27 Tips for Software Cost Savings [Ultimate Guide]

Finding cost savings is hard. It often results in uncomfortable conversations, tiring negotiations, or difficult decisions without enough data. Frankly, it’s not fun!

In this article, we’ve compiled a list of strategies, tactics, and tips for controlling your app spending. For each tip, we’ve included a simple rating system based on its value, the amount of technical knowledge or new tooling it requires, and whether or not it could include an awkward conversation.

For example, the following rating would indicate high value, low technical difficulty, and the potential for moderate social discomfort!

Take every rating with a grain of salt. An extroverted IT Director will have different struggles than an introverted Database Admin!

Getting Started

---

1. Communicate the importance

Let’s start with arguably the most important action—communication. Changing company culture is really difficult, but once the communication is out there, it empowers you to take more action with more clarity. Explain to your entire organization why cost optimization matters—platitudes are nice, but data is better. Emphasize that these strategies aim to ensure resources are well-spent and the right tools are in place.

• How to talk about it: Hold company-wide meetings, send out detailed emails, or create an intranet page dedicated to cost optimization goals.
• Focus on benefits: Highlight increased efficiency, better allocation of resources for innovation, and the ability to invest in new growth areas when SaaS spending is streamlined.
• Note: Your success will also depend on leadership’s support—if you can get allies at the top level, this process becomes a lot easier.
  

2. Schedule regular audits

Proactive reviews are crucial as usage patterns and SaaS options change rapidly. Quarterly or semi-annual audits are a good baseline. Without the right tools, the audit process can feel tedious, and follow-up actions often slip through the cracks.

• Set calendar reminders: To ensure these reviews happen, put them on your calendar (and those of key decision-makers).
• Audit template: A simple spreadsheet can be a starting point. List each SaaS tool, cost, renewal date, contract owner, and key features.
  

Consolidation & Optimization

---

3. Identify redundant tools

Redundant tools are those that accomplish more or less the same task. The difficulty with this is that it relies on a lot of digging to uncover. Often, there will be a sanctioned solution and a shadow IT solution—the trouble comes with identifying those shadow apps (something that only SaaS Management Platforms are designed to do). Simple consolidation can produce some significant cost savings as well as simplify training, support, and integration efforts across the organization.

• Look for ubiquitous tools: Things like file transfer tools (WeTransfer, Dropbox, Google Drive…), productivity apps (Asana, Monday, Trello…), are often overlooked.
• Tool Mapping: Create a list or diagram where you list each SaaS tool and its primary functions. Look for areas where multiple tools offer similar features.
• Talk to users: Ask your teams which tools they actually use regularly and which feel unnecessary. This feedback is invaluable
  

4. Right-size Licenses

One of the greatest sources of cost savings, your contracts probably include a number of unused license seats. If you can identify those seats, you’re well on your way to massive cost savings via negotiation for contracts to match your needs.

• Usage reporting tools: This process will require usage insights; fortunately, many SaaS management platforms provide detailed usage analytics. Identify if you’re consistently under-utilizing the number of seats or features in your contract.
• Reclamation: For unused licenses, be sure to reclaim them whenever possible. This will prevent purchasing unnecessary seats and provide clarity come renewal negotiations.
  

5. Optimize feature adoption

When companies are searching for a “silver bullet,” the knee-jerk reaction is to purchase a shiny new tool. Sometimes, the new tool is absolutely worth the purchase. However, those capabilities are often already available as an unutilized feature in your existing tech stack. Train users well on the full capabilities of your existing tools to avoid unnecessary new purchases.

• Ask why they need a tool: When someone requests a new tool, start by asking what capability they need. Once you understand the “why,” you can encourage some comparison research based on the existing stack.
• Vendor resources: Most vendors offer tutorials, webinars, or knowledge bases to maximize the use of their products.
• Internal champions: Identify tech-savvy users within your company who can train others, leading to better feature adoption.

6. Cancel unused subscriptions

In terms of value against effort—this is one of the best ways to trim fat from the tech budget—proactively canceling any subscriptions your team isn’t actively using anymore. Make this a regular habit instead of letting zombie subscriptions haunt your finances indefinitely.

Note: This tip is entirely dependent upon accurate usage data for the applications involved.

• Centralized list: Keep a master list of all subscriptions with renewal dates and owners. This will make cancellation decisions easier.
• Ownership accountability: Ensure contract owners are responsible for reviewing their tools and canceling unnecessary ones. Collaborate with app owners to understand purpose, usage, and other relevant information.

