SaaS Spend Optimization - 8 Simple Ways to Reduce SaaS Spend

According to Digital Silk’s 2025 SaaS Statistics, SaaS is the third-largest enterprise expense after salaries and rent.

This shows how much organizations rely on SaaS applications. But how much ROI are companies generating from their SaaS spend?

Our customers often complain about the poor ROI on SaaS applications. And we believe the major reason for this is uncontrolled spending and poor vendor negotiations.

Here are two quick questions that’ll put things into perspective:

1. Are companies spending a lot on SaaS applications? - Yes

2. Are they purchasing applications as per the requirements and through effective negotiations? - No.

Without an effective SaaS spend optimization strategy, you cannot keep your SaaS spend under control. With that in mind, we created this article to provide you with eight proven ways to reduce your SaaS spend.

Leverage them as part of your SaaS cost optimization tactics to optimize SaaS spend and increase your ROI.

‍

TL;DR

• SaaS spend is the third-largest business expense, but most companies struggle to get a strong ROI due to poor visibility and weak vendor negotiations.
• Uncontrolled purchasing and shadow IT drive up costs—without proper processes, teams often buy tools they don’t need.
• SaaS spend optimization platforms give full visibility into app usage, costs, and renewals—helping reduce waste and avoid duplicate tools.
• Smart license management, vendor consolidation, and strong negotiation strategies are key to cutting SaaS costs and improving ROI.
• CloudEagle.ai helps finance and IT teams reduce SaaS spend through automation, real-time insights, and expert-led buying workflows.

‍

What is SaaS Spending?

SaaS spending is the total amount a company spends on cloud-based software like Zoom, Slack, Salesforce, and Adobe for business functions like communication, collaboration, sales, and marketing.

As enterprises rely more on these tools, SaaS spend management becomes crucial to ensure costs remain under control. Without effective SaaS spend optimization, expenses can quickly spiral, especially as teams add new tools or increase user counts.

SaaS spending includes costs for user licenses, monthly or yearly subscriptions, add-ons, and sometimes hidden fees for unused or forgotten accounts. To optimize spend and reduce waste, organizations often turn to SaaS spend optimization software or a dedicated SaaS spend management platform.

These solutions help companies track all cloud-based software subscriptions across departments, making it easier to manage SaaS spend and avoid duplicate or unnecessary costs.

Key Points about SaaS Spending

• Includes all cloud-based software subscriptions used by a company, which can be hard to track without a robust SaaS cost management strategy.
• Costs are often spread across many departments, making SaaS cost optimization a challenge for IT and finance teams.
• SaaS spending tends to grow quickly as organizations scale, so it’s important to regularly review and reduce SaaS spend where possible.
• Proper management helps prevent waste, duplicate subscriptions, and unnecessary costs, contributing to overall IT spend optimization.

Why is SaaS Spending Important?

Managing SaaS spending is important because it helps organizations:

• Control costs and avoid overspending on unused or duplicate software, a key goal of any SaaS spend optimization solution.
• Stay compliant with software licensing and IT policies, ensuring efficient SaaS cost management.
• Improve efficiency by making sure teams use the right tools for their needs and eliminating redundant subscriptions.

With the right tools and processes, companies can track, analyze, and optimize their SaaS spending, saving money and making smarter software choices. Leveraging SaaS spend management software not only helps manage SaaS spend but also supports broader spend optimization initiatives across the organization.

‍

What is SaaS spend optimization?

SaaS spend optimization is a business process followed by finance teams to track, manage, and reduce SaaS spend effectively. Using a combination of SaaS spend optimization software and best practices, organizations can ensure they are not overspending on cloud-based applications. 

The primary objective behind SaaS spend optimization is to get the maximum value for software investments while minimizing needless expenses—such as those from missed renewals, shadow IT, or unused licenses. By leveraging a robust SaaS spend management platform, companies can identify and eliminate waste, ensuring their SaaS stack is both efficient and cost-effective.

Here are some of the main steps this concept encompasses:

Analyzing All The Tools In The Saas Stack: IT companies often value autonomy, but this can lead to employees purchasing tools with limited use cases and inflated costs. With so many tools in the stack, keeping track becomes difficult.

As a first step to reduce SaaS spend, it’s crucial to make an inventory and analyze all tools in use. This process helps uncover duplicate, redundant, or underutilized applications—allowing organizations to optimize spend and achieve significant SaaS cost savings.

Licensing Management: SaaS tools are typically licensed based on user requirements. Sometimes, companies purchase more licenses than needed, leaving many unused and reducing ROI. Effective SaaS cost management involves right-sizing these licenses and renegotiating contracts, which is a key part of any SaaS spend optimization solution.

