How companies can keep control of their SaaS and cloud spend after investment

Technology is one area that can immediately benefit from an influx of capital, as purchasing new software or upgrading existing products takes relatively very little time. And benefits can be seen quickly too, as teams can work more efficiently and with expanded capabilities to push further company growth. 

However, investment into technology brings extra pressures and targets that a tech stack has a direct impact on:

• Expectations to hit growth targets, with quick noticeable impact
• Expanding operations into other global markets
• Rapidly increasing headcount, and the requirement to provide the tools they need
• Acquiring new companies to address skills / product offering gaps

The easiest solution is to pay up and give employees the tech they need to achieve these goals. However, as we’ve seen from many of our customers, this can create a pattern of spiraling costs, duplicate tools and contracts that aren’t fit for purpose. 

This blog takes you through the steps to go from chaos to control.

Why investment can cause long-term spiraling SaaS costs

In amongst the focus on growing headcount, buying new software and investing in innovation, a coherent SaaS management strategy is often neglected.  

Unknown technology costs eat away at the bottom line, restricting a company’s ability to innovate further, invest more and ultimately continue to grow at a sufficient pace to stay ahead of competitors or the market. Many companies resort to cutting headcount to control costs, but that doesn’t solve the problem and leads to a talent shortage within the organization - which restricts growth even more. 

What can companies do to keep control of software costs as they scale?

Here are some best practices you can implement to ensure cost control is maintained as you expand.

Foster a cost aware culture within your organization

Building an intrinsic value of cost awareness into every employee across the business helps prevent skyrocketing spend now and into the future. All teams should be encouraged to ask questions about what they are paying for, complete thorough vendor research, and negotiate better prices. 

By encouraging employees to build business cases when requesting a new tool, you can help them realize cost implications and also consider spending efficiencies when putting it together. It also provides a much better understanding of why a tool is needed, so you can make a more educated decision.

Being encouraged to consider the costs of everything they do, whether by incentives, SLAs or business cases, means the control of spend is the responsibility of everyone, not just finance teams. 

Create a data-led procurement strategy

A combination of ever-shifting prices that are obscured from general view, contract clauses that automatically trigger higher payments, and a lack of internal understanding into your own usage data means that you’re left negotiating a contract on hearsay and guesswork, resulting in overpayments and oversized features.

Using industry research and data from previous negotiations is crucial to helping you understand what you should be paying, as opposed to what the vendor wants you to pay.

Data you can use to benchmark includes:

• Usage rates - so you can tailor your contract to your specific usage needs. 
• Previous prices you have successfully negotiated or been quoted - these will give you some idea of what a typical price point for starting negotiations will be - and always look for discounts!
• How many employees need to use any tool (user rates) - you can then work from this as a current limit to how many seats you need to pay for.some text
  • Also, including yourself in strategic internal growth conversations can help you predict how many extra seats you’ll need to pay for in the future to accommodate growing team sizes.

Finally, when renewing a tool post-investment, make sure you are intrinsically familiar with the original contract. As your investment may be all over industry news, vendors may use this opportunity to hike their price, but mask it by saying they’ve provided innovations or added extra value to the customer during the term of the contract. Being totally aware of your original terms of service means you can effectively mount a legitimate challenge to this price increase.

Introduce more robust procurement processes 

Maverick spending is when software is purchased outside of established procurement rules and procedures. It drives substantial amounts of SaaS spend wastage as, being procured without official checks and analysis, you cannot track associated costs or be sure the tool provides business value.  

In our experience, the majority of startups take a manual approach to managing their SaaS stack - meaning they don’t have a clear procurement process for acquiring or renewing software licenses and that they don’t take advantage of technology to streamline the process.

With purchasing decisions increasingly decentralized across departments, this can lead to the purchase of unnecessary licenses, or different functions of the business using different software.

A much more robust and efficient procurement process, where delays, push-backs and a lack of progression clarity don’t exist, inspires more confidence. Everything from easy intake forms to automated communications can help solidify your procurement process. 

Remember - department managers don’t want to take on a procurement project. They do it because they think it’s less hassle. If you create something that is easier, they’ll use it. 

Maintain tech stack visibility through centralization

To help combat maverick spending and create a more robust process, it’s crucial to bring procurement under the remit and control of a single department. Not only does this help bring costs under control, but it also gives you a much better opportunity to gain visibility over your tech stack. 

Why does this matter? In a scenario where you have the ability to intake a lot of procurement projects, you’ll want to steer clear of purchasing duplicate tools. Having requests go through a singular point means that they can be easily logged, evaluated and monitored. So you can build a view of your tech stack to evaluate further and prevent duplication, and even dig into core usage rates, average users, and how additional features are used. 

Plus, if there is an acquisition post-investment, you can use your centralized procurement process to evaluate the tools that are being introduced to your ecosystem by the new team, and work out if there are further duplications you can cut. 

Talk to Vertice

If you’re approaching an investment round, or have recently acquired investment, you may need some guidance through the minefield of expanding your SaaS capabilities while maintaining visibility, cost control and effective tech stack growth. 

Vertice’s procurement team are experts in not just negotiating the best SaaS contract for your current needs, but helping you strategize for the future. They can provide deep, data-driven insights into the state of the market and vendor pricing benchmarks, and give expert advice on how to grow your SaaS stack sustainably to meet your explosive growth requirements, without sacrificing fiscal responsibility. 

All while enabling total visibility into your tech stack, vital contract dates that need to be tracked such as renewal periods, and key contract terms that might be hidden among all the legal ease.

Reach out to us today to hear more about how we can help you.