Navigating the coronavirus crisis involves optimizing SaaS app spend in the near term while positioning the company for future growth.
According to a survey by TrustRadius, C-suite executives are now less likely to increase software spending for the rest of 2020, demonstrating the urgent need to conserve costs while simultaneously managing the growing usage of softwares in the organization. This contradicts the historical rise in SaaS spending, but isn’t a surprise as companies around the world are already grappling with a slowdown in business amidst the coronavirus outbreak.
The focus area for cost optimization is likely to be in discretionary IT expenditure such as software spend, where we estimate up to 30% in cost reduction.
At Workato, we’ve had similar conversations around managing our software spend carefully. While we truly believe in buying the best-in-breed SaaS applications to help us scale, we currently spend over 70% of our IT budget on more than 180+ different SaaS applications across 260 employees worldwide. The other 30% is spent on people and services.
Since many of these products charge based on a per-user basis, it isn’t difficult to imagine that our cost of owning SaaS applications will grow exponentially as we continue to scale and double our headcount every year.
Your organization doesn’t have to invest in SaaS spend management software (tools that centralize SaaS subscriptions and track their usage) to manage costs. We’ll break down five ways that we—and you can—make better use of your SaaS spend, but first, let’s review what we mean by SaaS spend optimization:
What is SaaS Spend Optimization?
SaaS spend optimization can be defined as the measures taken to reduce the costs associated with your SaaS applications, while minimizing any reduction in their value to your organization. These measures can range from proactively managing licenses to renegotiating the contractual terms of an application.
You can keep this definition in the back of your mind as we review the following tactics.
1. Waste Reduction
As with most start ups, in the early days of Workato, there was no clear process to manage, evaluate, and rationalize new technology investments. This resulted in a lot of waste and poor adoption as anybody in the company could just swipe a credit card to get the tool they wanted.
We soon realized that this could quickly get out of hand, given that as an integration company, we connect to thousands of different applications. Hence, we made the early decision to consolidate and centralize the software budget and license management process under the Business Technology function, which manages all the technology the business requires to run business and operational processes.
The Business Technology team owns architecture and infrastructure, vendor relationships, and partners with other business units on data, process, use case and software spend justification.
While this might lengthen the time taken to procure new software licenses, the overall benefit to the company cannot be understated – there is less waste, fewer opportunities for data leakage, and stronger governance and risk control frameworks to inspire confidence in external stakeholders. We are also able to ensure that technology investments are constantly reviewed against the company’s best interests while negotiating with vendors to scale our licenses reasonably.
Reducing waste starts with enabling accountability and transparency. We want our business units to be fully accountable for the ROI of each tool they use, so we partner with them to ensure a sound and robust framework exists for every new tool that we bring onboard. Through a 3-step process of business justification, security review, and legal review, we can be more assured that we minimize waste and maximise value in our spending.
2. Proactive License Management
While most companies would reduce license volumes for software spend altogether, we find that a better approach is to monitor usage proactively and redistribute the licenses internally. This way, we can retain the flexibility of provisioning new licenses when needed while staying within contractual limits with our vendor partners.
We have a consolidated Business Technology budget and manage software licenses centrally. This gives us the benefit of procuring at scale, spending visibility and the ability to build automations around them.
It is important to understand whether application licenses are fully utilized by your intended users. To do this, you need to define the criteria of ‘fully-utilized’, as it impacts the number of eventual licenses to be freed up.
Take Zoom for example, whose paid pricing model charges users based on the number of hosts. Not every user in the organization needs a paid Pro license to host meetings. A free license would be sufficient for users who don’t regularly host meetings over 40 minutes.
By monitoring usage, we can routinely identify these users and programmatically de-provision their Pro licenses if they were given one, without needing to manually visit the dashboard to do so. If they need to be provisioned with a Pro license for an extended meeting, they can self-provision on-demand within Slack using our custom Workbots that route the request automatically to Zoom, which grants them access on-the-fly without IT intervention.
3. Increase App Adoption and Engagement
To create a long-lasting way to increase the utilization of SaaS apps, we also advocate for company-wide adoption of our procured apps.
The best way to do this is through internal awareness campaigns and creating company champions across business lines who can push for the wider adoption of these tools. Furthermore, we support our stakeholders through regular dialogs and always iterating on the feedback received.
It’s always an uphill battle to change the habits of users. By educating and encouraging your teams to collaborate on the same set of tools and platforms, you can potentially see higher returns on investments on your software spend and unlock greater value when using them to the fullest.
4. Renegotiation of Contractual Terms
Renegotiating vendor contracts is not always possible but some areas of SaaS spend offer a way to reduce the scope of services in the medium term. This frees up immediate capital for other uses such as staff costs, rental, and other fixed costs.
An alternative to frequent renegotiations of contracts with vendors is to negotiate the set of contractual agreements currently in place. For example, you could request the vendor to throw in additional training programs, additional licenses, additional test environments or additional tickets to events that can boost productivity and company-wide upskilling efforts. Not only are your employees trained to be more effective with the set of tools that they have, these acts of goodwill also build a more lasting and mutual business relationship over the long term.
5. Invest in Automation to Streamline Business Processes
Reducing IT costs alone is not the path to a high-performing business. Companies should also consider enabling fuller use of their existing SaaS apps through integration and automation, to streamline business processes to drive more revenue with less resources.
One way to effectively do this is by identifying apps and business processes that can easily benefit from collective synergies through integration or automation. These low-hanging fruits can help to build confidence in the new tool and obtain wider stakeholder buy-in before launching more complex projects with a larger audience.
We recommend starting small with your integration projects by focusing on test use cases that bring tangible and immediate results. The best way to do this is with a small team of business users who are involved in these processes in their day-to-day work.
It is best to automate business processes that have a direct business impact. An example is collecting customer feedback and tagging them to the correct contact in your customer relationship management tool. This will ensure accountability at the case level and provide the client services team more intelligence to improve products and processes based on direct customer feedback.
To accelerate the adoption of automation projects within Workato, our founders built a no-code automation tool that can be used by non-developers to get quick implementations without sacrificing governance and security.
With robust integration of various SaaS applications so they benefit from a greater scope of use cases, your business will see immediate tangible benefits and extract greater value from the SaaS stack that you already own.
Reductions in spending should be made in the context of how they can simultaneously drive the business forward. Reinvesting savings from SaaS spend optimization into projects that in turn accelerate the company’s SaaS inventory would reap big rewards for your business in the long-term.
To get started on your automation journey and optimize your SaaS spend, speak with an automation expert.