4 Cost-Saving Strategies to Optimize Your SaaS Budget

There is a Software-as-a-Service tool for every business function you can imagine -- from legacy CRM goliaths to project management tools and cloud storage. The proliferation of cloud-based tools shows no signs of slowing. Gartner predicts that by the end of 2023, 16% of an organization’s total IT budget will be allocated to SaaS spend, and it's important for them to make sure that it is optimized to get the most value out of their costly investment. But amid layoffs and budget cuts, SaaS can also be an area that helps generate considerable savings, improved operational efficiency, and increased revenue.

With C-suite executives and IT leaders aligned, SaaS budgeting involves understanding where there are cost inefficiencies and wasted spend, what types of SaaS applications are being used, and how to get the most value out of SaaS investments. It's important these teams keep a close eye on SaaS spending before it spirals out of control. IT rarely has total visibility over all the SaaS tools in play, as work-from-home and digital transformation initiatives have ramped up SaaS purchases across most organizations’ functional areas.

To make sure that SaaS budgeting is done effectively, organizations need to have a clear understanding of their current SaaS spend and where they want to save. This requires a comprehensive audit of their current SaaS stack, a strategy for optimizing it, and a solution to minimize disruptions to workplace productivity. Here are four strategies to reel in SaaS spending without making waves:

1. Right-size your SaaS stack

Not all SaaS tools are created equally, so it's important for organizations to identify the SaaS tools that most directly contribute to improving business outcomes and KPIs, prioritizing them accordingly. It’s common for organizations to use multiple SaaS solutions that solve the same problem, which can be both costly and inefficient.

These scenarios present opportunities for consolidation, a process that can only occur when IT can identify varying SaaS solutions first. Then, they should analyze employee usage data and evaluate the impact of these tools on the organization’s business objectives. SaaS tools that are most critical to driving productivity and revenue growth should remain in the tech stack.

2.Negotiate better pricing and terms

For those SaaS tools deemed most necessary, organizations should look for opportunities to optimize their pricing and negotiate better terms. This involves deeply analyzing the tool’s pricing by tiers to ensure you are on the right one. Additionally, many SaaS providers offer discounts for more licensed users or long-term contracts (think a year or more). Those in charge of managing SaaS contracts should reach out to their customer service or sales representative to inquire about flexible pricing. As existing contracts approach their renewal dates, organizations should take advantage of built-in SaaS savings to negotiate better pricing and terms, such as volume discounts, flexible payment plans, and long-term contracts.

3. Manage enterprise SaaS judiciously

Organizations should also make sure they are managing their enterprise SaaS against a meaningful execution plan that has been pre-approved by key stakeholders. Such management includes closely monitoring ongoing usage and proactively identifying areas where usage can be reduced or eliminated. It also means ensuring that users are only accessing the services that they need, and that access is being managed securely -- especially as employees are on- and off-boarded.

SaaS management requires a watchful eye, but when automated appropriately, less of this burden falls on IT. Managers can keep track of this by assigning ownership to department heads and project leaders. Both can help reduce unnecessary spending and free up IT’s budget for more valuable tools, while also mitigating possible security threats.

4.Implement usage guardrails and cost controls

Controlling which employees have access to which tools can also help enterprises gain visibility over the SaaS stack and minimize so-called ‘shadow IT’ --those applications that IT has no oversight over. Organizations should also institute usage guardrails to ensure that SaaS spend is kept in check and users have access according to their specific roles. This may include setting budget limits per team or project to prevent scope sprawl, monitoring usage, and taking action when a project goes over budget. By restricting the number of users or the amount of data that can be accessed from given SaaS apps, IT leaders can get a better handle on both costs and data governance.

SaaS budgeting is an important part of any organization's strategy to make sure that SaaS spend is optimized and delivers the most ROI. From consolidation to usage limits and ongoing management, enterprises can implement several cost-saving measures right now. With those savings, organizations will be better equipped to drive revenue growth, connect with customers, or invest back into their talent pipeline.