Better Negotiations: The key to optimizing SaaS spend is strong vendor negotiation. Without negotiating, you may end up paying the list price for applications and licenses, missing out on potential savings. By focusing on spend optimization and leveraging data from your SaaS spend management tools, you can secure better pricing and terms, helping to further manage SaaS spend and control your overall IT budget.

‍

8 Clever Ways to Reduce SaaS Spend

These eight ways have been tested and proven by various organizations, but if you want to have an inside look of how finance teams and leaders reduced SaaS spend in their organization, click here.

Use a SaaS Cost Optimization Software

How can you reduce SaaS spend if you don’t know where you’re spending the most?

Some companies use spreadsheets to track their spending. A manual approach makes sense if the stack is small, but what about a SaaS stack of 100+ applications? Spreadsheets aren’t practical and scalable.

This is why you must use a SaaS cost optimization platform to minimize SaaS spend.

These platforms can integrate with your SSO, finance, and HRIS systems to retrieve complete app, spend, user, and usage data from applications.

It’ll provide complete visibility of your entire SaaS portfolio. This includes:

• Visibility on sanctioned and unsanctioned applications.
• Visibility on duplicate, redundant, and underutilized applications.
• Department-wise, user-wise spend reports.
• Complete license details, including provisioned users and spend per license data.
• Accurate usage data to calculate ROI.

A platform will reveal active and inactive users. You can easily deprovision inactive users from licenses and reallocate those licenses.

Fix Shadow IT

If you see unsanctioned applications in your SaaS stack, it indicates shadow purchases.

‍

‍

Shadow IT has a plethora of risks associated with it, so you must act quickly to prevent it. We asked our customers what they did to eliminate shadow IT, and we got two major tactics,

1. Create strict policies for shadow purchases. Some policies even include “work termination” for using a company credit card to purchase SaaS applications without approval.

Educate your employees about the risks involved in shadow IT. Limit credit cards to specific third-party purchases or set a threshold for every virtual card you offer.

2. A centralized SaaS procurement process. Our customers used a SaaS buying platform to streamline their software purchasing process.

• Delayed procurement
• Lack of transparency over purchase requests

These are the major reasons that frustrate the employee and lead to them going rogue with their purchases. A SaaS buying platform will automate the process and provide 100% transparency.

Workflows will accelerate SaaS purchasing and prevent employees from purchasing unsanctioned applications.

Effective License Management

A SaaS spend management platform will reveal the number of licenses purchased and how many are being used effectively.

If you want to get the maximum value from your SaaS application, you must eliminate those unused licenses. It is also essential to assess underutilized licenses, as they can impact your return on investment (ROI), follow these best practices to manage your licenses effectively.

You can use the tool to deprovision users of underutilized licenses, reallocate them to needed users, and eliminate the remaining. This will greatly reduce SaaS costs.

Pro tip:

• Do not forecast your growth and purchase licenses based on future projections.
• Only purchase licenses based on the requirements.
• It is important to inform vendors before the renewal notice period about your intention to right-size licenses. Failure to do so may result in penalties imposed by certain SaaS vendors.

Longer SaaS Subscriptions, Lesser Costs

For any given product, the pricing options for year-long SaaS subscriptions are considerably discounted compared to their monthly plans.

This is because SaaS companies find forecasting growth and revenue easier and more lucrative when a customer has pledged for an extended period.

Considering that you and your team will be using the particular SaaS product continuously, you can negotiate your contract by opting for a yearly or two-year subscription. You can talk your way through negotiations in several ways:

• Opting for the prolonged discounted rate mentioned in their transparent pricing plan.
• Increasing the potential SaaS usage & bringing down the cost in a bulk-usage scenario.

Stay Ahead of Renewals

SaaS renewals are tricky, especially when you aren't anticipating them. As a ground rule, you should make it clear in the SLAs to avoid auto-renewals. It gives more opportunities for the SaaS vendor to process the payment without a revised contract negotiation.

SaaS vendors work differently, and while some send reminders regarding the upcoming renewal date, others prefer to remain silent until the last moment.

This is where SaaS renewal management software could come in handy. You can use workflows to send automatic reminders and stay ahead of renewals. Here's how the renewal workflow can help you out:

• Get reminders 90 days before the renewal date and start prepping your negotiations well in advance.
• Be sure to re-do the competitive research & leverage benchmark data to stay in line with the market and pricing.
• Make it clear with the vendors about your decision to right-size licenses well before the renewal date arrives.

Get rid of the auto-renewal clause from your agreement; this will prevent you from incurring unnecessary expenses.

Manually tracking your renewal dates is not feasible. Use a renewal management tool to streamline SaaS renewals.

Consolidate Vendors

We recently had a conversation with Dave Beckwith, the Vice President of Global Procurement & Endpoints at 8x8, and asked about his approach to reducing SaaS spend.

He replied, Vendor Consolidation!

He added, “Our portfolio included 100s of SaaS vendors. However, around 20–30 vendors covered the majority of spend. " We noticed we paid seven figures for a small fraction of vendors.”

“So we decided to eliminate some of the underutilized and high-spending vendors and consolidate them.” “We relied on some of our reliable vendors who delivered similar functionalities,” says Dave Beckwith.

‍

‍

Get complete SaaS visibility using a SaaS management platform. Identify the high-paying vendors, evaluate your requirements, and consolidate them to reduce SaaS costs.

For example, let’s say you have Mailchimp for email marketing, Asana for management, and Hubspot for marketing. In this case, you can consolidate Mailchimp and Asana since Hubspot can deliver both email marketing and project management functionalities.

This consolidation will bring potential benefits such as simplified vendor management, improved efficiency, cost optimization, and better integration between various organizational functions.

Negotiate & Reduce SaaS Spend

Negotiation is the most crucial stage of your SaaS application purchasing process. Cost savings begin with effective negotiations.

‍

‍

You can clarify your primary requirements for the product by communicating your needs to the vendors. This can help you in a number of ways, such as avoiding additional and unwanted features, avoiding upselling traps, and devising a customized plan well suited to the company's needs.

The main steps of your SaaS contract negotiation process are as follows:

• Begin early to ensure you are ahead of your contract's expiry date. New renewal also paves the way for new offers and bargaining.
• Ensure that the vendors provide SLAs while signing the contractual agreements.
• Keep your BATNAs ready before you go into negotiations.

Leverage price benchmarks and analyze what your peers are paying for similar products and features for better negotiations. Clearly define your requirements and allocate your budget. Do not fall for it because SaaS vendors will ask you to buy more licenses to earn discounts. You’ll only end up spending more.

Check out the do’s of don’ts of SaaS vendor negotiations →

If your team lacks the bandwidth to negotiate, seek assistance from expert SaaS buyers. They can analyze your requirements and usage, leverage benchmarks, and negotiate with the vendors for you to right-size licenses, downgrade plans, and help minimize your SaaS spend.

Usage-Based Pricing

A SaaS cost optimization platform comes with direct integration capabilities. Platforms like CloudEagle.ai and Zluri can integrate with 600+ applications.

Direct integrations enable these platforms to provide accurate usage insights. You can track the user activity and usage patterns and use them to negotiate with the vendors.

When we asked Jinendra Jain, the Global head of Finance at Tiger Analytics, about the pricing plans to choose, he added, “Do not pay the pricing upfront. Always opt for slab-wise or usage-based pricing for better control over spending.”

The best way to reduce SaaS spend is to pay only for what you use. You can do this in two ways,

1. Ask your teams, clearly understand your requirements, and purchase the product based on projected actual usage and the number of seats.

2. If your ROI is low, right-size your licenses, cut down on unnecessary features, and downgrade your pricing plans to keep your spend under budget.

Most SaaS vendors will not be open to offering usage-based pricing. However, it is essential to skillfully negotiate and align the vendors' understanding with your requirements without straining your relationship.

‍

Why Do You Need to Optimize Your SaaS Spend?

The market is volatile, and failing to implement a robust SaaS spend optimization strategy can negatively impact your bottom line. During times of economic uncertainty, organizations must focus on SaaS cost optimization to ensure every dollar spent delivers value.

By leveraging a dedicated SaaS spend optimization solution, companies can proactively manage their software expenses and avoid financial surprises.

Time Efficient: While saving costs is critical, organizations must also consider the time spent managing software subscriptions. Using SaaS spend management software streamlines the auditing process, making it easier to identify unverified expenses and quickly optimize spend. This efficiency allows finance teams to focus on higher-value activities and respond rapidly to budget concerns.

Improves ROI: Effective SaaS spend management increases the value derived from cloud applications, directly improving ROI. By eliminating overlapping and unused licenses through a SaaS spend management platform, finance teams can reduce SaaS spend and redirect resources to high-priority applications. This approach simplifies app management while maximizing the impact of software investments.

Enhanced Budget Allocations: A SaaS cost management platform helps organizations define team needs and priorities based on real usage data. With tools that send alerts when purchases exceed the budget, companies can enforce accountability and manage SaaS spend more strategically. This leads to smarter budget allocations and prevents unnecessary spending.

Clean Stack: A cluttered SaaS stack increases financial burden and operational complexity. Implementing a spend optimization strategy results in an organized stack where each tool has a clear use case. The right users have access to the right applications, and plans are purchased accordingly, supporting both SaaS spend optimization and increased ROI.

Space for More Services: By benchmarking and optimizing SaaS spending, organizations can free up resources to invest in other critical areas—such as customer service or product development. Better IT spend optimization not only improves morale but also enables teams across marketing, production, and development to operate more efficiently.

Better Compliance: Many organizations face fines and compliance issues due to poor tracking of software expenses. Adopting SaaS spend optimization software and maintaining clear records of subscriptions helps companies stay compliant with licensing and IT policies, reducing risk and avoiding costly penalties.

‍

How Does Cloudeagle.ai Help You Reduce Saas Spend?‍

CloudEagle.ai is a comprehensive SaaS spend management platform that can help finance teams reduce SaaS spend. It has an extensive integration library, enabling you to get 100% visibility on apps and spend, and it provides accurate usage and user activity insights for better app control and management.

Here’s a quick rundown of CloudEagle.ai’s capabilities:

Complete SaaS Usage Visibility: CloudEagle.ai connects with 500+ tools to give you full visibility into SaaS apps, user activity, and spend, helping cut costs by removing unused licenses and duplicate tools.

‍

‍

Accurate Usage and User Activity Insights: The platform tracks who is using which apps and features, allowing organizations to reclaim unused licenses and reallocate them efficiently, reducing idle spend.

‍

‍

Automated Renewal Management: CloudEagle.ai automates contract renewal workflows with reminders starting up to 90 days before renewal dates, helping avoid missed negotiation windows and unnecessary renewals at full price.

‍

‍

Price Benchmarking: It provides industry benchmarking data to compare prices and select cost-effective SaaS solutions, enabling more effective vendor negotiations.

‍

‍

Custom Workflows and Procurement Automation: The platform supports no-code workflows for SaaS intake requests, approvals, and procurement processes directly within collaboration tools like Slack, speeding up buying cycles and reducing duplicate purchases.

‍

‍

Centralized Contract and Document Management: All vendor contracts and related documents are stored in one place with enriched metadata, simplifying contract management and spend tracking.

Shadow IT Detection and Proactive Alerts: CloudEagle.ai notifies teams about unauthorized or shadow IT applications early, preventing uncontrolled SaaS spending and security risks.

‍

‍

Expert Assistance: CloudEagle.ai offers assisted buying experts and procurement workflows to help organizations make informed purchasing decisions and accelerate SaaS buying.

Head over to see CloudEagle.ai's full-stack SaaS cost optimization functionality in action!

‍

‍Conclusion

SaaS spend optimization isn’t a tricky process, but what makes it challenging is that it’s always ongoing. By prioritizing SaaS cost optimization and adopting a robust SaaS spend management approach, organizations can stay ahead of unnecessary expenses and maximize the value of their software investments.

You can reduce SaaS spend and avoid waste with the right SaaS spend optimization strategies. One effective tactic is to implement a SaaS spend management platform like CloudEagle.ai, which enables you to manage SaaS spend and gain full visibility into your SaaS portfolio.

CloudEagle.ai’s clients have seen significant results:

“It was amazing to see how CloudEagle.ai's team saved us thousands of dollars within just a couple of months of our engagement. With their insights about internal usage and persistence with vendors, it feels like they are our own team that's working hard to save us money.” — Michael Lipinski, Director of IT and Security, ICEYE

Are you ready to embrace spend optimization and boost your ROI with a modern SaaS cost management solution? Start optimizing your SaaS spending today and unlock more value from every dollar you invest.

‍

FAQs

1. What is SaaS spending?

SaaS spending is the total money a business pays for cloud-based software subscriptions, like Zoom, Salesforce, or Slack. It includes all costs for user licenses, add-ons, and renewals.

2. What does SaaS mean?

SaaS stands for Software as a Service. It’s a way to access software over the internet, usually by paying a monthly or yearly subscription instead of buying and installing it on your own computers.

3. What are the fixed costs of SaaS?

Fixed costs of SaaS are regular, predictable expenses like subscription fees, user licenses, and support charges that you pay regardless of how much you use the software.

4. What is SaaS user management?

SaaS user management is the process of controlling who can access your SaaS apps, assigning and removing licenses, and tracking usage to make sure only the right people have access.

5. How to get better usage on SaaS?

To get better usage, train your team, monitor usage data, remove unused licenses, and regularly review which features are actually being used to make sure you’re getting value from your subscriptions.

‍