According to a recent report by Cleanshelf, up to 30 percent of SaaS spend goes to waste everyday due to different reasons, including complex pricing models and lack of complete control over the SaaS stack. Minimizing wastage of money on SaaS subscriptions requires a new approach as businesses are committing more budget than ever to cloud-based services. Here is a quick summary of the key findings of the report:
- On average, businesses having 800 or more employees typically spend around $15 million on SaaS subscriptions each year
- Most employees have access to 44 apps, but they don’t even use 7 of these on a regular basis
- The annual spend per employee is more than $13,000 or $15 million (800+ employees). Around $4 million of this spend goes to waste
- Businesses can minimize this $4 million waste each year by optimizing their spending
With businesses relying more on SaaS apps to power their operations, they simply cannot ignore to manage and optimize their subscriptions properly. Some businesses buy a new subscription just because it looks great on paper. However, they end up underutilizing the subscription or in some cases not using it at all. Known as software waste and shelfware, it can be huge burden on the IT budget and could have been utilized on other important things such as hardware or other mission-critical software upgrades.
It’s not always a good idea to invest huge sums of money in new and trendy software just for the sake of it. In fact, new solutions can cause new issues to pop up, including incompatibilities, steep learning curve and inadequate adoption. Let’s start with some tips from experts that can help businesses minimize software waste and optimize their IT spend.
Different Ways Software Spend Can Go to Waste
- Purchased a software, but failed to implement it (research suggests around half of companies don’t achieve full adoption of CRM software)
- Failing to conduct a research before buying a software
- Failing to test-drive the solution in real-time and getting feedback from the users
- Not having any kind of software asset management system in place
- Buying more licenses than a business actually needs (usually due to discounted prices for more users)
- Lack of communication and transparency within the organization
- Failing to get everyone onboard
Tips for Minimizing Software Waste
SaaS subscriptions are becoming more affordable with the passage of time. This can result in businesses making rash spending decisions without properly considering the long-term costs and actual benefits in terms of productivity gain. Practicing caution is a simple and effective strategy in this regard as it can save businesses from entering a financial sinkhole. Decisions related to IT infrastructure and software spending are no laughing matter, especially for budding small businesses and startups.
Businesses have a lot to consider when planning their technology spend. For most businesses, the most important decision to make is to choose between the traditional licensing model and SaaS subscriptions. SaaS has its obvious benefits over perpetual licenses, but it does not necessarily mean SaaS will work great for every business. We have covered the benefits and challenges associated with SaaS so you might want to have a look at the post for more details.
Businesses need to consider their requirements such as accounting, POS, inventory management and customer relationship management and how a SaaS subscription fills all these. For example, there is no point in paying for a full-fledge CRM if a business only needs an online chat system.
Getting a second opinion from a technology expert you trust can actually save companies quite some money on subscriptions. An expert can not only help you choose the best plan according to unique business requirements, but he/she can also help discover costs and potential issues a business might not be able to see otherwise.
Avoid Buying a Subscription You Don’t have the Capacity to Implement
A SaaS subscription will not bear any fruit without proper implementation. Proper training and resources are needed to implement complex solutions, while users also need training to get familiar with the new solution.
Underutilization is another common reason behind money wasted on software. There is no point in paying for an expensive marketing automation solution if all you want to do is send a few dozen emails and build some landing pages. This circles back to proper training, which ensures that employees understand the full capabilities of the system and know how to make the most of company’s IT investment.
Integration and Interoperability
Integration support and data interoperability are important aspects to consider when choosing any SaaS solution, which should be able to seamlessly communicate with most (if not all) the existing solutions. This saves time needed to enter data into different systems and ensures consistent and up-to-date information across all systems.
Only Pay as Much as Really Needed
The software industry is different from other industries in a sense that you don’t necessarily have to pay more to buy a quality product. With so many options available, businesses can easily find affordable solutions that they can customize according to their needs. It’s now possible to achieve the same results via SaaS at a fraction of what traditional software cost.
SaaS subscriptions also save companies from heavily investing in their own equipment and IT infrastructure. Although putting all the data into the cloud has its own disadvantages, it can help restrain infrastructure costs and keep the network environment simple.
Consider Vendor’s Reputation
It’s not necessary to buy a subscription only from top vendors. However, businesses need to consider reputation of vendors and make sure to read and understand the SLA (Service Level Agreement), which defines what to expect from the provider and what should they do if something goes wrong. Reputable providers stand by their products, offer great support and don’t try to trick businesses with hidden/unexpected costs.
Streamline Existing Subscriptions
HR, marketing and accounting related solutions are the most widely used SaaS systems, but large enterprises often use hundreds of other cloud-based services for different purposes. Subscribing to multiple solutions that offer similar features or overlapping in functionalities is one of the main contributors to software waste. For example, most marketing solutions offer communication, tracking and analytics functionality in one form or another so it does not make financial sense to buy solutions for these functionalities separately.
Keeping a track of existing subscriptions and streamlining them according to current requirements helps keep IT costs under control, especially when the spend is spread across multiple business units. Better visibility provides more control over spend and reduces waste of money on software. An easily readable and understandable SaaS spend dashboard makes it easier for teams to gain clear understanding about where the software spend is going and how can they control it more effectively.
Adopt Proven and Mature Technologies
Small and medium businesses should consider the risks and limitations associated with early adoption. Although they can leverage latest technologies to gain a competitive advantage, new technologies can have issues of their own and might result in poor user experiences due to spotty reliability and compatibility issues.
Despite its massive popularity and ‘buzz’ in the recent years, cryptocurrency is still not where people hoped it to be. Some small business at the height of crypto-buzz (in late 2017) started to invest and accept cryptocurrencies, but the new technology proved to be a double-edged sword.
There is nothing wrong with what they thought and did, but the world was probably not yet ready for the change. Even the mainstream cryptocurrencies such as Bitcoin had some serious limitations such as five transactions/second limit, which severely limited scalability (Visa can process 25k/sec).
Align Software Spending with Business Goals
Businesses should avoid picking a software solution based only on cost/availability/popularity. Instead, technology should be aligned with business goals. IT managers need to identify the solutions that align to business goals and the working environment.
SaaS subscriptions might seem like fairly affordable in the beginning, but they are not cheap in the long run. Businesses spend a lot of money on these subscriptions, which should help them achieve business goals. However, not all solutions work effectively and businesses can end up wasting loads of money on underutilized/unutilized SaaS subscriptions. The process of wasting money on SaaS subscriptions is quiet and it requires some number crunching and transparency to streamline subscriptions.
- Conduct a research before buying any software, take user feedback on different options
- Beware of duplications, regularly conduct software assessments
- Only buy subscriptions you really need
- Subscriptions should align with business objectives and strategies
- Consider dynamic/consumption-based pricing plans
- Choose software vendors that engage you actively and are focused on you, not just the next renewal
- Consider implementation and training before making a decision
- Free trials are a great way of understanding how a subscription fits into the core business strategy
- Employee experience is also important, not all solutions offer a great experience
- Use a software asset management solution to keep track of subscriptions
- Automate distribution and upgrades
- Use proven and mature technologies, especially small and medium businesses
Conduct regular software audits (company-wide)