Cloud services boost productivity and strengthen a company's competitiveness. But how can a CFO maintain tight control over an increasing number of SaaS licenses? Let's explore the topic here.
The COVID-19 crisis accelerated the IT industry, and this development has only continued. Worldwide end-user spending on public cloud services is forecast to grow 20.4% to total $678.8 billion in 2024, up from $563.6 billion in 2023, according to the latest forecast from Gartner. Businesses understand the importance of investing in IT to remain competitive and to increase productivity.
It's easy to rush into investing in a large number of SaaS solutions to drive growth and efficiency. After all, these are SaaS solutions that free up wages and employees, improve various aspects of the company's operations, and release resources. Eventually, the question arises: Do we have an overview of all our SaaS licenses?
A CFO will always want to answer this question with a clear yes. Because: When the CFO has control over all SaaS licenses, it lays the foundation for better cost control and budget management. In this article, we present a practical approach to the growing challenges of an increasing number of SaaS licenses.
The most important challenges when managing SaaS costs
As cloud services become increasingly popular, and businesses see the importance of having an overview and control over agreements, one would think more finance departments would have better control over their SaaS costs. However, many still struggle to maintain control, due to a multitude of challenges in SaaS license agreement management. Understanding these is essential to prevent and resolve them. Known challenges include:
Different contract and billing terms
A challenge with expenses for SaaS solutions is that each solution is linked to a variety of contract terms and billing approaches. Challenges are related to subscription conditions, types of licenses, and the number of users.
Lack of centralized purchasing
Often, SaaS solutions are purchased by individuals who see a need for the product. An example is a graphic designer purchasing access to Photoshop, with the contract in her or his inbox. When the designer leaves, the license continues to run because no one has the overview or assesses if the business still needs Photoshop. The more such licenses, the greater the risk associated with the lack of central control.
Centralized purchasing has five clear advantages: Cost reduction, risk reduction, improved compliance, better supplier selection, and more long-term supplier relationships. Read this case about how Visma saved 220 million kroner through a centralized purchasing department.
Using spreadsheets, lacking overview
With the increasing number of SaaS solutions in use, contracts are constantly being renewed and renegotiated. Spreadsheets are poorly suited to keep a comprehensive and updated overview, especially since the overview depends on individuals who have built the spreadsheet. Therefore, an overview of SaaS solutions requires a centralized system that handles all data related to the agreement and makes the data visible.
Silo thinking creates disadvantages
A challenge, especially in large companies, is silo thinking. For example, we often see the same SaaS solution purchased multiple times – instead of utilizing access across the company. Again, the problem is the lack of overview.
9 Questions CFO's should ask concerning the company’s SaaS products
How can a CFO gain an overview and better manage SaaS costs? We believe that by answering the questions below, the company can achieve significant gains.
1. Which SaaS agreements have been entered into by each employee – and what do they cost?
To get an overview, the CFO can map SaaS usage per employee in a central solution. Such a bottom-up aggregated control can be significant for companies experiencing growth, restructuring, or a reduction in the number of employees. By getting this overview, the CFO can also see how SaaS costs have looked historically and how they are expected to develop.
2. What is the sum of all the SaaS costs, and what is budgeted for the next period?
The overview allows the company to identify potential cost savings, negotiate more effectively with suppliers, and maintain a sustainable economy. It also helps minimize the risk of unforeseen expenses and ensures that the company's budget reflects realistic expectations for SaaS consumption.
3. When are your SaaS agreements renewed, and what are the other significant contractual obligations and conditions?
Knowing the expiration date of your SaaS agreements is a condition for predictable contract management, not least to avoid unwanted automatic renewals of contracts. With notifications before the expiration date, you have time to evaluate the suppliers' performances before renegotiation. It's also important to be aware of conditions related to cancellation deadlines, price increases, and any changes in the scope of services.
4. What is the pricing model for each SaaS agreement?
Is the SaaS agreement license-based or volume-based? With the former, you pay per user access. With volume-based models, the invoice from the supplier will depend on the usage or the amount of data or transactions performed within the SaaS product. When you know how the costs arise, you can more easily optimize the use of SaaS solutions.
5. Are the SaaS products used by your colleagues?
This question should be viewed in conjunction with the question of the pricing model. Many SaaS licenses are distributed widely in the organization, but not all employees use them. Without an overview of who and where employees use specific SaaS products, it's difficult to identify and realize savings.
6. Can you compare prices and renegotiate your SaaS solutions?
Like airline tickets, SaaS solutions can vary a lot in price depending on the sales process and customer behavior. Has a demo been performed? Have you gained access to discounts or alternative pricing? Therefore, it may be beneficial to find a service that compares prices on various SaaS solutions, so you have a good basis for renegotiations.
7. Are you aware of built-in price increases for your SaaS solutions?
Like rent, some SaaS solutions have set an annual price increase, set at, for example, 3-5 percent per year. It's important to have access to these figures, so you can more easily budget for what the future expenses for SaaS solutions will be.
8. When do SaaS products need to be paid?
When you have a complete overview of the due date for payment of all SaaS solutions, you can better manage cash flows.
9. Do we have SaaS solutions that we can terminate because there are duplicates or the solution is redundant?
There are a plethora of SaaS solutions on the market. Especially large companies may find that their employees have access to different SaaS solutions that actually resemble each other and have overlapping functions. Through this evaluation, you can reduce costs for SaaS products by stopping the use of redundant solutions.
The Ultimate Solution for Managing Your Company's SaaS Costs
Professional management of SaaS licenses can be demanding for the company. With a contract management software, you have the tool you need to get a complete overview. Yes, most of the questions above will be answered almost by themselves. This is the solution described in this Visma case, where the procurement department saved 220 million kroner by centralizing their purchases and using our software for contract management.
House of Control's contract management solution indeed provides an overview of all agreements and their associated data, making it easy to get alerts when agreements are due for renegotiation or renewal. The contracts are stored in a cloud-based software where key people can access as needed. This enables significant cost savings and a comprehensive overview of contracts.
If you are interested in hearing more about such a solution, we are ready to assist you further and tell you about House of Control’s software.
Pick a time slot that suits you and schedule a meeting with us here: