In today’s business In the world, every dollar counts more than ever. The current economic downturn, funding crisis and race to positive cash flow are forcing organizations to re-evaluate their budgets and spending habits. This prompted CFOs to issue mandates: reduce software spending by between 10% and 30%.
Based on data available on my company’s platform, software spending is now the third largest expense for organizations, just behind employee and office costs.
CFOs should work closely with CIOs and department heads to develop smart plans to reduce their SaaS spend and get more bang for their buck. At the same time, reducing software spending is not expected to negatively impact business growth or dampen innovation.
The primary goal of CFOs should be to identify where they are spending, identify departments with the highest costs, and identify instances of low utilization and application redundancies.
I believe the right approach to reducing SaaS spend involves a strategy driven by data and metrics. Understanding each vendor’s ROI and assessing SaaS spend per employee will allow CFOs and IT directors to identify the true value of the software and how quickly it will contribute to the company’s top and bottom line. . Expenditure analysis will allow you to make informed choices regarding cost optimization.
What do typical software spending look like in organizations?
Our data indicates that the engineering department spends the most, followed by marketing and sales, then HR. Even though the engineering department spends the most in terms of dollars, it is not the one with the largest number of SaaS applications. This distinction goes to the marketing team.
Image credits: CloudEagle Database
So, should we ask the ministry that spends the most to reduce its spending?
Software is now the third largest expense for organizations, just behind employee and office costs.
Maybe so, but let’s look at the low-hanging fruit first: Sales and marketing teams have the highest number of abandoned and underutilized applications.
Sales and marketing teams must quickly adapt to market changes and evolving customer requirements; they often acquire different tools to meet their immediate demands, and when those requirements change, they frequently move to new tools, leading to low utilization and redundant tools.
Second, CFOs can use benchmark data to ensure their spending matches that of similarly sized companies. Depending on the size of the company and the employee’s department, companies spend on average between $1,000 and $3,500 on software tools per employee. CFOs must collaborate with teams to optimize the purchasing process and control spending. If your company’s expenses don’t meet the usual benchmarks of your peers, it might be a good idea to investigate why.
