With a recession looming and economic headwinds showing no sign of abating, many companies are scrambling to cut costs. Software is a prime category for optimization, and many organizations are paying 50% more on cloud technologies than they did just two years ago.
It’s tempting to over-invest in best-in-class technologies to drive efficiencies and stand out, but that technological desire to keep up with the Joneses can come at a significant cost. Companies currently carry hundreds of software contracts, mixing and matching apps, platforms and an endless array of SaaS vendors.
The result is that some of that spending is unnecessary. In fact, according to our internal data, which reflects over 10,000 contracts we’ve negotiated, companies are overspending on their software by nearly 30%.
The challenge is that most companies don’t have the right purchasing infrastructure in place — data, tools, experts and processes — to effectively navigate the nuance and complexity inherent in software procurement. They’re essentially in “DIY” procurement mode.
The question is not whether there is waste or inefficiency, but rather how much.
As a result, they don’t know how much they should be paying for each tool or what tools they really need, let alone if they’re actually using what they bought, where they’re storing the original contracts, or documenting when contracts are up for renewal. This disparate approach leads to massive inefficiencies, not to mention overspending.
How can you regain control of the process to make sure you’re making the best possible decisions around your software spend? Start by asking yourself these three important questions.
Do I know what I’ve bought and am I using it wisely?
Every company should be auditing its current tech stack. No exceptions! Most companies suffer from bloat from years and years of over-investing in software, and it’s essential to have a clear picture.
Start by getting an accurate count of the number of tools and software platforms your company actually has, and how much you paid for them. Next, make sure you know where the original contracts are and when renewals are scheduled. In addition, find out if you have a single source of truth by examining whether all your contracts and associated data are stored and accessible from one place.