Finance
Managing the Cost of Digital Transformation with SaaS Optimisation
Global Banking & Finance Review®
Company
Alexandre Dussurgey
By Alexandre Dussurgey, Head of Procurement, Sastrify – the digital procurement platform for Software-as-a-Service products
Catapulted into the spotlight by the demands that the Covid pandemic placed on business practices, 2022 has seen the process of digital transformation continue at pace. However, having integrated huge tech stacks of Cloud and Software-as-a-Service solutions to enable digitalisation, sometimes in a hurry, many companies are now finding that their tech costs are spiralling out of control.
Particularly in the face of an economic downturn, there is now a need to rein these costs in and ensure ROI on all tech spend made in the name of digital transformation. With cloud and software costs representing the highest overhead behind employees, finding ways to bring clarity to tech chaos and discover hidden or unnecessary costs to manage spending will be a crucial means of negotiating economic turbulence. Our data shows that 78% of businesses overspent on SaaS in 2022 – sometimes by up to 7 figures – so SaaS subscriptions are a good place to start for those looking to make savings.
One of the great things about SaaS stacks is that they are designed to grow your business. It is their agile nature that makes them so appealing. However, that also means that it’s easy for companies to lose sight of how many apps or solutions they use. While IT departments were once considered the gatekeepers of an organisation’s tech stack, today’s distributed workforces often mean that IT tools have become decentralised. Gaining a clear overview of which SaaS applications are being used, how, when, and by whom, where renewals fall and how much they are likely to cost all becomes increasingly difficult. But that is what is needed if costs are to be brought under control.
It’s not simply about taking the axe to your stack – it’s still important to maintain functionality, ability, and user experience. But by reducing waste, discovering hidden SaaS, using tools more efficiently and rationalising where necessary and enabling better SaaS management and procurement practices, businesses can optimise spending – often quite significantly.
Here are our top tips for being able to see the wood for the trees and make meaningful changes for SaaS cost-effectiveness:
Centralise decision-making data.
Companies often need to be made aware that they have multiple contracts for the same tool, creating inefficiencies and higher spending. When separate departments work independently, it’s difficult for all team members to utilise SaaS infrastructure fully. Different departments may be taking on licences for existing tools or are unaware of ongoing subscriptions that could make their work lives more manageable. In a post-pandemic world where companies are more commonly working on remote or hybrid models, a rise in poor inter-department communication has significantly amplified the issue further. Large numbers of teams and employees can easily lead to overlap in SaaS app functions, especially if some solutions do multiple things. This will all represent areas of overspend. By centralising all contracts in one place and defining a SaaS tool owner to ensure clear governance and responsibility internally, leaders gain better visibility and minimise the risk of inefficient purchasing.
Visualise usage.
It’s also essential to have visibility of SaaS tools that are being used less than you’d like them to be or, worse, at all. If usage is low, driving user adoption is a priority, or it’s time to let go of that tool. But that task becomes possible with knowledge of which tools are being used, and by whom. A robust, centralised SaaS network will help eliminate redundancies and reduce unnecessary costs. It can also lead to a more effective licence management strategy. For instance, you might have 100 users of a platform, but if you have full awareness of what it’s used for, you might find that 80 users only need the basic package. If that leaves only 20 needing advanced functionality, then buying those packages separately is more efficient than buying 100 advanced.
Automate.
According to MuleSoft’s Top Digital Transformation Trends for 2023 report, automation will be central to many businesses’ strategies as they look for operational efficiencies, which rings true for SaaS management and optimisation. With the average business using around 100 SaaS and cloud solutions (our typical client has 98), effectively handling them all is a complex and time-intensive task. But with the right tools, your SaaS stack can be automated in five minutes, giving you full access to all the insights on usage, spending, security risk, and more.
A key area for automation is the renewal process. Having automated early warning systems in place to enable timely renegotiations is critical to an effective SaaS buying strategy. This could be obvious such as starting the process early for an upcoming renewal, knowing when to turn off the auto-renewal clause to avoid being trapped with the same T&Cs for another year or two, or being aware of price increases and changes to pricing structure.
Negotiate.
Contract negotiation is a time and effort-intensive task. Our figures show that at least 10 hours of back and forth go into each SaaS contract, and if you’re a business with 50-100 tools to manage, that is a lot of time you could be spending elsewhere! But the challenge isn’t just the time investment. It can be tough to gain visibility into pricing, which might leave you feeling like you’re on the back foot when agreeing on a fair price. You might know that you shouldn’t be paying the list price for a particular solution, but with no clear guidance on what you should be paying for a certain number of licences, it can be hard to negotiate confidently. This is where procurement solutions can be worth their weight in gold. They help simplify the process by negotiating for you, leveraging benchmarked pricing data to ensure you feel confident you’re getting the best price.
The digital transformation of business practices can reap many rewards. Enhanced customer interaction, smoother sales and marketing processes, better internal collaboration and many more efficiencies can be achieved. But without ensuring that the same efficiency is applied to the cost of the transformation process and the related SaaS tools, the process could represent a considerable cost. But the good news is that by centralising, visualising and automating the entire SaaS management and procurement process, companies can save significant time, discover hidden savings and cut unnecessary SaaS costs by up to 30%. And in these times of economic uncertainty, those cost savings could be critical.
SaaS, or Software as a Service, is a cloud-based service where applications are hosted online and accessed via the internet, eliminating the need for local installation.
Digital transformation refers to the integration of digital technology into all areas of a business, fundamentally changing how it operates and delivers value to customers.
ROI, or Return on Investment, is a financial metric used to evaluate the profitability of an investment, calculated by dividing the net profit by the initial cost of the investment.
Cloud computing is the delivery of computing services over the internet, allowing for on-demand access to storage, processing power, and applications without direct management by the user.
Cost optimization is the process of reducing expenses while maintaining the same level of service or quality, often through efficiency improvements and waste reduction.
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