Cost management

5-Step Cost Optimisation Playbook for CFOs

With software spend being reported as the third-highest in an organisation after employee and office lease costs, Nidhi Jain, Co-founder and CEO at CloudEagle highlights findings from its SaaS research, outlining key strategies CFOs can implement to optimise costs, enhance financial stability, and make every dollar count in an era where cost-consciousness is essential.

Comprehensive spend analysis

To optimise spend, as a CFO you must first analyse how much your teams spend on SaaS applications and the ROI of those applications. Analyse the complete inventory of your applications and identify used, unused, and redundant apps, purchased licenses, and the associated costs.

Nidhi Jain, CEO and Co-founder, CloudEagle

Some CFOs conduct a detailed analysis of their spend and proceed to make cost-optimisation decisions. However, it's crucial to note that this approach might not be sufficient. After scrutinising your spending, the next step involves benchmarking it against industry peers to determine whether your costs are comparatively high or low.

What is your employee size? Did you know that organisations with an employee count of 1000 to 2500 spend between $10M to $50M on SaaS applications? How does your spend compare against industry benchmarks?

SaaS Spending Benchmarks from CloudEagle database

Analysing your spend and comparing it against your peers will help you understand whether you’re paying high or low, and it will help you make the right cost optimisation decisions.

Consolidating overlapping applications

The quickest SaaS cost optimisation approach is removing redundant and consolidating overlapping applications. Your app and spend analysis would’ve revealed what apps are being used by your teams, including the redundant apps. Eliminate them to optimise your spend.

Often, different teams find themselves using multiple applications that perform similar tasks. For instance, the Marketing, Sales, and Engineering teams may each utilise separate applications to send email.

In such instances, you can consolidate these applications into a unified, full-stack solution serving all teams efficiently.

Organisations are actively choosing full-stack solutions rather than best-in-breed applications, according to CloudEagle’s SaaS spend report. You can switch to full-stack solutions for quicker cost savings.

Cutting down on surplus licenses

Organisations have a practice of purchasing surplus licenses to predict high business growth; they’ll usually end up purchasing 100 licenses, while 50 licenses are required. This leads to underutilisation and poor ROI.

Analyse the license usage and deprovision users from licenses with low usage. You can then re-allocate them to another user or reduce surplus licenses during renegotiations to save on spending.

Meticulously analyse the purchase requests, and only approve purchases and allocate budgets if the requested product and licenses align with your budget and business goals.

ROI-centric buying decisions

To make your purchase request approval process easier, ask your team to submit the ROI of the application along with the purchase request.

Mandate the team to provide insights on:

  • The application's potential benefits for the organisation. 
  • The intended duration of the application's usage by the team. 
  • The expected timeline for its impact on revenue. 
  • The initial costs associated with procurement and implementation. 
  • The total cost of ownership of the application.

Armed with these insights, CFOs can make the right decision when granting purchase requests. It will also prevent overspending and underutilisation of licenses in the future.

However, as CFOs scrutinise purchase requests, users might get involved in shadow IT, where they will purchase and utilise applications without the approval of IT.

How H&T’s attestation process works with Chainlink for stablecoins to ensure not too many are minted. Credit: Harris & Trotter”

Preventing shadow IT

Shadow IT will lead to non-compliance and escalated spending, so CFOs must pay close attention. However, if you’re still relying on outdated SaaS management approaches, you won’t be able to prevent shadow IT.

Use a full-stack SaaS management platform to get complete visibility over your stack. Identify unsanctioned applications existing in your system due to shadow IT and eliminate them. Receive proactive alerts whenever shadow IT occurs, helping you prevent shadow IT before it happens.

Provide your users with an app catalogue of sanctioned applications to prevent them from purchasing independently, preventing cost escalations.

Streamlined procurement process

To streamline SaaS buying, create a world-class procurement process using a SaaS management and procurement platform.

CFOs must ensure that all purchases go through a centralised purchase process, educate the team on why it is necessary to follow the right process, and formulate policies to create a cost-conscious culture in the organisation and optimise the spend.

Transitioning from manual procurement to workflows improves transparency and expedites the process, preventing individual users from independently making unauthorised purchases. This comprehensive approach supports cost control and financial responsibility within the organisation.

There you go, this CFO playbook focuses on cost optimisation, urging CFOs to align investments with financial goals. It highlights thorough spend analysis, consolidating apps, ROI-driven purchasing, tackling shadow IT, and streamlining procurement. By taking these steps, CFOs can better manage costs and enhance financial performance in uncertain times.

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