Effective SaaS cost management with visibility and control

IT leaders need to evaluate how their SaaS portfolio supports their company’s strategic priorities. For instance, are these tools enabling innovation and growth? Is there a clear roadmap for integrating SaaS applications into enterprise-wide digital initiatives? Aligning cost optimization efforts with the bigger picture helps ensure that all the money spent on SaaS delivers tangible value to the business.

The good news is that there are ways to avoid rocketing costs, but with so many options how do you know what is best for your business needs?

Below we look at ways to reduce oversubscription charges, optimize SaaS costs and functionality, and ensure best practice across the whole of your cloud-based software ecosystem.

The move to the cloud has been rapid with an exponential growth in costs. Gartner®^¹ predicts that worldwide spending on software as a service (SaaS) will grow by 19.2% from 2024 to 2025, with end-user spending on SaaS of US$ 299,071 million in 2025 alone.

The shift from on-site to the cloud has led to a move from lifetime licenses to a subscription-based model for software services and apps. Subscriptions can offer flexibility in deployment and scaling but also have significant and unpredictable costs. It is no coincidence that SaaS is one of the fastest-growing revenue streams for vendors.

Only pay for what you need

Typically, SaaS spending falls into three main categories: inventory, licenses, and renewal management. However, a significant and often overlooked cost is associated with shadow IT.

Spending on cloud-based SaaS has already surpassed on-premises software, but how many businesses truly understand what they are paying for? For instance, one company that SoftwareOne (formerly Crayon) assisted discovered it was unknowingly running more than 900 different SaaS applications. This lack of visibility underscores the importance of SaaS cost optimization.

Vendor management and negotiations

Effective SaaS cost management starts with identifying all applications in use. Identification tools can provide comprehensive insights into utilization, revealing potential cost-saving opportunities. While SaaS is typically pre-paid – limiting immediate savings – these insights enable organizations to reallocate redundant licenses, optimize usage, and right-size contracts during renewals, ultimately boosting ROI.

SoftwareOne’s expertise in SaaS cost management ensures organizations maintain financial accountability in cloud environments by offering real-time visibility and control

The challenges of shadow IT

Shadow IT – software, devices, and systems operating outside the knowledge and control of IT departments – poses a significant challenge for businesses. These unapproved solutions range from email services and messaging apps to specialized and task-specific programs offering high-level functionality, often discovered only through credit card expense audits.

The risks of shadow IT are manifold: duplication, compliance violations, and an increased likelihood of security breaches and cyberattacks. It is also a recipe for uncontrolled spending, which can quickly spiral out of control.

The severity of shadow IT issues varies by organization and perspective. For compliance and procurement teams, it can represent legal, security, and financial challenges. For smaller business units, however, shadow IT may provide a quick workaround when the central IT team is perceived as unresponsive or inflexible. Regardless of the perspective, the lack of oversight can inflate costs and compromise security.

Various SAM and FinOps tools now exist to quickly identify unauthorized software use. Bringing the software estate under control requires alignment with company goals, collaboration across departments, and mutual trust. While eliminating shadow IT entirely may be unrealistic, these tools offer near real-time insights into what software is being used, where, and by whom. This empowers IT teams to intervene early, ensuring compliance, controlling costs, and safeguarding security.

Overprovisioning

It is clear that many businesses overcommit and overspend on SaaS because they lack high-quality insights into their actual usage and needs. While evaluating existing resources is essential, it is equally important to assess what your business truly needs. Software cost optimization does not always mean opting for the biggest or fastest solutions – especially if they are the most expensive and unlikely to be used to full capacity.

At renewal time, it is easy to be seduced by vendors offering higher discounts for higher volume or performance, but optimizing your SaaS stack is easier when you can right-size expectations and focus on what aligns with your business needs.

The good news is that these blind spots can be addressed. Identification tools provide clear visibility into what software is being used, where, and how. While they cannot recoup costs that have already been incurred, they ensure that software licenses are used efficiently, and that you can retire or reallocate them where necessary, and that contracts are right-sized at renewal. This approach forms a critical part of a holistic SaaS spend management program.

Managing SaaS vendors effectively is another critical aspect of cost control. Many organizations struggle with multi-vendor environments, where overlapping features or unnecessary redundancy inflate costs.

