100-million-dollar waste.
Recently, we wrote about the information asymmetry in Saas negotiations: buyers tend to limit their spending on SaaS due to the need for more knowledge of its fair market price. Still, the SaaS industry is booming and is expected to reach 1 Trillion USD in the early 2030th.
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At the same time, industry researchers assume that 30-50% of SaaS licenses are not fully utilized or unused. Even 30% of the 300-350-million-dollar industry gives us around $ 100 million annual wastage of SaaS investments, which is a flip side to its ease, flexibility, and speed. However, this blog isn't meant to hail perpetual licenses - it's all about IT Procurement.
5 Possible Answers to the Problem
- Software Asset Management (SAM).
When a company purchases software, that license is considered a business asset. As companies have come to depend increasingly on technology to carry out daily business activities, managing these licenses and applications has become an essential part of their investment strategy. The goal is to get the most out of these investments at every lifecycle stage.
Briefly, SAM is expected to accomplish all of the above.
Ideally, a company may consider implementing the ITAM framework.
2. SaaS demand management.
SaaS demand management assumes the analysis of demand metrics, improved utilization of existing licenses, consolidation of requirements across different end-user departments or entities, and tonnes of internal negotiations.
SaaS demand management can help procurement identify cost savings opportunities, boost efficiency, and reduce risk. These benefits can help companies maximize their SaaS investments and improve their procurement processes.
3. Contract management.
Indeed, we meant the contract management before SRM.
We explained this point at length in this post.
4. Vendor partnership.
How do we make our vendors not upsell us unnecessary or excessive licenses instead of advising on optimizing the usage patterns and allowing us to scale down in times of crisis?
Many vendors are good partners only during our exponential growth and true-ups. Procurement professionalism is to manage such vendors to safeguard the best interests of our company and not favor their sales quotas and bonuses.
5. Employee awareness.
Some colleagues install shadow licenses or claim unnecessary ones simply because they can (process or security loopholes.) Changing such attitude requires cross-functional cooperation (e.g., with HR to update policies and InfoSec to disable shadow subscription opportunities.)
In parallel, we have to communicate tirelessly.
After exhausting these options, we may approach our SaaS vendors for negotiations instead of proudly shaving off 10% savings after month-long RFPs.
Meanwhile, 30% of benefits were up for grabs through these five activities.
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My Udemy course "Modern Approach to Cloud Software (SaaS) Negotiations."
My Udemy course "Value-based Procurement."
My Udemy course "Procurement Lab."
My Udemy course "Foundations of Contracts and Outsourcing."
My Udemy course "Adaptive Sourcing: Agile Procurement in Practice."
More information on this and other exciting topics can be found in "The Technology Procurement Handbook." It represents 23 years of experience, billions of dollars worth of successful sourcing projects, and 1000s hours spent on research, analysis, and content creation for the most demanding professional readers.
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