November 13, 2024
by Claire Brenner / November 13, 2024
Effective SaaS optimization has remained a distant dream for B2B industry.
While analyzing pricing and features of a software, buyers don't pay attention on software spend management, user adoption and user consumption. Not prioritizing these factors can lead to ineffective SaaS monitoring, duplicate licenses, and underutilization of services.
Auditing your software stack in real-time with SaaS spend management software helps build system of records, sets automated renewal reminders, tracks app usage and prepares a catalogue for you and your teams to eliminate software redundancies.
In this article, we’ll learn more about SaaS optimization and how it can help you achieve financial success along with some measures to prevent SaaS overspending.
What is SaaS optimization?
SaaS optimization is a technique to prevent SaaS sprawl in B2B companies. It is a process of centralizing software catalogue for every internal department to update active licenses, maximise app transparency and track app consumption. With this data, businesses are able to right-size their software licenses and reduce ambiguity.
Here’s the scary part: Wasting money with SaaS is relatively easy. Often the process is quiet and discreet until you crunch the numbers and realize, woah, you bought this software last half but still only have one registered user.
Purchasing software that you fail to implement is a complete waste of money. You’d think that goes without saying, but it’s more common than you think. In fact, according to Zylo, the average organization is only using 49% of it's provisioned licenses, that leaves a staggering 51% ripe for optimization. These licenses are eating up into company's marketing budget and making companies cut their paychecks for no tangible return on investment (ROI) as employees aren't utilizing the SaaS solutions.
It’s also important to get everybody well-versed on the why: Why are you implementing this particular software, why it’s important they start using it, and why it’s going to help you push the needle on your company’s goals.
One of the major reasons is decentralization of SaaS software. Sometimes, employees, blithely unaware of the fact that the software credentials they need are available within the company's SaaS suite, would go ahead and buy a license on their credit card and list it under expense reimbursement. This results in ambiguity of multiple software licenses that degrades your IT compliance and gives rise to shadow IT.
Additionally, using software to less than its fullest capabilities is another sneaky way to waste money. For example, if you’re paying top $1 for a marketing automation tool, but only using it to build landing pages and send a few emails a year, you’re missing out on a around $99 worthy of features. Ideal software consumption efficiency is 90% but most companies are only utilizing software to 30-40% which degrades the IT administration and gives room to potential data breaches and DDOS mitigation attacks as idle software inventory is prone to more downtime and wastage.
Again, this circles back to why adequate training is so important. Employees should be well-versed on most features of the software tool – not just what they’ll be using in their day-to-day. This knowledge does more than ensure you’re using your software to its highest capability.
Below are some of the benefits of long-term SaaS optimization that can help your company optimize productivity and information technology (IT) audits better.
And while you always want to have enough software logins and licenses for your team to get their work done, be wary of “overbuying,” or paying for too much. This increased spending can often result in underutilized logins, licenses without employees, and overall, some wasted cash.
Building a SaaS spend management pipeline offers real-time actionable insights into active licenses verses user adoption rates. It provides a real-time view of SaaS analytics and ensures that you utilize these software to their maximum efficiency. Here are some ways to build SaaS optimization workflows:
Let's see how you can avoid SaaS spend oversight and reduce your risk of splurging money on underused tools and services that your company invests in.
Analyzing your SaaS spends is crucial because it determines your entire buying journey. By referring to half-baked data metrics, companies won't be able to optimize their software budgets and cater to revenue growth. Understanding and evaluating each parameter of your SaaS spend and monitoring a data repository to back new ideas and strategies during software contract renewals can not only optimize revenue, but also pass of a great impression of you as a buyer in the market.
Learn how you can build effective surveillance strategies to audit your SaaS resources with SaaS operations management software in 2024.
This article was originally published in 2018 and has been updated with new information.
Claire is a former growth marketing team manager at G2. Born and raised in the Chicago area, her brief stint in Ohio (University of Dayton) gave her a new appreciation for deep-dish pizza, but left her well-versed in Cincinnati-style chili and "cities" with a population fewer than 400,000. While not writing, Claire can be found practicing calligraphy, seeking out the best dive bars in Chicago, and planning her next trip. (she/her/hers)
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