Stop Bleeding Money on Unused Software: Optimizing SaaS Spend

Imagine walking into a tech company’s office. Every desk is humming with cloud-powered tools, from Slack conversations to digital dashboards. Project management, customer relationships, team collaboration – it’s all powered by sleek, subscription-based software that is promised to revolutionize how we work.

SaaS applications are actively empowering organizations to operate efficiently and scale effectively. However, with the rapid adoption of SaaS comes a hidden challenge: SaaS spend management.

Digital transformation, albeit necessary in today’s tech-driven business environments, comes with a price tag. It’s not just any price tag; we’re talking about a potential money pit silently draining your company’s budget.

Picture this: Your company could be paying for software licenses that nobody’s using. Abandoned subscriptions, redundant tools, forgotten enterprise accounts are mere digital dust collectors eating away at your bottom line.

Without proper oversight, organizations risk overspending on unused or underutilized software, transforming what should be a productivity boost into a financial headache.

The numbers are staggering! Most companies waste up to 30% of their SaaS spending on unnecessary or underused subscriptions. That’s not just loose change; that’s a significant chunk of your operational budget bleeding out, one forgotten software subscription at a time.

With the use of SaaS solutions sprawling across businesses, the critical question emerges: What is the right approach to buying them wisely?

Should you master complex spreadsheet formulas to keep SaaS spending in check, or should you invest in specialized software to streamline your SaaS spend management strategy?

Let’s find out!

In this guide, we’ll explain everything you need to know about SaaS spend management, why it’s critical for your organization, and how to optimize it to stop bleeding money on unused software.

What is SaaS Spend Management?

SaaS spend management is the process of tracking, analyzing, and optimizing the costs associated with SaaS applications across an organization. It involves identifying all SaaS subscriptions, SaaS renewals, assessing their usage and value, and ensuring that every dollar spent on software assets delivers maximum ROI.

In simpler terms, it’s about eliminating waste, whether it’s unused licenses, duplicate tools, or auto-renewing subscriptions that no longer serve a purpose.

Breaking down the concept

Software spending in modern businesses: According to sources collected from different SaaS platforms, the average organization uses over 100 SaaS applications, with spending on SaaS tools growing by 20% annually. Yet, nearly 30% of SaaS licenses go unused, leading to significant financial waste.
Why traditional expense management doesn’t cut it anymore: Traditional expense management systems are designed for physical assets and one-time purchases.It doesn’t cater to SaaS application’s dynamic, subscription-based nature. Organizations struggle to track recurring subscriptions, usage patterns, and renewal dates without specialized tools.

Here is what every IT manager needs to understand for SaaS Spend Management.

‘SaaS spend management can quickly become chaotic if tools and software are not properly managed. Governance should be one of the key priorities for IT managers, otherwise, it can lead to financial inefficiencies, security risks, and operational bottlenecks’

4 critical signs your SaaS Spending is out of control

1. Duplicate tools – The organizational overlap trap

When multiple teams independently select and purchase software for similar functions, you’re essentially paying double, or even triple for the same capabilities.

For example, your marketing team could be using Asana, your engineering team could be on Trello, and your sales team on Monday.com, all essentially tracking project workflows.

Each subscription might cost $10-$30 per user per month, which means a 50-person company could be burning $1,500-$4,500 monthly on redundant project management tools.

2. Unused licenses – The ghost subscriptions

Inactive or underutilized accounts are silent budget killers. In many organizations, employees churn, change roles, or simply stop using a tool, but the license remains active.

A typical enterprise-level SaaS license ranges from $20 to $100 per user monthly. If just 20% of your 100 purchased licenses sit unused, you could be wasting $4,000-$20,000 annually, money literally disappearing into thin air.

3. Lack of visibility – The management blind spot

Without a centralized tracking system, SaaS subscriptions become a sprawling, unmanaged ecosystem. Most companies don’t realize they’re subscribed to 2-3 times more software than they actively use.

