reduce software expenses

The modern business world is run on software – from SEO tools to accounting to customer management systems. As more organizations transition to remote work arrangements and satellite offices, SaaS and cloud-based tools are becoming especially crucial. It is estimated that the cloud-based SaaS services market segment will reach $113.1 billion by 2021 – almost twice the size of the industry’s 2017 value.

That value is driven by businesses both large and small. A 2017 study found that the average company with over 250 employees used 100+ SaaS solutions. Smaller organizations with under 50 employees still used on average 25-50 SaaS tools. That represents a large expense for most businesses and the numbers have only increased since 2017.

The growth in the software and SaaS market is not surprising. Today’s software solutions help businesses save countless hours of manual work, optimize internal systems, and maximize revenue. Not all software is created equal though and not all software is a good fit for every business. Considering how many software tools the average company uses, this is a prime area for cost cutting and optimization.

Could you name every software solution your company is currently using and paying for? How many of those have ongoing monthly costs? How many are actually providing value or even being used on a regular basis? If you can’t easily answer those questions, it’s time to take a deeper look at your software costs.

Honestly Evaluate All Your Current Business Software Expenses

The first step in cutting software and SaaS expenses is evaluating all the tools you currently use and their cost. If you have a larger company, this could mean breaking down software solutions in each department as well as company wide systems. Smaller organizations will have a much easier time with this step.

For each software tool evaluate:

  • How often is it used?
  • What is the annual or monthly cost of the software?
  • Are there any ongoing upgrade costs or IT expenses related to the software?
  • What value is it providing to your company? Can this value be directly tied to revenue and if so, what is the ROI? If not, how else can the value be determined?
  • If we didn’t have this software, could the work be completed manually by an employee? If so, what would be the time and cost attached to that work? 

The goal here is to determine what software is essential or a must have for your business. For most companies, there are a few pieces of software that are undeniably vital. These solutions might automate processes that would take employees days or weeks to complete. Many also help organizations directly increase revenue.

During your evaluation though, you are likely to come across software or SaaS tools that don’t provide enough value to justify their cost. Maybe at one point they did but as businesses change and grow, old software subscriptions can often get overlooked. Dropping these nonessential or rarely used tools is an easy cost-cutting solution.

For Essential Software – Can You Find a Less Expensive Alternative?

Just because a certain software tool does something vital in your organization, that doesn’t automatically mean it is the best solution. Every year new software companies are popping up with new and even better tools to help your company with everything from eCommerce to employee management. With a bit of research, you might find a tool that not only works better for your company but is cheaper as well.

The first place to look is at open source software options. Going with an open source solution will save you the most money upfront. There are lots of really great software options in the open source community that won’t cost you anything to use. You should keep in mind future IT expenses though as open source software can sometimes be less reliable and you won’t have a dedicated support team on call.

After evaluating open source options, spend some time looking at software comparison guides and reviews for the alternative paid and free tools you are considering. You should be looking at how close the software matches your current solution and any potential extra value the software might have. Compare that with the cost and you’ll begin to see if a new software tool might be worth trying out. 

Most software and SaaS solutions offer free trials or demos so you can get an even better feel for the tool. Once you have found a new, less expensive software solution that might work for your company, there is only one more thing to consider.

Is it Worth Migrating to a New Software Tool?

While migrating to a new software solution might be a great way to cut direct software costs, it’s not always the best option. Before moving to a new system, honestly ask yourself if the savings are worth the effort.

Migrating to a new software tool will likely require a lot of time and effort. The more invested in your old system you are, the longer it will take to move over and the greater chance issues will arise. You also have to consider the cost of training employees on the new software solution.

If moving to a new system will save your company a lot in the long run, it can be worth the headache of migrating to a new software solution in the short term. You definitely don’t want to walk into the migration blind though. Take some time to evaluate and plan before making any decisions.

Lowering Costs without Migrating to a New System

You have already evaluated all your software, looked at the alternatives, considered migrating to a new system, and still think your current solution is the best option. If that’s the case, it’s time to break out the negotiating skills.

It can seem like software and SaaS companies have pretty set prices but any good business owner knows everything can be negotiated.

First, consider what discounts the software company might offer upfront. You can usually get a pretty good discount by paying annually instead of monthly. Some companies also offer start-up pricing to new, smaller organizations.

If no discounts fit your needs, get in touch with the company and just ask what they can offer you. As an existing, loyal customer the SaaS company doesn’t want to lose your business. If they know you are considering switching to a competitor, they might offer you a small discount or possibly extra free software features to keep your business. It never hurts to ask.

Modern software and SaaS solutions have dramatically changed how we all do business in the 21st century. It’s a rare business that can survive without these tools. At the same time, the new model of small, monthly software subscriptions can quickly add up to a major business expense. Hopefully these tips will help you reevaluate your software costs to make sure your business is getting the solutions you need without unnecessary expenses.