We’ve written about SaaS cost management extensively on this blog in recent months. Why? Because companies are spending more on SaaS…a lot more. Gartner estimates SaaS spend will grow by 20% in 2022, and that estimate is conservative for many enterprise customers. The volume and value of SaaS transactions NPI has analyzed over the last 12 months has grown at a sharp clip even as economic headwinds prevail. We expect the trend to accelerate as because SaaS is now the default delivery model for new software solutions, and top enterprise software vendors have not only transitioned to the model but are also getting more aggressive about phasing out residual perpetual licenses.
One byproduct of cloud spend proliferation is a growing marketplace of tools and services to help companies gain better visibility into their SaaS spend. This visibility is critical – foundational even – but it’s just one piece of the SaaS cost management puzzle. How are SaaS licenses being used? Who’s using them, and is there an optimal match between the license type and the features each user needs? Do you have shelfware licenses? Are you paying a fair price to begin with? Are your business terms aligned with your rollout plans? If you want to move the needle on SaaS spend, these questions are your guideposts.
Which SaaS Cost Management Tactics Deliver the Best Results?
As our clients grow their SaaS footprint, they typically have three objectives. The first is to proactively manage the category and get maximum value out of every SaaS dollar spent. The second is to achieve the first objective without any disruption to IT operations or departmental workflows. The third objective is to accomplish the first two while supporting the internal IT roadmap and, in most cases, paving the path with much-needed flexibility and agility.
NPI has found these objectives can be achieved using two proven tactics:
Assess large SaaS estates for opportunities to reclaim, reduce and realign licensing. NPI’s SaaS license optimization assessment is the first, most effective way to get rid of SaaS toxic spend. Assessments identify inactive or overpowered licenses, and typically reveal savings opportunities of 10 to 30%. They can be performed any time but are especially helpful in preparation for renewals – establishing a fact-based demand baseline is a best practice that measurably cuts costs (as opposed to renewing what you already bought without validating that you need it, which is the norm for many companies today). Here are some recent examples:
Optimize renewal agreements for better pricing, discounts and terms. Enterprise agreement renewals are an excellent time to ensure you’re receiving best-in-class pricing, discounts and business terms. This requires IT price benchmark analysis to ensure pricing is at or below fair market value range (note: SaaS pricing isn’t as “transparent” as many vendors would have you believe). It also encompasses license optimization, which includes executing against the licensing requirements defined in a SaaS license optimization assessment. Another layer of enterprise agreement renewal optimization is aligning business terms and usage rights with both current and future-state usage requirements.
Here are a few more detailed examples of how companies have achieved 7-figure savings through these tactics:
Remember – Visibility into SaaS Spend is Important, But It’s Not Enough
As we’ve pointed out, execution of the two tactics detailed above can have a material impact on enterprise SaaS spend – especially for large SaaS software estates like Microsoft 365, Salesforce, Workday and others. Just as importantly, it can give companies the flexibility and cost protections they need to grow their SaaS usage in lockstep with changing requirements.
The key? Focusing on SaaS cost management best practices that deliver real impact. Visibility into top-line SaaS spend is important – but it’s simply not enough.
If you want to learn more about how you can get more mileage out of your SaaS spend, NPI can assist. Contact us today.