In today’s business In the world, every dollar matters more than ever. The current economic downturn, financing crisis, and race to be cash flow positive are forcing organizations to reevaluate budgets and spending patterns. This has prompted CFOs to issue mandates – cutting program spending by 10% to 30%.
Based on data available from my company’s platform, software spending is now the third largest spend for organizations, right behind staff and office costs.
CFOs should work closely with IT managers and department heads to devise smart plans to reduce their SaaS spending and get more bang for their buck. At the same time, reducing software spending should not negatively impact company growth or hinder innovation.
The primary goal for CFOs should be to determine where they are spending, identify departments with higher costs, and identify cases of low usage and frequency of applications.
I believe the right approach to reducing SaaS spending involves a data- and metrics-driven strategy. Understanding each vendor’s ROI and evaluating each employee’s SaaS spend will enable CFOs and IT managers to determine the true value of the software and how quickly it will add to the company’s bottom line. Spend analysis will enable you to make informed choices regarding cost optimization.
What does typical program spending look like in organizations?
Our data indicates that the engineering department spends the most, followed by the marketing and sales department, and then the human resources department. While the engineering department leads in dollar spending, it is not the department with the highest number of SaaS applications. That distinction goes to the marketing team.
Should we ask the administration that spends the most to cut spending?
Software is now the third largest cost for organizations, right after staff and office costs.
Probably yes, but let’s look at the low-hanging fruit first – Sales and marketing teams have the largest number of abandoned and underutilized applications.
Sales and marketing teams must quickly adapt to changes in the market and evolving customer requirements; They often acquire different tools to meet their immediate requirements, and when these requirements change, they often move to new tools, resulting in decreased usage and redundant tools.
Second, CFOs can use benchmark data to ensure their spending is consistent with similarly sized companies. Depending on company size and employee department, companies spend an average of $1,000 to $3,500 on software tools per employee. CFOs must collaborate with teams to improve the purchasing process and control spending. If your company’s spending doesn’t meet typical peer standards, it might be a good idea to investigate why.