Software-as-a-service (SaaS) is a critical tool for a startup's ability to grow. Allowing businesses to try and subscribe to best-of-breed software, it has been a boon for growing companies.
But the dark side of B2B SaaS is that many startups are oversubscribed — making software their second largest expense after payroll.
According to research by SaaS management platform Cledara, the average startup holds at least 66 licences. But 59% of companies surveyed believe they hold significantly more subscriptions, which Cledara estimates could be as many as 93, not counting the company’s IT infrastructure.
Heading into 2023, what can businesses do to assess the return on investment (ROI) of each of their software tools? And when is it time to just cancel?
Oversubscription reduces productivity — and stifles culture
Oversubscription means companies are wasting money — either in the form of duplicate licences, forgotten ones or by holding subscriptions to solutions that perform similar functions.
Underuse of software also causes issues. If adoption across the company isn’t uniform, inefficiencies are created, as teams might struggle to find relevant information or data across too many solutions. This leads to a drop in productivity — just 14% of companies think all of their SaaS subscriptions are driving ROI.
Additionally, if data isn’t stored in a uniform way, it can expose the company to unnecessary risk — especially if individuals are using platforms outside of the agreed IT infrastructure.
Most buyers mistakenly focus on the buying and subscribing of software, but the real cost to businesses is once it enters your organisation
“Most buyers mistakenly focus on the buying and subscribing of software, but the real cost to businesses is once it enters your organisation,” says Rob Glickman, Cledara’s chief marketing officer. “Companies are stunned when they actually see, for the first time, the software they are paying for, and using — or not using.”
This inefficiency can affect employee satisfaction too. Some 63% of Cledara’s survey respondents feel the mismanagement of SaaS is having a negative effect on their company culture.
“We live in software all day long,” says Glickman. “Companies that have a process around the software they use see more productivity and enjoy better company culture simply because people are more efficient and less frustrated.”
Hack your stack
Glickman says that startups should “hack their stack” by taking a lean approach to their software stack from the start.
“You want to get the most out of the software you're using and resist the temptation to upgrade or switch to a more comprehensive solution,” he says.
Naturally, this becomes harder to manage as a company scales. As teams grow, businesses are more likely to have employees make their own purchasing decisions. Cledara found companies with a headcount of 51-100 allow 10% of their team to make purchasing decisions in regards to SaaS — compared to 26% of staff in companies of 251-500.
“People have much more power within organisations. But with that power comes the responsibility of making sure that they're making the right choice for the business,” says Glickman. “It's not just about you or your team. Ask yourself if this is the right tool for the company? Is this a tool that's going to allow me to collaborate better with my peers?”
Free trials, costly consequences
With many solutions offering free trials, it's easy for employees not to think about the long-term commitments they may be making.
Glickman suggests creating a checklist with considerations around the use of the tool, its costs and any compliance issues, particularly as it pertains to customer data. This is crucial, as a new SaaS platform may become a fundamental part of the business’s operations going forward.
“When deciding to subscribe to a new tool, try to think beyond your immediate needs. If the tool proves valuable, it will in turn become harder and costlier to extract yourself from it,” says Glickman.
When deciding to subscribe to a new tool, try to think beyond your immediate needs. If the tool proves valuable, it will in turn become harder and costlier to extract yourself from it
For instance, at dev-ops startup Codacy, the team struggled to keep on top of their SaaS subscriptions as they scaled.
“We didn't have a management system for SaaS,” says Frederico Camara, senior accounting specialist at Codacy. “Basically we had a huge Excel with all of our applications.”
By consolidating the management of their software with Cledara’s SaaS management platform, the team now has visibility over all of its applications (current count is 79), and the finance team has better oversight of new software requests and purchases made by employees. Camara also highlighted a compliance checklist feature that has minimised the company’s risk, a key consideration as it grows.
Trim your SaaS in 2023
The right balance between growth and efficiency will be critical in 2023 — and one of the first places companies should look for savings is in their software stacks, says Glickman.
“Now it's a very different environment where teams must tighten their belts and find savings,” says Glickman. “As software is a company’s second largest expense, we see this as the lowest hanging fruit for immediate budget relief.”
Glickman recommends taking an inventory of all current software subscriptions — including any ongoing free trials. This initial inventory, even on a spreadsheet, can go a long way to reveal the current software footprint in a company and opportunities for savings.
From controlling costs, to helping with both onboarding and offboarding; it saves us time, because we see all our software in one place
Camara says that since adopting a SaaS management platform, the team has been able to save days per month on managing invoices, increasing productivity and ultimately creating savings for the company across multiple functions.
“From controlling costs, to helping with both onboarding and offboarding; it saves us time, because we see all our software in one place,” he says.
