It is forecasted that by 2025, 85% of all business applications will be Software as a Service (SaaS) based. Today’s CROs and business leaders alike both understand how critical SaaS applications are to the success of their business. With the right software and people in place, businesses can incrementally improve productivity across their workforce and create a competitive advantage within their market.
With this increase in SaaS spend, it is more important than ever for finance and revenue operations teams to have strategic procurement and management processes in place that will help maximize the return on investment (ROI) for your organization.
My name is Mohammed, and I lead the sales technology strategy at TELUS, one of Canada’s flagship Telecom and technology companies. For close to a decade I have had a front-row seat witnessing the boom of SaaS spending within marketing, sales, and now customer support functions.
This investment boom has catapulted some organizations’ ability to scale quickly and efficiently. Unfortunately, it has also negatively impacted others through poor spend management practices and wasted investments.
In this article, I will dive into what spend management entails, explore the current state of SaaS spend, and outline five ways you can enhance your company’s SaaS spend management through the lens of Revenue Operations.
What Is Saas Spend Management?
SaaS spend management is the strategic process of optimizing and controlling your organization’s spend on SaaS applications. This would include all aspects of procurement, vendor relationship, and negotiation.
Effective spend management practices go beyond just the traditional concept of cost-cutting. Effective practices also focus on the upside. That is why it’s critical to invest in resources and people that focus on enablement and operations.
Revenue enablement will help ensure your employees are equipped with the knowledge and ability to adopt new software applications. While your tech operations team will ensure the systems are efficiently functioning at all times. Both of these resources play a critical role in ensuring that spending on SaaS applications contributes to organizational growth, efficiency, and sales.
Current State Of Saas Spend
Organizations today are inundated with an endless amount of SaaS options with each of them promising transformational benefits. Just like any good thing, companies also have a tendency to accumulate these applications over time.
As per this State of SaaSOps report shows, young companies (one to two years old), typically start out with 29 SaaS applications on average. This number spikes to 103 by the time they are three to six years old.
With the growth in spending for SaaS, it’s no wonder, why spend management software sales have also spiked. According to Business Research Insights, SaaS spend management software sales market revenue will reach $624 million USD in 2028, with a compounded annual growth rate (CAGR) of 21.2% from 2023-2028.
Hidden Saas Expenditures
With this growth in mind, it is easy to see how complexities arise when these applications are underutilized, become redundant, or are not effectively integrated into a broader tech roadmap. The result is hidden expenditures that might not be immediately apparent. Here are some of the most common SaaS expenditures to keep in mind:
This one is all too common, especially among sales, marketing, and customer success teams. With different business units adopting similar tools independently, organizations will ultimately end up paying for overlapping functionalities.
Without centralized oversight from revenue operations, redundant systems will inflate your cost significantly and can even bring down productivity.
Utilization is very often an overlooked expenditure of SaaS spend leading to a waste in resources. More often than not, teams do not have the necessary training and enablement to fully leverage tools, resulting in poor usage and a diminishing return on investment (ROI).
Change management is a critical function in ensuring you reduce wasted costs and maximize your ROI. As part of any good changement management plan, executive sponsorship and support is often missing component that can hinder your organization’s ability to fully embrace and utilize new applications.
Bottom Up Spending
With many companies moving towards a product-led growth (PLG) model, it’s becoming more common for business units and individuals to purchase individual licenses on credit cards rather than through a formal procurement process.
With purchasing behavior evolving, it’s critical to ensure your organization has best practices in place to manage this new way of purchasing technology.
5 Ways To Improve SaaS Spend Management Through RevOps
As a framework, Revenue Operations can help integrate your SaaS spend management strategy into your overall revenue strategy. RevOps focuses on aligning sales, marketing, and customer success through people, processes, data, and technology.
By infusing these fundamental principles into your spend management strategy, organizations can ensure the systems they invest in directly impact broad-scale business initiatives. RevOps can help streamline processes and workflows to ensure efficient utilization of the tech stack. It is also the muscle that can help assess the impact (ROI) of SaaS tools on revenue metrics.
Here are my top 5 ways Revenue Operations can Improve your SaaS spend management:
1. Defining Your Procurement Strategy
As a business function, Revops can help define the procurement strategy for SaaS applications. Within this strategy, your RevOps team can help focus on cost reduction objectives. For example, how to take advantage of volume-based discounts or even how best to negotiate contract terms.
Risk management should also be part of your procurement strategy. Focusing on factors such as data security, compliance, and vendor stability.
2. Centralize Your Contracts
As a RevOps team, you should be looking to centralize your contract management to ensure the right viability and oversight. With GTM teams leveraging dozens of tools, it’s becoming increasingly difficult to do this without the right platform.
A contract management solution can help support this strategy and will help your organization streamline the renewal process, understand negotiation terms, and adhere to compliance standards.
3. Control Bottom-Up Spend
The benefit of allowing your employees to buy solutions faster can have a positive impact on growth. The other side of this is that uncontrolled spending can also have negative impacts on your business’s overall performance.
With new ways to purchase technology, like PLG, ensure that your organization has a clear policy in place to follow. Make sure that there are approval workflows that involve relevant stakeholders in order to prevent ad-hoc software spend.
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4. Invest in Revenue Enablement
Training and enablement have always played a central role in maximizing software utilization. Traditionally not all revenue teams were afforded the luxury of having learning professionals in their corner.
With the focus on breaking down silos, revenue enablement takes a broader perspective and encompasses all revenue-focused teams. These teams are your secret weapon in ensuring employees have the skills, knowledge, and resources to be able to effectively adopt new software.
This team will help you implement usage policies, create enablement material such as user guides, and incorporate regular tech training. Revenue enablement will empower users to fully leverage the capabilities of new software and help drive increased ROI.
5. Consolidate Where You Can
As part of your spend management strategy, your revenue operations team can help ensure that tech audits are completed frequently. Tech audits are an opportunity for your organization to take a step back and evaluate the current software landscape that exists.
As part of this audit, you will want to ensure you are evaluating your software tech stack for overlap and redundancy. What you will be looking for is an overlap in functionalities that may not be necessary to have. As a centralized function that has a view of all the technology being leveraged by marketing, sales, and customer support, RevOps can play a critical role in reducing wasteful spending and maximizing the utilization of existing tech.
Enable The RevOps Framework
As businesses continue to accelerate their reliance on SaaS products, SaaS spend management becomes a strategic imperative. In order to ensure that investments made in SaaS solutions directly impacts revenue, Revenue Operations must be integrated into the border financial management strategy of these platforms.
By defining a comprehensive SaaS spend management strategy, organizations will be able to optimize their spending and drive revenue growth in a holistic way. Incorporating spend management into the Revenue Operations framework will ensure fiscal responsibility is adhered to while they achieve their organizational goals.