What is SaaS Spend Management? How Businesses Control Software Costs

With corporate software environments transitioning irrevocably to cloud-based software solutions, spend management has emerged as an essential area of operation. Currently, marketers, salespeople, engineers in a corporation are able to procure dedicated cloud-based software solutions in a matter of minutes using their corporate credit card.

Nevertheless, this approach leads to spiraling costs for cloud software, software duplication and security issues. SaaS spend management is the only way to get full visibility and control over your cloud applications in order to ensure that every spent dollar brings the expected result.

What is SaaS Spend Management?

Essentially, SaaS spend management means ongoing process of managing all aspects of cost related to organization’s software-as-a-service application portfolio.

Unlike conventional software licensing acquired via capital expenditure, SaaS applications are based on recurring billing models which scale proportionally to company’s employee base.

SaaS cost management involves setting up proper governance frameworks, monitoring of application usage, repository management and licensing optimization.

Waste Inducers In Cloud Software Spendings

In the absence of proper supervision, companies are prone to certain waste elements that arise from the scattered purchasing process of software:

• Shadow IT Expenditure: Software acquisitions done individually by teams without any approval from IT and procurement leads to additional hidden expenses.
• Inactive Licenses and Orphan Accounts: The software accounts of people who have left or are inactive incur unnecessary monthly fees.
• Redundant Applications: The various business departments use different sets of software applications for doing the same job.
• Automated Renewal Without Proper Notice: Due to no notice period, the procurement staff fails to reduce or negotiate the number of seats.

Key Strategies for Cloud Cost Control

Sustainable cloud cost control is only possible within the context of an operationally sound framework built on top of automated discovery tools and interdepartmental collaboration:  

1. Automation of Application Discovery through Finance and Identity Systems

Advanced management tools are capable of interfacing with single sign-on (SSO) services, accounting applications, and corporate spending solutions. Such automated discovery makes sure that every subscription in use within an organization is known.

2. Monitoring and Rightsizing in View of Active Usage

Analyzing active usage of software will show if the employees are using the functionalities provided by premium subscriptions. Rightsizing involves decreasing the number of premium subscribers and downgrading them.

3. Single Repository of Software Contracts

Storing all the software contracts in one place together with the automated notification function allows procurement teams to get ready for renewing contracts 30, 60, or 90 days prior to their expiration.

4. Automated Offboarding of Employees

Combining spend management solutions with life cycle automation ensures that every time an employee is leaving the company, he or she will be automatically offboarded from software subscriptions.

Core Business Benefits of Managing Software Spending

Setting up a proactive software spend management provides many benefits right away:

• Financial Savings: Getting rid of unnecessary software and unused licenses immediately decreases software spending expenses.
• Precise Budget Planning: Knowing all the expiration dates and user levels lets the finance department create accurate forecasts.
• Improved Security and Compliance: Getting rid of orphan users reduces the number of possible access points and helps to protect company data.

SaaS Spend Management vs. SaaS Management Platforms

Although both concepts are frequently used in the same sense, SaaS spend management is specifically related to the financial control of cloud applications. This includes monitoring license expenses, renewals, and unnecessary spending on subscriptions. Unlike that, a fully equipped SaaS Management Platform (SMP) consists of a wider set of activities

Beyond just monitoring finances, an effective SMP performs daily management tasks such as automation of onboarding/offboarding processes for users, access control, and security monitoring of the whole software suite.

Incorporation of both spend management and SMP allows IT managers to have full control over finances and security aspects of the software.

Also Read: What is SaaS Spend Management? Reducing Software Costs

Conclusion

The analysis of the concept of SaaS expense management demonstrates how modern companies combine the flexibility of employees with financial discipline.

Frequently Asked Questions