Management is a journey! Sometimes that journey will take you in unexpected directions. But ultimately, a journey is something to be enjoyed. So understand your goals, and chart your path to a better tomorrow.
Are you ready to take back control of your SaaS Spending? If you want app optimization, but don’t know where to start, request a demo of Torii. We’ll walk you through how Torii gives you insight into the shadows, uncovers your true cost, and operationalizes your toughest tasks through automation.
Data referenced:
1. https://www.itassetmanagement.net/2019/10/17/saas-subscription-management-standard/
2. https://www.gartner.com/smarterwithgartner/is-the-cloud-secure
3. /blog/new-report-76-of-it-leaders-say-offboarding-is-a-significant-security-threat
4. https://www.toriihq.com/shadow-it
5. https://www.ibm.com/security/data-breach
