Lessons for B2B SaaS Buyers from the Consumer Subscription Cull
The rise of streaming services has led to families slowly expanding the number of monthly subscriptions they pay for — but some of them are cutting back, and businesses can learn something from their tightening purse strings.
According to new research from Kantar, UK households culled just under 170,000 streaming services in the first quarter of 2023 in an attempt to offset rising household costs. Many of those families found themselves paying for a multitude of entertainment services in the wake of Covid, and businesses had a similar experience: An uptick in the number of SaaS tools used to enable remote, collaborative working.
Sastrify research shows that 66% of businesses use at least 50 SaaS tools, with 20% using more than 100. Over half (51%) of companies increased SaaS spending in the last two years.
But with prices rising due to inflation, the cost of labour and vendor attempts to push retention, a dedicated software procurement strategy has never been more crucial for businesses to pinpoint cost-saving opportunities and control spend, with usage analysis and forecasting representing essential factors for improving procurement outcomes.
In this article, we’ll explore the challenges SaaS sprawl creates and how businesses can build a strategic SaaS stack with a subscription cull of their own.
The challenge of SaaS sprawl
SaaS sprawl refers to the uncontrolled proliferation and adoption of many SaaS applications within an organisation to the point where it becomes unmanageable for the IT department. This can happen when different departments and teams – or even individual contributors -purchase SaaS tools independently, without allowing IT to coordinate, negotiate and approve those expenses.
This results in a number of challenges:
● Unused or duplicate tools – When SaaS sprawl gets out of control at an organisation, it becomes highly likely that there will be inefficient usage of the software. This may mean tools are paid for, then forgotten or underutilised, or teams have duplicate subscriptions or use SaaS vendors with overlapping functionalities.
● Messy tool request processes – As the SaaS stack expands and the IT, Finance and Procurement departments try to keep up, the tool request and approval process gets messier. Teams may not be able to invest proper time in vetting and negotiating each piece of software.
● Shadow IT – SaaS sprawl can go hand in hand with shadow IT, where employees adopt applications without proper approval or oversight from the IT department. This can create security risks, data silos, and difficulties in maintaining a centralised IT governance framework. 1 in 5 companies have experienced a cyber event, such as a data breach related to shadow IT.
● Cost escalation – When SaaS applications are adopted across different departments or teams without the proper controls, the overall costs can escalate rapidly. Each application typically has its own subscription or licensing fees, which can add up quickly if not monitored and managed effectively. Sastrify data indicates that the average company is overspending on SaaS by 30%.
Do businesses need a subscription cull of their own?
During a downturn, every business is trying to survive however possible, and reducing recurring expenses can certainly extend an organisation’s runway.
Just as many households in the UK decided to reevaluate their subscriptions – and cut the ones that weren’t important to them – businesses must take a hard look at their own SaaS stacks and consider where savings could be achieved.
If you think your business might be dealing with some SaaS sprawl, it’s time to audit your software usage, build a strategic SaaS stack and find ways to bring both the number of tools and total spending under control.
Building a strategic SaaS stack
To address the challenges of SaaS sprawl, organisations must be strategic about building a software stack that is efficient and effective. Having a long-term SaaS strategy ensures the number of applications stays under control, so your teams can keep track of usage and stay within budget.
What does a strategic SaaS stack look like?
● Transparent visibility – A full picture of your SaaS stack at any moment in time ensures nothing slips by unnoticed and limits your risk exposure, so all tools are properly vetted and actually being utilised
● Optimised processes – The tool request and approval process must be streamlined to save employees time and get important applications up and running quickly
● Collaborative ownership – Tool owners and the relevant teams (Procurement, IT, Finance, etc) should be able to find and update all subscription documentation in one centralized location
● Proper compliance – With transparent visibility comes decreased risk and ensures the organisation and its software stack is compliant with all relevant regulations and data protection laws
● Best possible negotiations and deals – A long-term SaaS strategy enables Procurement teams to get the resources they need to sign better deals from SaaS vendors while also speeding up negotiations with improved data and visibility into the renewal calendar
A strategic SaaS stack starts with a dedicated software procurement strategy. For businesses to regain control over their spending and uncover future opportunities to save on subscriptions, it’s crucial to audit the current SaaS stack and build a strategy procurement teams can execute on.
If there’s one key insight we can take from the great subscription cull, it’s this: Save what’s working for you and trim the rest.