Cost-Savings Guide for SaaS Spending

Your finance, ops, and procurement teams may oversee core business inventory and software needs, but they don’t necessarily get in the weeds with departmental buying decisions.

This removes bottlenecks and allows departments to get access to key solutions faster. However, it also leads to a lack of visibility, which can be a cause of negotiation inefficiencies and high costs. Even if a department is staying within budget, is it getting the best deal for your business?

So, how are finance and procurement leaders expected to save money when you don’t even know about department-specific spending?

In this article, we share a range of strategies, tips, and tools so you can identify and reduce your SaaS platform spend. We also look at the fundamentals of cost savings and how this differs from cost avoidance.

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Business cost-savings: An introduction

The term business cost savings refers to the practice of reducing your current spending. It’s often confused with cost avoidance, but these are different concepts, with the latter referring to the preventive action you take to avoid incurring future expenditures. 

Picture this: You’re paying $8 per user per month for team communication software. You find that paying annually can reduce the price to $6 per user per month, a clear cost-saving opportunity.

However, if you want to switch providers, the contract requires a three-month notice. Failing to provide this notice means paying for an additional month. Anticipating this clause is cost avoidance.

Usually, the finance and procurement departments own the cost-saving metric. However, department heads and decision-makers must ensure their teams operate efficiently and avoid incurring additional expenses. 

But it’s not easy to track how effectively department leaders look into cost-saving opportunities when signing up for a tool, and we discuss ways to reduce SaaS spend below.

Understanding cost savings in the SaaS context

Delegating budget authority to heads of departments spares your procurement team time, but it can lead to a lack of spend control, with SaaS subscriptions often becoming a hidden expense. 

Identifying cost-saving opportunities in the subscription-based software model can help you reduce more spend than you initially expected. 

As Kala Dikibo, Managing Director at Telso Procurement, says: “Procurement can achieve cost savings by consolidating spend as different parts of the business may be ordering the same products and services from different suppliers.”

When it comes to SaaS, consolidating spend could mean choosing all-in-one providers to serve different areas of the business rather than paying for separate tools. For example, pay for a CRM with email marketing and customer support capabilities, rather than for three dedicated tools. 

But consolidating spend isn’t the only route to procurement savings. Take a look at the different types of cost-saving opportunities in the SaaS models next.

Types of cost savings on SaaS subscriptions 

Since subscriptions renew automatically, it can be tricky to spot when and where you’re over-spending. 

To simplify the analysis, ask each head of department to come up with a list of subscriptions they use and identify one of these types of cost-saving opportunities: 

• Discounted rates. Renegotiating rates with SaaS providers or paying in advance are quick ways to save money on subscriptions.
• Lower-tier subscriptions. Determine if there are any subscriptions you could lower to save on future costs. 
• Indirect savings. Identify efficiency gains by leveraging cross-promotional opportunities for discounts or reducing staff needs, such as decreasing the number of software seats.
• Negotiation leverage. Research and determine whether or not you’re paying a fair price, for example, by accessing a benchmark study to make a request based on industry data. 
• Consolidation of subscriptions. As discussed above, paying from one single account for multiple employees can lower the price per user. 

5 strategic approaches to SaaS cost savings

To reduce SaaS expenses, you need to conduct a cost analysis to identify the highest and lowest expenditures. Then, come up with a plan to either lower costs or reduce them altogether. 

Here are five strategic approaches to identifying SaaS cost savings:

1. Negotiate better deals with these tactics

Every time you sit on a sales call, you have the opportunity to negotiate a better price. But sometimes the person who initially negotiated for the service is no longer managing the relationship, or you have no idea what this service should cost. 

This makes contract negotiation hard and, ultimately, expensive. 

Use one of these tactics to get significant cost reductions: 

• State the specific price you need to renew. While determining the right price can be challenging, our expertise and intelligence at Vendr can guide you. We’ve found that you get better results when you ask for a specific rate, and our data can help you know the price you should be paying.
• Leave more runway for closing deals. Don’t rush it. Take your time to evaluate the offer, nurture the relationship, check competitors, and get back. Time often gives you leverage in the negotiation.
• Get competitive benchmarks. Use data-based insight into your preferred tools and industry to get a transparent view of fair pricing and commercial terms. With Vendr’s Buyer’s Guides, you can stay informed throughout negotiations and access key discount levers that will get you a better price. 

If you’re handling multiple projects at once, hire Vendr to manage all SaaS negotiations for you. Try it for free. 

2. Leverage contract analysis to find savings opportunities

Analyze your current contracts to identify hard and soft savings. Maybe you’ll find that if you build partnerships, you get a discount. For example, some platforms offer up to a 5% discount for a case study. 

But analyzing each contract individually can take hours. 

Try Vendr’s contract analysis feature to get a bulk view of which subscriptions are likely to offer you a discounted rate based on certain discount levers. 

This analysis provides benchmarking, supplier-specific insights, and a strategy recommendation on how to achieve the provided rates—helping you make faster and more informed decisions.

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3. Prioritize spending visibility and management

As mentioned above, when department heads have the authority to make budget approvals, it can be hard to track all the expenses. 

So, conduct a detailed spending analysis by looking at each department’s expenses. Then, contrast them with financial statements to get more transparent finances.

You can implement a workflow for the procurement team's approval of purchase orders. Alternatively, use Vendr to optimize workflows with procurement automation.

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4. Adopt spend management tools

Pay for new technology to manage and monitor expenses. It may sound counterintuitive to recommend adding tools to your tech stack while discussing cost-cutting tactics. However, manually recording and analyzing your spend in a spreadsheet can take forever. 

Instead, try tools like Coupa or SAP Ariba to track and manage spend. Do periodic financial reporting and come up with short-term and long-term saving measures. This can help you have full control over the total cost of company software. 

5. Work with good business partners

Look for tools that can prove their ROI and that have no hidden associated costs or periodic price increases. 

Stable companies provide predictable pricing, which is critical for cash flow planning and budgeting. 

“Identifying business partners that lead with transparent pricing and fair business practices, like our Vendr Verified Sellers, is a great place to start. Vendr Verified Sellers partner with us to provide buyers with the best possible buying experience and a long-term relationship,” says James Raggi, Manager of Vendr Verified Partner Program at Vendr. 

Looking for companies with a stable pricing strategy allows you to budget and plan your spending more accurately in the future.

Unlock SaaS cost savings with Vendr today

As you’ve seen, it’s important to differentiate cost avoidance from cost savings. While both impact your spend, cost savings do so by reducing existing expenditures. For instance, by improving your current terms or implementing optimized processes with automated workflows. 

Throughout this article, we discussed ways to save costs on SaaS. The strategies include negotiating better rates with your current providers, identifying discount levers within contracts, and using spend management tools. 

If you understand how this affects the business finances, but aren’t in a position to go through the heavy lifting of auditing internal expenses, try Vendr for: 

• Personalized SaaS spend optimization strategies

Honesty and fairness is an essential feature of Vendr’s service. We offer pricing benchmarks for multiple industries. This information helps you determine whether or not you’re paying the right price for your SaaS license. 

• Specialized contract negotiators

When you pay for Vendr, you get access to experienced negotiators. They’ll help you analyze contracts, identify negotiation opportunities, and handle calls for you so you don’t have to buy software alone. 

• Fast-tracked procurement cycle

Reducing costs now doesn’t solve your business problem. Vendr helps you establish an automated internal procurement process to centralize purchases without causing bottlenecks. 

This way, no expenses will drop out of sight and you’ll be able to spot cost-saving opportunities much more easily.

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