The Hidden Costs of SaaS

The Hidden Costs of SaaS

SaaS adoption within businesses across the world is spiralling more than ever before. 

However, many companies are suffering from the hidden costs that creep around the amazing SaaS solution since it was recorded by a global CIO survey, that an average of 22% of a businesses IT budget goes to cloud-based tools and services. But as that number increases so does the percentage of businesses that are unable to manage and track their usage and spending. In which is known as SaaS waste, therefore, money and also time is wasted on SaaS tools that are unused or duplicated. 

For many companies that utilise SaaS this is a under the radar problem. According to the 2020 SaaS trend report, that underlines the average waste per company can be over $135,000 annually. In this post, we will outline how you can identify and tackles these hidden solutions within your business in order to save you from SaaS waste. 

What are the Hidden Costs of SaaS? 

There are numerous hidden costs that many businesses who utilise SaaS don’t see, but you may be thinking what can they be? Well, the top 3 hidden costs consist of: Duplicated apps, Automation renewals, and Incorrect licenses. This may be confusing right now as you may not know what any of these 3 things refer to but let’s dive into them individually so you can identify them and resolve them in your own businesses. 

Cost #1. Duplicated Apps

The most common hidden cost for businesses is duplicated apps. This is since it’s been recorded that many large organisations have a situation where two different departments face similar functional issues in which they then purchase specific applications that will help solve their problems within the department. Due to the business being a large organisation the two departments lack communication which unfortunately results to the business facing an increase in SaaS spend since it has been bought twice. Therefore, the business has overplayed when it’s unnecessary. 

What has caused this problem: 

  1. As previously mentioned, if communication between both departments is poor, it can result in same decisions being made twice or two different departments having a different opinion on an application resulting in two similar software’s being bought. 
  2. The second way that this could occur is if a department such as marketing purchases a tool such as Trello. But the application isn’t widely adopted within the whole of the businesses. Therefore, leading to an increase in SaaS costs due to multiple tools being purchased by different departments within the business. 

How you can prevent this cost: 

To ensure that this hidden cost DOES NOT occur within your business you MUST make regular meeting and discussions across all departments crucial. This will help your business to be more successful since departments can share opinions on tools needed in which they can make final decisions for tools that can be used across all departments. This will further result in money being saved due to there being no duplication of apps which are not needed, Overall reducing your SaaS spend. 

Cost #2. Automation Renewal

As we know SaaS tools are subscription based, meaning there is a monthly cost in order to own and use the tools. However, what you may not know is that the majority of SaaS tools issue automatic renewals. So, what does that mean for a company? This could lead to a companies SaaS waste to increase dramatically due to not having the right management of your owned apps, since the tool is auto renewed but never used. 

Scenario: 

A scenario where this could occur is if a department such as sales ask for a specific SaaS tool to help with operations, in which they need a year subscription. Therefore, IT purchase a yearly subscription since they believe it will help that department. However, the sales team only use the SaaS tool for half the time that they had originally stated. But they did not notify IT that the subscription can be cancelled. Due to the IT department being unaware that the application is not in use by anyone within the business, the SaaS tool will auto-renew every year, resulting in SaaS waste. 

How you can prevent this cost: 

To ensure that this hidden cost DOES NOT occur within your business you MUST designate each application used within the business to one specific owner and not a whole department. This will 100% ensure that your company will have no SaaS waste since the designated owner will monitor and control the tool for their department. 

Cost #3. Incorrect Licenses 

It is common for subscriptions-based apps to have multiple packages that customers can choose from since each have their more advanced features which will require a higher price to own. This is the same for SaaS companies who offer different features that a business can utilise at a price. 

It’s found that some businesses may rush or overestimate their needs and requirements of the tool, finding themselves buying the more top-tier plans. However, over some time of having the software running in the business, they find that some of the features that they are paying for are not being used at all. Therefore, the cost for the additional tools is being wasted, resulting in SaaS waste and loss in money. 

How you can prevent this cost:

To keep it short and simple the easiest way to prevent this hidden cost is to carefully monitor the most expensive SaaS tools that you have purchased within your business. You should ensure that more advance tools and functions in the top tier packages are being used by employees. Otherwise, you should definitely switch/downgrade to a less expensive plan which will assist your business in saving money and avoiding SaaS waste. 

Wrap up

To conclude, there are a few hidden costs within SaaS that may not seem dangerous but are a big risk to your business’s success. But you now know the different hidden costs that can produce a risk to the amount of money and SaaS waste your company losses. So, within this information double check that your business is not making the same mistakes and if so counter them with confidence by having excellent communication through all departments, having great monitoring and organisational skills which will stop the hidden costs of SaaS. 

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