1st August 2023

The convenience and benefits of SaaS based licensing models has driven their widespread adoption by many companies. The challenge is controlling the cumulative cost. Incremental cost increases seem manageable however, when compounded over multiple years, they result in a significant financial burden. 

SaaS subscription fees increase for two reasons:

1. Vendor Price Rises -  Driven by market conditions, inflation or the introduction of new/enhanced features. 
2. Organisational Change - Such as employee churn, organic growth, restructuring and merger and acquisition activities, which often lead to the purchase of additional, and in many cases, unnecessary licenses. 

These cost increases may seem modest in isolation, but SaaS costs quickly add up when compounded over time.

While not much can be done about vendor price increases, companies can exercise control over change-driven increases. Adopting proactive optimisation practices within your organisation will mitigate the cumulative impact of subscription licensing models.

Discover more about the Microsoft Global Price Increase and what it means for you >

The Power of Optimisation

The below graph illustrates the impact of optimisation vs the cumulative cost of SaaS Licenses. 

The examples used in this document are assumptions of a compounding effect of a 15% price increase year on year on an annual spend of £1,000,000 (7.5% due to vendor rise and 7.5% attributed to organisational change), with optimisation achieving a modest 10% reduction of costs.

NB. The average employee churn rate for a UK organisation in 2022 was 15%.

Proactive license optimisation practices are vital in identifying and eliminating unnecessary expenses. A continuous approach to identifying underutilised or surplus licenses enables prompt action to optimise usage and remove excess costs. By continuously assessing and fine-tuning the allocation of licenses based on usage, companies can remain in complete control of their SaaS estate at the point of change, proactively avoiding unnecessary costs in that and subsequent years. By proactively avoiding these costs, organisations will achieve a greater return on their software investment and have the power to allocate their resources to the users who need them with complete confidence.

The Effect of Timing 

When considering optimisation, it matters not only what you do but also when you do it. The below graph demonstrates the impact of delaying optimisation activity, in terms you ability to offset comounding costs.

In the ever-evolving landscape of SaaS licensing, organisations cannot ignore the impact of cumulative costs. They must embrace proactive optimisation practices to maintain tight control of costs and mitigate the cumulative impact of cost increases. By doing so, they can navigate the challenges of organisational change and strategically manage rising subscription costs to ensure optimised investments for the future.

Beyond The Cost Savings

SaaS Optimisation is undoubtedly the most effective way to regain control of your organisation’s licensing spend, but it has other profound benefits too. With SaaS Optimisation, you can proactively drive software adoption, enhance your digital employee experience and bolster your security by eliminating hidden vulnerabilities in your software estate. 

Discover Hublsoft SaaS Optimisation today.