Leveraging vendor management for optimal SaaS spend

Want to get the most bang for your software buck? It’s all about smart vendor management – basically, teaming up with your software providers so everyone wins.

With software spending to continue to grow at a CAGR of 13.5% in the next five years, it’s more important than ever to get a handle on your tech stack. 

Think of vendor management as a partnership with the companies you get your software from. It’s about building good relationships so you get the most out of your software without breaking the bank.

Good vendor management isn’t just about saving money (though that’s definitely a plus). It’s about getting the best return on your software investment and making sure your tech actually helps you achieve business goals. It’s about turning just buying stuff into a real strategic advantage. And it’s about constantly re-evaluating your choices to maximize tech ROI.

Understanding your SaaS spend

The first step to managing your SaaS spend is to actually know where your money is going. A clear picture of every line item is needed to manage your software spend effectively. 

It might sound obvious, but visibility across all users is critical here. And what about those apps that weren’t authorized by IT or set up without your knowledge? 

To get started, you need to take inventory of all the SaaS applications your company is using and track the associated spend. Some teams manage to do this with a spreadsheet, which can be a great start, while others do this in tandem with a SaaS management software that will find the tools that you don’t know about, aka shadow IT. 

For the teams that currently manage their software spend with a spreadsheet should really consider plans to transition to a SaaS management tool. Spreadsheets hinder your ability to dynamically support the fluctuations in software spend and can greatly impact your team’s ability to make data-driven decisions. SaaS management software not only creates spend visibility across your tech stack, but can also inform potential savings opportunities.

Key vendor management strategies

Once you have a better understanding of your SaaS spend, it’s time to roll up your sleeves and start implementing some smart vendor management strategies.

1. The SaaS procurement process: Plan before you leap

You know your current tech stack as it sits, but what about when sales adds a new tool tomorrow? It’s important to take a step back and think through the right software procurement process for your organization.

This process should include clear guidelines for evaluating each application and defining selection parameters. It should also account for a review of existing applications to ensure you don’t procure a capability you already have from an existing application (anyone else have five different project management applications?).

In addition to functional and technical requirements, the evaluation criteria should also incorporate security and compliance considerations. These considerations are critical to ensure that any new software adheres to your organization’s internal security policies and complies with relevant data privacy regulations. This may involve assessing the vendor’s security practices, reviewing the software’s data handling procedures, and conducting vulnerability scans or penetration tests.

Once the evaluation criteria have been defined, it’s important to establish clear selection parameters. These parameters should specify the minimum acceptable levels for each evaluation criterion, as well as any weighting factors that may be applied to prioritize certain criteria over others. The selection parameters should be based on your organization’s specific needs and risk tolerance, and should be reviewed periodically to ensure they remain relevant.

After finalizing the software procurement process, it’s essential to communicate it clearly to all stakeholders. This includes not only the IT department, but also other departments that may be involved in software selection, such as finance, legal, and procurement. By involving key stakeholders in the decision-making process, you can ensure that all perspectives are considered and the final decision is aligned with the organization’s overall goals.

Ultimately, you’ll also want to include a mechanism for ongoing monitoring and review of the procurement process. Beyond tracking usage and performance of a new software, you’ll want to speak to those who are more involved in the procurement process to identify areas for improvement to make sure the process is effective and will continue to be used.

2. Contract negotiation and getting the best deal

Negotiation is a strong tool at your disposal, don’t be afraid to use it! Know that software vendors want your business and they’re often willing to work with you to get it.

Evaluating contracts

The first thing everyone looks at is pricing. SaaS vendors typically offer a variety of pricing models, such as per-user, per-seat, or per-feature. Understanding the different pricing models in context of your organization’s planned usage will help negotiate the best terms for your organization.

Contract length is another key factor. While limiting contracts to a maximum one year length may lower risk and provide an opportunity to re-evaluate your decision, multi-year contracts offer an opportunity for huge savings. Regardless of contract term length, make sure you understand auto-renew clauses and plan your decision timelines accordingly. 

Other key factors to consider are additional new features and available support channels or maintenance packages.

Getting to the negotiation table

Thorough research is essential for successful negotiation. This includes not only understanding the contract itself, but also your own organization’s needs. Specifically, knowing which licenses are actually required, which will be actively used, and the associated budget are critical for both acquiring new applications and renewing existing software agreements.

Beyond price, negotiating terms such as support levels, service agreements, and data security provisions can significantly impact the long term value and partnership of the software vendor.

3. Getting the most out of your software

Knowing your tech stack is one thing, knowing what software your employees are actually using is another.

A good first step to avoid this is regularly checking application and license usage. Without a vendor management tool like BetterCloud, you might have to ask around or resort to less ideal methods, like cancelling subscriptions to see who notices. 

The best approach is using a SaaS spend management tool to accurately assess usage and license types across your entire tech stack. For example, you might find all employees using Zoom Pro, even though only the sales team needs meetings longer than 40 minutes. This reveals an opportunity to adjust licenses based on actual use. And a spend management tool can help you course correct things like this. 

Another SaaS optimization opportunity is overlapping applications. If you have multiple apps doing the same thing, you can consolidate. Why pay for three different project management tools when one really good one will do?

And finally, make sure your team knows how to use the tools they have at their disposal. Training can boost adoption and make sure everyone’s getting the full value out of the software you’ve invested in.

4. SaaS governance: Keep things in check

To really stay on top of your SaaS spend, you need to have a solid governance structure in place.

Think of SaaS governance as the rules of the road for software – it keeps things organized and prevents things from going off the rails.

So, what does a solid SaaS governance structure look like? It includes some key things like clear policies and centralized visibility. If you’re looking for a more comprehensive guide to SaaS governance, we’ve got best practices here.

While a solid SaaS governance plan might seem like a lot of work upfront, it is well worth it. It’ll save you money, reduce risk, and give you more control over your SaaS spend.

Why effective vendor management matters

Effective vendor management is like having a financial superhero on your side, quietly saving you from wasted cash and frustrating contracts.

This translates to tangible benefits, including:

• Cost savings: By optimizing your SaaS usage and negotiating better contracts, you can significantly reduce your software spending.
• Improved efficiency: When your employees have access to the right tools and know how to use them effectively, they can work more efficiently and productively.
• Reduced risk: A strong vendor management program helps you mitigate risks associated with data security, compliance, and vendor lock-in.
• Better decision-making: By having a clear understanding of your SaaS landscape, you can make more informed decisions about your software investments.

Get your spend management out of spreadsheets

Sure, you could try to wrangle your software spending with spreadsheets and policies, but there’s a much easier way.  A spend management tool like BetterCloud makes it a total breeze.

From automatically spotting every transaction with G2’s extensive taxonomy to giving you detailed insights into how your software is being used, and even reclaiming unused licenses automatically, BetterCloud is your secret weapon for effortless software spend management.