2023 Software Spending Analysis Unveils Trends in Cost Optimization
The economic downturn and a heightened focus on cash flow have prompted organizations to examine their budgets closely. CFOs have mandated significant reductions in software expenditures, ranging from 10% to 30%.
A report from CloudEagle, a SaaS procurement and management platform, sheds light on the evolving landscape of software spending.
Shifting Priorities in Software Spending
The EagleEye SaaS Spend Report 2023 analyzed $400 million in transactions through the CloudEagle platform. It unveils a noteworthy trend where software spending has emerged as the third-largest expense for organizations, trailing only employee and office costs.
The report highlights that the departments with the highest software spending are:
- Engineering (IT, security, data) at 45%
- Marketing at 19%
- Sales at 17%
- Finance at 7%
- Customer success at 7%
- HR at 5%
In terms of the number of applications used, the breakdown is as follows:
- Marketing leads with 76 applications
- Engineering utilizes 56 applications
- Sales manage 42 applications
- Finance employs 35 applications
- HR utilizes 31 applications
- Customer success relies on 22 applications
Dominant Software Categories
The report identifies cloud providers, CRM, project management, and data analytics as the top software categories in expenditure. It also highlights the emergence of ‘Citizen SaaS,’ where individual buyers or small teams within organizations purchase tailored SaaS tools, accounting for over 40% of SaaS spending.
Marketing, sales, and customer success departments tend to have the highest number of unused apps within a year of purchase, often due to evolving needs and adopting new tools.
Companies typically allocate between $1,000 to $3,500 per employee annually for software tools. For instance, businesses with 10 to 100 employees budget between $250,000 to $1 million across 50 to 70 apps. Larger organizations with 2,500 to 5,000 employees allocate between $40 million to $100 million for 300 to 400 apps.
Negotiation Dynamics with SaaS Vendors
Specific SaaS vendor categories, such as video conferencing, testing, collaboration, storage, helpdesk, payroll management, and mail automation, are more open to price negotiations due to the abundance of available options.
Conversely, vendors in categories like CRM, enterprise workflow, and business intelligence need more negotiation flexibility due to their entrenched roles in daily operations.
A Strategic Approach to Cost Reduction
Nidhi Jain, CEO and founder of CloudEagle, emphasizes the importance of scrutinizing software budgets to maximize value: “CFOs must work closely with CIOs and department heads to devise smart plans to cut their SaaS spend and get more bang for their buck. The primary objective for CFOs should be to identify where they’re spending, recognize departments with the highest costs, identify instances of low utilization and application redundancies, and establish a well-defined procurement process.”
According to CloudEagle, the most effective approach to reducing SaaS spend involves a data and metric-driven strategy. Analyzing the ROI for each vendor and evaluating SaaS spend per employee enables CFOs and CIOs to determine the true value of software and its impact on the company’s financial performance.
Read the original article on The FinTech Times.
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