This visibility gap means:

No clear understanding of total software expenditure
Difficulty identifying redundant or overlapping tools
Increased risk of shadow IT
Challenges in budgeting and financial planning

4. Frequent auto-renewals – The silent budget drain

Auto-renewal clauses are designed to keep you locked into subscriptions, often with minimal notification. Many SaaS providers automatically renew contracts with slight price increases, betting that busy IT managers won’t notice.

While unnoticeable, these renewals can:

Increase costs by 5-10% annually without adding additional value
Lock you into long-term contracts with minimal flexibility
Create budget unpredictability
Consume resources without ongoing utility assessment

The invisible price tag in SaaS Spending

As mentioned earlier, studies suggest that companies waste 30-40% of their SaaS spending on unused or underutilized software. For a mid-sized company spending $500,000 annually on SaaS, that’s potentially $150,000-$200,000 in avoidable expenses! But this isn’t the only cost that companies could incur. There’s more to it:

1. Compliance risks

Unauthorized or unvetted SaaS tools can transform your organization into a compliance nightmare. Each unapproved software introduces potential security vulnerabilities and regulatory challenges. In industries like healthcare, finance, and technology, a single unauthorized tool can trigger:

Data protection violations
Potential GDPR, HIPAA, or industry-specific compliance breaches
Increased cybersecurity risks
Potential legal and financial penalties ranging from $10,000 to millions of dollars

2. Vendor lock-in

Long-term contracts and auto-renewal clauses create a strategic trap that limits your technological flexibility. These agreements often:

Impose hefty exit fees (sometimes 50-100% of remaining contract value)
Make software migration complex and expensive
Prevent your organization from adopting more innovative solutions
Create financial and operational inertia that stifles technological adaptation

3. Operational inefficiencies

Proliferating SaaS tools can transform your workplace from a streamlined operation into a chaotic software ecosystem. The consequences extend far beyond mere financial costs. There’s

Decreased employee productivity due to tool confusion
Lower software adoption rates
Increased training and onboarding complexity
Communication breakdowns between teams using different platforms
Cognitive overload from managing multiple disconnected systems

The shadow IT challenge in SaaS Spend Management

Shadow IT represents the digital wild west of modern workplace technology, where employees and teams purchase and implement software solutions outside of traditional IT governance.

At its core, shadow IT occurs when teams seek quick, efficient tools to solve immediate challenges, bypassing formal approval channels.

A marketing team might subscribe to a new analytics platform, an engineering group might adopt a project management tool, or sales representatives might use an unauthorized communication app, all without the IT department’s oversight. Below are some ways you can eliminate shadow IT and the SaaS spend resulting from it.

Use software standardization for Shadow IT

Addressing shadow IT isn’t about suppressing technological creativity, but channeling it strategically. Standardization offers compelling organizational benefits:

Cost optimization: Consolidating tools dramatically reduces subscription expenses by eliminating redundant and overlapping software.
Enhanced collaboration: Unified platforms create seamless cross-team workflows, breaking down technological barriers.
Improved data integration: Standardization eliminates data silos, enabling more comprehensive and accurate organizational reporting for SaaS apps.

The goal is creating a flexible, responsive IT ecosystem that balances technological governance with team-level innovation.

Choose the right tool for your organization

Selecting the right SaaS spend management tool is crucial for gaining control over software expenses and optimizing your organization’s tech stack. The ideal solution should offer a combination of features that streamline tracking, eliminate redundancies, and improve financial efficiency.

Key features to look for include:

License Management: – Helps track active, inactive, and underutilized licenses to ensure you’re not overpaying for unused seats.
Vendor Management: Facilitates better contract negotiation, tracking of vendor agreements, and ensuring compliance with service-level agreements (SLAs).
Cost Optimization: Identifies areas where spending can be reduced, such as duplicate subscriptions or unused tools.
Compliance and Security Management: Ensures all SaaS applications meet regulatory and security requirements, reducing the risk of data breaches or compliance violations.