7. Explore tiered pricing

You know those fancy, full-featured versions of software you’ve been paying top dollar for? Time for a reality check—does every single team actually need all those bells and whistles? Don’t be afraid to open a dialog with the vendor and negotiate your way down to the tier that works best.

Strategic Procurement & Negotiation

---

8. Centralize purchasing

Bringing all your software purchases under one roof can be a game-changer. It ensures everyone’s on the same page and that your buys truly make sense for the business. Depending on the purchase’s cost, you might find it necessary to implement different approval processes.

Note: Implementing this solution will require strong support from leadership.

• Procurement forms: Create standard forms for requesting new tools, outlining the business need, budget impact, and other key details.
• Approval workflow: Establish a clear chain of approval (IT, department heads, etc.) before any new tool is purchased.
  

9. Implement approval workflows

In many ways, this goes hand in hand with the previous step. Centralized purchasing will only work if employees sense that there’s a clear process in place. Otherwise, they will become dissatisfied or work to work around the process. That’s why clarity is king.

• Step-by-Step Process: Clearly articulate every step within this process with accountable parties at each phase of the approval.
• Workflow tools: For complex organizations, consider procurement software that can automate these approval steps.
  

10. Benchmark pricing

Sometimes, ignorance is just ignorance (not bliss). Compare prices with market averages to ensure you’re getting competitive deals.

• Review sites: Websites like G2 Crowd often have user reviews that mention pricing or allow you to filter and compare based on cost.
  

11. Negotiate Renewals Proactively

If you want to save big, you have to master the renewal process. The first step to mastery is preparation. Ensure that you have full visibility and a proactive plan for engaging with vendors before the date. The more you can set expectations in advance and back up your positions with data, the better you’ll fare. A little practice at negotiation can save your company big.

• Renewal calendar: Track all renewal dates and set reminders to start negotiations 2-3 months beforehand. Ensure that you mark auto-renewals and other relevant details.
• Automation to stay on track: Staying on top of renewals is difficult. Find automation that can help you stay on track and in the know. Don’t find yourself scrambling 5 minutes before a call.

12. Negotiate Payment Terms

Aiming for discounts with annual payments or seeking extended payment periods can be a surprising boost IT budgets. While it requires a good understanding of your company’s software needs and some negotiation skills, the financial benefits can be substantial.

13. Seek Volume Discounts

Securing lower pricing when purchasing licenses for multiple teams or departments is a straightforward way to reduce software costs. However, this technique won’t offer a lot of value unless you’re working with large contracts. On the plus side, though, it can also be an effective way to consolidate multiple contracts, making future cost savings exercises more focused.

Directly Ask Vendors: Initiate conversations with your vendors about volume discounts. These discounts are often available but may not be publicly advertised.

14. Leverage Long-Term Contracts

Thanks to multi-year contracts, committing to a tool for the long term can net you better pricing. This approach is best suited for software that’s core to your operations and where you’re confident in its long-term value.

Calculate Trade-Offs: It’s crucial to consider the potential cost savings against the loss of flexibility. Evaluate how much you’re likely to save over the contract period versus the potential costs if your needs shift and you’re locked into a less-than-ideal contract.

15. Consider Usage-Based Billing

For tools that see fluctuating levels of use, switching to a usage-based billing model could lead to substantial cost savings. This approach aligns costs directly with consumption, potentially offering cost savings during lower usage periods.

Usage Analysis: Conduct a thorough analysis of past usage patterns to determine if your current payment model is cost-effective. If you notice significant variability in tool usage, it might be time to negotiate a usage-based billing plan with your provider. This model can be particularly beneficial for businesses with seasonal fluctuations or those in the process of scaling operations.

Visibility & Data-Driven Decisions

---

16. Track and Find Shadow Spend

Like it or not, someone in your company is purchasing software via unsanctioned channels. Often, these purchases are small and insignificant via a company card. However, sometimes, these purchases can bloat and grow, adding new license seats and zeros to the final figure in the process.

• Monitor company cards: the most common form of shadow spend is company credit cards. Ensure you have a handle on who spends what on what.
• Communicate with procurement and finance: Have there been any surprise renewals recently? These surprises often stem from shadow spending left unchecked.

17. Measure ROI

Ok, don’t roll your eyes. Discussions of ROI are easy to initiate, but doing the analysis can feel frustratingly futile. In order to truly calculate ROI, you need to start with some basic details and some pass/fail criteria.

• What was the tool purchased to do? Did it accomplish this work?
  • If yes, was that worth the cost?
  • If no, why not? Lack of adoption? Unrealistic expectations? Poor research?