IT leaders should establish robust software vendor cost management processes, focusing on contract negotiations, identifying opportunities for consolidation, and ensuring that vendor lock-in risks are minimized. Regularly reviewing vendor contracts and holding vendors accountable for promised value is key. Businesses can also leverage usage insights to renegotiate terms or transition to alternative providers offering better value for money.

SoftwareOne has extensive SaaS cost management expertise and vendor knowledge to help businesses with vendor management and negotiations should they not have sufficient skills in-house.

Sustainability

SaaS sprawl not only drains financial resources but also impacts environmental sustainability. With growing investor and regulatory focus on ESG (Environmental, Social, and Governance) metrics, optimizing SaaS usage can reduce energy consumption and carbon footprints.

For instance, consolidating redundant applications or moving to more energy-efficient platforms has the dual benefits of cost savings and reduced emissions.

Effectively managing a SaaS environment with full visibility into usage and understanding who is using what is a critical step in mapping the environmental impact of an organization’s workforce. Organizations should aim to gain this level of insight to better understand the impact of adopting specific SaaS tools

Vestas: A success story

Vestas, a leading manufacturer of wind turbines, had little oversight of the roughly 5,000 applications it was running across 45,000 laptops globally when it approached SoftwareOne (formerly Crayon) in 2023 to help right-size and optimize its software estate. Work has already saved Vestas more than 3 million euros.

Before the project, Vestas senior leaders had a hunch that the business was overspending on software. But it had limited overview of contracts and licenses, and the usage data it had was not being used for optimization or in license renewals. With SoftwareOne’s support, active monitoring of hundreds of license agreements and applications provides oversight and insights. In the first year it introduced 30 cost optimization initiatives based on usage monitoring data and found and removed an admin tool that posed a security risk.

Realizing savings

Savings – in cost avoidance – can be made quickly, but to really deliver sustained efficiencies, SaaS management projects need to be ongoing and sustained, with buy-in at all levels of the business.  Automation can help, especially as the same people in the business who are tasked with oversight of contracts, licenses, and renewals are typically the same as those tasked with innovation, improving functionality, and managing security risks. The important-but-not urgent task of optimization often gets pushed down the list of priorities.

Introducing KPIs to make each business unit contribute to optimization and efficiency has proved effective in software cost management. Being held accountable is a real disincentive to uncontrolled or unauthorized IT spending.

KPI examples

Accountability hinges on clear and measurable KPIs. Here are some examples that can guide performance measurement in SaaS cost management:

• Percentage of inactive licenses: Target a reduction of unused licenses by 15% annually.
• SaaS cost per employee: Set a benchmark, e.g. less than $150 per employee per month, to monitor cost efficiency.
• License utilization rate: Aim for at least 90% utilization for critical applications
• Time to reallocate licenses: Track the average time to reassign unused licenses to pending users, who requested a license.

Why SoftwareOne

Effective SaaS optimization and cost control require a holistic, continuous approach rather than a piecemeal one. SaaS management builds on the principles of software asset management (SAM), expanding them to address the unique challenges of cloud-based solutions. With extensive global experience supporting businesses of all sizes, SoftwareOne is your trusted partner to implement a proactive, integrated strategy that ensures cost efficiency, scalability, and long-term success.

SoftwareOne Cloud Cost Control

The cloud has many complexities and often requires teams of people to understand all the moving parts. Many organizations do not have the bandwidth nor the headcount to effectively manage each part of their cloud environment, especially in a multi-cloud setup.

That is where working with a trusted partner such as SoftwareOne to identify and successfully implement cost control really delivers. SoftwareOne’s Cloud Cost Control is a powerful FinOps solution that drives financial visibility and accountability in your cloud environment. By delivering faster, more detailed insights, the solution provides a solid foundation for organizations looking to enhance their cloud cost management and move through the FinOps journey with confidence.

SoftwareOne Cloud Cost Control complements and enables the success of our SAM/ FinOps/ SaaSOps Managed Services.

^¹ Gartner Press Room: https://www.gartner.com/en/newsroom/press-releases/2024-11-19-gartner-forecasts-worldwide-public-cloud-end-user-spending-to-total-723-billion-dollars-in-2025

^{DISCLAIMER: GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally. All rights reserved.}