EZO AssetSonar for the Win

EZO AssetSonar is one of the leading market leaders in SaaS management, empowering organizations to track and manage their digital infrastructure with prudent spending.

With unprecedented ease, EZO AssetSonar conveniently maps software licenses, versions, and installations across on-premise and cloud environments from a single source of truth.

Optimize your software spending through intelligent renewal management and access powerful pre-built reports like Technology Spend per User, while simultaneously neutralizing digital threats by blacklisting malicious software, tracking browser data, and maintaining a secure digital arsenal through comprehensive patch management.

Implementation roadmap: A step-by-step guide

Successfully implementing a SaaS spend management solution requires a structured approach.

Follow these steps to ensure smooth adoption:

Conduct a SaaS audit: Identify all SaaS applications currently in use, including both IT-approved tools and any shadow IT purchases. This helps uncover redundancies and hidden expenses.
Implement a reliable tool like EZO AssetSonar: Choose a platform that fits your organization’s needs based on budget, company size, and required features.
Develop a clear SaaS policy: Establish guidelines for procuring, managing, and renewing software licenses and software license management to prevent unauthorized purchases and unnecessary expenses.
Train employees and stakeholders: Ensure that all relevant teams understand how to use the new system and the importance of SaaS spend management. Teach your teams to stay away from the ‘shiny new toy’ syndrome when it comes to buying new software.
Implement change management strategies: Gain buy-in from leadership and employees to ensure widespread adoption and adherence to new policies.
Monitor and optimize continuously: Regularly review SaaS usage and spending to make data-driven decisions and optimize your tech stack over time.

Other best practices for effective SaaS Spend Management

Track relevant KPIs

To maximize the benefits of SaaS spend management, organizations should monitor KPIs to measure the effectiveness of their SaaS spend management efforts. Essential KPIs to track include:

License utilization rate:The percentage of software licenses that are actively used versus those that remain dormant.
Cost savings from optimization efforts:The amount of money saved by eliminating redundant tools, unused licenses, and negotiating better contracts.
ROI on SaaS investments:Comparing the financial benefits gained through optimized SaaS spending against the cost of implementing a management solution.

ROI calculation methods

To determine the return on investment (ROI) for your SaaS spend management strategy, use the following formula:

ROI (%) = [(Cost Savings – Cost of Implementation) / Cost of Implementation] x 100

For example, if your organization saves $100,000 annually from optimized SaaS spending and the management tool costs $20,000 per year, your ROI would be:

ROI = [(100,000 – 20,000) / 20,000] x 100 = 400%

Sounds like a massive steal right?

This calculation can help justify your investment in SaaS spend management and demonstrate tangible financial benefits to the senior management.

Future-proof your SaaS investments

As SaaS adoption grows, managing costs efficiently is becoming more important than ever. Organizations must stay ahead by embracing emerging trends and evolving their SaaS management strategies. As companies grow, their SaaS usage tends to increase, leading to new challenges in managing costs and ensuring efficiency.

To prepare for scaling, organizations should regularly review and adjust SaaS policies to accommodate new business needs, automate subscription tracking to prevent overspending as new tools are introduced, and standardize software procurement processes to maintain efficiency across teams.

SaaS spend management isn’t a one-time effort; it requires continuous monitoring and optimization. To ensure ongoing success, companies must by all means:

Conduct quarterly SaaS audits to identify new redundancies and cost-saving opportunities.
Keep a centralized SaaS management platform updated with real-time usage data.
Encourage cross-team collaboration to maximize software efficiency and adoption.

By taking a proactive approach to SaaS spend management, businesses can unlock significant cost savings, improve operational efficiency, and position themselves for long-term success. Don’t let wasted software expenses drain your resources and start optimizing your SaaS spend today!