After analyzing these basic starting points, you should know whether or not the product is even worth measuring ROI (of if it’s time to say “au revoir”). If you believe it is worth the measurement, create a formula looking at time saved, cost savings, and other relevant metrics (like security enhancements, customer satisfaction, etc.). Make sure you consult other teams to create a report that is fair and honest.

18. Centralize Data For Insights

Data in isolation is interesting, but data in context tells a story. To read that story, your data needs to be stored in a central location so you can interrogate the numbers. Identify trends, patterns, problems, and opportunities.

• Keep data up to date: Make sure you are acting on the latest insight and keep your data current.

19. Make Software offboarding a Priority

Offboarding is a top way to ensure better cost control and better security. Ensure subscriptions tied to departing employees are canceled. When you fail to deprovision software to a former employee, you are literally paying money to expose yourself to more threats.

• Work with HR: Don’t get left in the dark. Ensure that HR knows that you need to know when employees leave the organization.
• Automate whatever is possible: Speed is of the essence with offboarding. To prevent IP theft, make sure employees are cut off from critical apps immediately. Find automation solutions to ensure nothing critical slips through the cracks.

20. Tackle Shadow IT

More than any other item on this list, shadow IT is highly dependent upon your tooling. Currently, a SaaS Management Platform is the only way to identify all your shadow IT, and even then, many platforms only show partial visibility. But, if you want to see cost savings and reduce headaches, shadow IT is a top culprit. Identify duplicate or redundant apps, identify shadow spend, and find out which tools the company truly uses.

• Pick the right tool: Many SMPs specialize in financial driven discovery, which sounds good but often misses freemium tools or those procured through unsanctioned means. Looks for an SMP that uses multiple forms of AI powered discovery and mapping.

Additional Tips

---

21. Explore freemium/open-source alternatives

Consider if these options could cover basic needs.

• Freemium limitations: Understand what features/usage limits come with freemium plans before switching from paid tools.
• Open-source support: Assess if your team has the technical know-how to maintain and potentially update open-source solutions.

22. Improve Your Software Evaluation Process

Evaluate tools thoroughly and avoid purchasing before you’re certain they’re the right fit. Come up with a checklist complete with stories about how your company currently tries to accomplish certain actions and compare this with the process with the new tools. Be through and use trials whenever possible.

• Prepare trial checklists: Have a list of key functions you need and test them out meticulously during the trial period.

23. Promote internal collaboration

Encourage departments to share tools to minimize redundancy.

• Internal knowledge base: Consider using a wiki or intranet page to list commonly used tools and their functions.

24. Consider managed service providers (MSPs)

MSPs can help manage complex SaaS landscapes.

• Assess your needs: MSPs excel if you have a large number of tools or lack internal IT resources to manage them effectively.

25. Renegotiate existing contracts

Aim for better terms even outside of renewal periods, if circumstances warrant it.

• Monitor the market: Stay aware of new competitors or pricing changes that can give you leverage in renegotiations.

26. Review App Exchanges

For platforms like Salesforce, consider cost-effective add-ons to avoid extra standalone tools.

• Know your needs: Define what extra functionality you need before browsing App Exchanges to prevent overspending.

27. Ask About these Discounts

Believe it or not, you have a lot of leverage in negotiations. Be sure to ask about the following discounts and see if one of them might apply to your organization:

• Non-profit: If your organization is a non-profit (501) or a B Corp, vendors might have specific discounts available. View this list of relevant non-profit organizations.
• New-vertical: Often, vendors are excited to expand into new verticals and industries. If you think your company exists in one of these industries, be sure to ask about a discount.
• End of Month/Quarter/Year: People want to hit goals. Those goals tend to align with the end of the month, quarter, or year. Ask if you can get a discount by pushing something over the line within that time frame.
• Case-Study: Companies are desperate for customer stories and this could allow a win-win scenario. Offer to include the promise of a case-study in your contract in exchange for a discount.

Software Cost Savings Made Simple

While this list is long, most of it comes down to some core principles:

• Visibility
• Process automation
• Consistency

If you have those ingredients, you’ll save big in no time. If you need an ally in your cost savings efforts, check out how Torii might be the tool for you.

See Similar Success Stories

• Lunchbox saved $430,000 in just 9 months
• Paxful saved $715,000 in SaaS licenses
• Hired saved $1.7 million in SaaS apps
• Article saved +$100,000 within a few months via visibility
• hhpberlin saved + €500,000 in one year and experienced continuous cost savings of ~ €40k per renewal period on right-sized subscriptions