The popularity of software as a service (SaaS) has skyrocketed. It’s evolved from a few niche tools to an expanding library of cloud applications that every company across industry depends on. But without following SaaS optimization best practices, like the ones listed below, CIOs and CFOs can be overwhelmed by the rising number of applications to manage and their costs too.
According to a report from Harvey Nash Group, 73% of global technology experts consider SaaS technologies to be “quite important” or “very important” for their organizations. Discover how SaaS optimization can help your organization, four steps to get started and the seven best practices you need to know to make this process more effective.
What is SaaS Optimization?
SaaS optimization is the process of assessing all applications currently in use and ensuring they are used efficiently. This requires aligning apps to business needs including evaluating any duplicate tools, licenses, users, user habits, and the spending associated with each application. The process involves identifying and addressing all issues that affect the utilization efficiency and cost of SaaS tools. Successful optimization unlocks continuous improvement in cost savings and usage efficiency to drive maximum value from your applications.
By using SaaS management software and optimization tools, you can create a SaaS optimization cycle. This cycle allows you to automatically iterate and optimize for every new application and user license you add.
It also enables ongoing cost efficiencies. SaaS price optimization is essential for any organization looking to control costs, become more efficient and obtain the maximum value from their SaaS investments and IT budgets. It helps you identify areas where you’re overspending and improve your cost savings and vendor management inefficiencies.
What Causes SaaS Overspending?
There are two main factors that typically lead to companies overspending on SaaS: lack of visibility and unauthorized license auto-renewals.
Lack of Visibility
The first issue, a lack of visibility into inventory, is often the result of shadow IT activity. This occurs when cloud technology is provisioned by individual business units without your IT department’s formal approval. As a result, IT lacks visibility into your organization’s use of SaaS technologies, much less their purpose. This can lead to redundant applications purchased across multiple vendors as well as security concerns. Without that insight, you can’t optimize SaaS application investments, comply with government regulations, or control costs.
The second factor, unauthorized license auto-renewals, is a common problem when SaaS products and applications are provisioned without involving IT. Because IT isn’t aware of subscriptions, no one is monitoring usage or managing the renewal process, leading to wasted spend.
5 Benefits of SaaS Optimization
There are many benefits of SaaS optimization. Here are some of the most significant ones.
Reduced SaaS Spending
With SaaS optimization, you can reduce spending and ease vendor management burdens by identifying redundancies and consolidating underused licenses. SaaS optimization helps you identify and eliminate unneeded applications while consolidating and replacing multiple applications with a single comprehensive option. First, determine which tools offer the greatest value, pose the least security risks, and have the highest levels of adoption, so you can identify SaaS licenses that can be discontinued and make data-driven decisions around license upgrades.
Having greater visibility into your SaaS applications and licenses means it’s easier to find and remove any outdated, unused, or high-risk apps. Additionally, the security team can more accurately track the list of vendors and contractors with access to company information systems.
Optimizing your SaaS apps also provides greater visibility into what services are in use. By tracking data such as user behavior and usage patterns, you gain greater insights into your business-critical tools and identify potential issues and opportunities. For instance, employee on-boarding and off-boarding becomes clearer as teams can see where licenses go unused. Financial chargebacks are also easier when IT has visibility into the applications used by each department and employee role.
SaaS optimization can help increase IT productivity by streamlining and automating management tasks and workflows including bill pay, contract renewal calendars, and pricing comparisons. This way, your staff members have access only to the tools they need, and work isn’t interrupted by unnecessary distractions.
4 Steps to Creating an Optimized SaaS Ecosystem
Your SaaS optimization process requires structure and strategy. Here are four steps to get there.
1. Assess Your Applications
The first step to optimizing your SaaS approach is conducting a comprehensive assessment and inventory of all applications within your organization. This process entails evaluating all associated SaaS transactions, licenses, contracts and subscriptions, plus the departments and individuals using them.
Ideally, you’ll obtain this data through integrations whether through direct app integrations, Single Sign On systems, or financial and accounting systems. Once you have that and any other data, you’ll be able to automate analysis with real-time updates inside the SaaS management and optimization platform.
2. Assess Usage and User Activity
Upon organizing and cataloging your SaaS stack, the next area of focus should be usage and user activity. You need to know what kind of applications you’re using, how much and when. This analysis will help you determine where you can save money by reducing or removing unnecessary applications, as well as other unused SaaS tools and resources.
If you can identify areas where users are inactive, you can reallocate those licenses. By understanding your data usage and user activity, you can optimize your SaaS stack for both cost and performance. This is also a time to evaluate role-based permissions. Optimizing this area restores control over usage and access, which improves compliance and mitigates security threats.
3. Right-Size Your Inventory
The next phase involves identifying and taking proactive action against any SaaS applications that are duplicative and unnecessary, unauthorized or provisioned outside IT. Start by assessing where you have waste. Getting an accurate picture of your SaaS applications informs your decisions about what to keep, where to cut costs, and how to improve license management going forward.
4. Optimize and Forecast SaaS Spend
One of the main benefits of SaaS optimization tools capabilities is that you can automatically connect each application to its associated contract and financial transaction to see not just which apps are in use but what they are costing the organization. You can then leverage those insights to budget, forecast future needs and ultimately trim the fat off SaaS spend.
Here are four ways you can do that:
- Manage expenses to stay within budget: Compare invoices and actual spending to current budgets. Assess current SaaS spend versus what the organization requires and can afford.
- Monitor usage to cut costs: Terminate low-impact and no-impact subscriptions to maximize efficiency across teams and departments. Look at applications that have little usage.
- Create accurate, fact-based estimates: Forecast budgetary needs based on current usage and SaaS spend trends and patterns.
- Maintain and monitor contract schedules: Check your alerts and notifications to keep you aware of any spikes in new licenses or increased billing or contract issues, auto-renewal reminders or other items to address.
If you’re unsure how SaaS optimization can benefit your organization, consider partnering with a SaaS management software provider for guidance and support. Someone like Tangoe.
Learn how Tangoe’s SaaS management software can further help with your SaaS optimization.