Optimizing your company's spend!

Reduce SaaS spend through SaaS cost optimization tools and increase runway!

For the longest time, companies’ motto was growth at all costs, but now with limited capital in the market, people have started giving importance to the abandoned cost metrics and runway. A few tools that are really helping in this journey are SaaS cost optimization tools.

These tools assess your SaaS spending, help you cut your costs, negotiate on your behalf and reduce overall SaaS spends.

Why the need?

Any growth-stage company would easily have 50+ tools spread across the organization.

• Shadow IT, which refers to the installation and utilization of hardware and software by individuals without the knowledge of the IT department, not only contributes to the rise of unapproved software in an organization but also presents a security challenge. Uncontrolled costs mostly stem from licenses and subscriptions simply being forgotten.

• On top of that, the buying process also takes a lot of time and is not the most efficient.

• Cloud enables lower initial IT costs and scalability but can be expensive in the long run. It is estimated that 30% of cloud spending is wasted, and companies generally over budget nearly 24% for their cloud needs.

According to Vendr, one of the biggest tools, ”We buy and renew software for companies. Why? Because the way it's done now is a pain. Stakeholders, especially engineers, are required to spend unnecessary time with software salespeople. We believe that the buying process should be dictated by the buyer. For example, if you want to procure New Relic, you should be able to do it your way, not the salesperson’s way. Vendr was created so that companies can get the SaaS they need without needing to invest the time to procure.”

Solution and tools?

The tools are divided into two categories:

• Optimizing buying experience and spend

  Tools like Vendr, Spendflo sit here. According to Vendr,” Buying and renewing software is complicated, and even more if you want to get the best deal. We take care of all that and get you the software you need, fast, and at the best possible price. We also handle renewals and are able to reduce the price per seat as a company grows”

  Vendr is currently buying and renewing software for many fast-growing companies. They are currently working with Canva, GitLab, Brex, Drift, HubSpot, InVision, and others. For example, in their first 12 months working with InVision, they claim they saved them over $1.5M.

• Optimizing the internal processes to bring in cost efficiency

  

  This has tools like Zluri, which claim to provide savings of ~$600k(~10x their cost) for a 500-member organization by giving visibility on all SaaS apps, users and licenses & preventing Shadow IT. They automate the IT tasks and thus, are able to detect duplication, and underutilization of software and optimize overall processes. This becomes important after the company reaches a certain stage and it becomes difficult to keep a track of all the tools everyone in the organization is using.

Traditional, companies like SHI, CWD(Bn dollar companies) used to do this for buying software, hardware and a bunch of other things.

These platforms have really gained momentum in the last few years as more and more SaaS tools are being used by companies to solve everything in the organization. Companies usually spend 10-15% of their total cost on tools and 5-10% on server costs. This, of course, has exceptions and every business should be optimized accordingly. According to an article by Spendflo:

SaaS spend per FTE has increased after the pandemic:

• If an organization’s SaaS spend for Full-Time Employees (FTE) was $4,000, after the pandemic, it has become $7,000.

• Some 200-people organizations spend up to $5 million on SaaS spends. The number of SaaS tools is being consolidated and the quantum of spend is increasing, with SaaS companies showing nearly a 7% price hike.

• The ratio for cloud spend to SaaS spend is 1:1. There’s a 2:1 ratio to SaaS spend if you are a B2B business and 3:1 if you are a B2C business.

Thus, if you are a company that is looking to reduce costs, some of these tools can really help at this point.