Companies cut software spend up to 30% as it hits $3500 per employee

Companies cut software spend up to 30% as it hits $3500 per employee

CloudEagle releases report findings based on $400m worth of SaaS transactions to help CIOs evaluate own spending patterns with peers.

CloudEagle has released its EagleEye SaaS Spend report analyzing $400M in transactions to say spending on software is now the third-biggest expense for organizations – right after employee and office costs.

According to the report, the department with the highest software spend is Engineering (IT, Security and data) on 45%.

However, when it comes to the number of apps, Engineering comes second to marketing.

As to the top software categories purchased, cloud providers, CRM, project management and data analytics, in that order, are at the top of the table.

The report spotlights over 40% of SaaS spending across companies as originating from so-called Citizen SaaS – individual buyers or small teams buying SaaS tools needed to do their jobs.

Another revelation is that, on average, companies spend $1000-$3500 on software tools per employee annually.

Digging deeper, a company with 10-100 employees has a total SaaS spend between $250k to $1 million spread over 50-70 apps.

On the other extreme, a company with 2500-5000 employees has a total SaaS spend between $40 million-$100 million spread across 300-400 apps.

The report shows SaaS vendors in categories like video conferencing, testing, collaboration, storage, helpdesk, payroll management and mail automation are most open to negotiating pricing due to the options available in these categories for customers.

On the flip side, vendors in categories like CRM, enterprise workflow and business intelligence are least likely to negotiate – being deeply entrenched in the company’s working culture. 

“Given that software spend ranks as the third-largest expense in organizations it has become vital for CIOs to scrutinize how they allocate their software budgets to ensure that every dollar spent returns a significant value. And it’s unsurprising that companies are looking at SaaS spend per employee as an important metric and accounting for that cost in addition to employee salaries and benefits,” said Nidhi Jain, CEO and founder, CloudEagle.

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. At the same time, reducing software spend should not negatively impact company growth or inhibit innovation. 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.

“The right approach to cutting SaaS spend involves a data and metric-Driven strategy.  Understanding the ROI for each vendor and evaluating the SaaS spend per employee will enable the CFOs and CIOs to identify the software’s true value and how quickly it will add to the company’s top and bottom line. Spend analysis, streamlining procurement and building a cost-conscious culture will enable companies to make informed choices and reduce overall software spend.

Click below to share this article

Browse our latest issue

Intelligent CIO North America

View Magazine Archive