Today’s issue is the last in our IT cost savings series. We will be reviewing how to reduce SaaS costs within your organization. According to Ortto, the average enterprise wastes $18 million annually on unused or underutilized SaaS licences, and 51% of SaaS licences purchased by enterprises go unused. Spending a bit of time auditing your firm’s SaaS spend can yield significant savings.

The first step to saving money is understanding exactly what your organization is paying for. Many companies do not have a complete list of all SaaS applications in use, especially when individual departments purchase tools independently.

A SaaS audit should identify every active subscription, who owns it, how much it costs, how often it is billed, how many users are assigned, and whether the tool is still needed. This includes software purchased through IT, finance, procurement, corporate credit cards, expense reports, and departmental budgets. Once everything is visible, it becomes much easier to find unused applications, overlapping tools, and subscriptions that should be downgraded, renegotiated, or canceled.

Keeping track of licenses can be a simple as maintaining a spreadsheet with key on information on your organization’s SaaS spend. A paid SaaS management platform (like Spendhound or Vertice) can enhance visibility in your firm’s SaaS spend and include additional features such as seat management, price benchmarking, and accounts payable automation.

Unused licenses are one of the most common sources of SaaS waste. Employees leave the company, change roles, move to different teams, or stop using certain tools, but their licenses often remain active.

To reduce this waste, companies should regularly review license usage. Look for users who have not logged in recently, accounts assigned to former employees, and users with premium licenses who only need basic access. Removing or reassigning these licenses can produce immediate savings.

For larger organizations, this should be an ongoing process rather than a one-time cleanup. Integrating SaaS management with identity and access management systems can help automate license removal when employees leave or change roles.

Many SaaS vendors offer multiple pricing tiers, and organizations often pay for higher-tier plans because they include advanced features. However, not every user needs those features. For example, an administrator or power user may need an enterprise-level license, while most employees only need a standard or viewer license. Paying for premium licenses across the entire company can dramatically increase costs.

Review each plan and compare actual feature usage against what is included. Survey users and figure out if they’re actually using the features in the more expensive plan. Downgrade users or teams that do not need advanced capabilities. In many cases, a mixed-license model can significantly reduce spending while still giving key users the tools they need. In other instances, it may make sense to downgrade all of your licenses to a lower tier.

SaaS sprawl often leads to multiple tools that perform similar functions. One team may use one project management platform, another may use a different one, and a third may rely on a separate workflow tool. The same pattern often appears with file sharing, messaging, analytics, diagramming, survey tools, and CRM add-ons.

Duplicate tools create unnecessary costs and can also make collaboration harder. By standardizing on fewer platforms, companies can reduce subscription fees, simplify training, improve security, and strengthen vendor negotiation leverage.

SaaS renewals are one of the best opportunities to reduce costs, but many companies miss them because they start the process too late. Vendors have more leverage when a renewal deadline is close, especially if the software is deeply embedded in the business.

Organizations should track renewal dates and begin reviewing major contracts at least 90 to 120 days in advance. This gives enough time to evaluate usage, compare alternatives, gather competitive pricing, and negotiate from a stronger position.

When negotiating, ask about discounts for longer commitments, upfront payments, lower usage levels, bundled products, flexible license terms, renewal caps, and removal of unnecessary add-ons. Avoid automatically renewing contracts without first reviewing whether the tool is still worth the cost.

Shadow IT occurs when employees or departments purchase software without going through IT, procurement, or finance. While this often happens because teams need to move quickly, it can lead to duplicated spending, security risks, compliance issues, and poor contract visibility.

To reduce shadow IT, companies should create a simple and transparent software request process. If employees know how to request tools and get timely approvals, they are less likely to buy software independently. Expense reports and corporate card transactions should also be reviewed for recurring SaaS charges. Once discovered, these tools can be evaluated, consolidated, approved, or canceled as appropriate.

Not all SaaS applications deliver equal value. Some tools are used heavily every day, while others are barely touched. Usage data helps organizations separate essential platforms from underused subscriptions.

Key metrics include login frequency, active users, feature usage, storage consumption, number of projects created, reports generated, and business outcomes supported by the tool. A tool with low usage may not need to be canceled immediately, but it should be reviewed carefully. Usage data is especially helpful during renewals. Instead of negotiating based on the number of purchased licenses, organizations can negotiate based on actual adoption and demonstrated need.

When every department buys software separately, the organization loses visibility and bargaining power. Centralizing SaaS purchasing through IT, procurement, or finance helps control costs and standardize decision-making.

A centralized process does not mean every purchase needs to be slow or bureaucratic. Even something as simple a Google Form that is filled out for each new software purchase or renewal can get the job done. The goal is to create clear ownership, better contract management, and consistent evaluation criteria. This can include security review, budget approval, vendor comparison, and license optimization. Centralized purchasing also makes it easier to identify opportunities for volume discounts, enterprise agreements, and vendor consolidation.

Many SaaS contracts include automatic renewal clauses. If no one is actively tracking these dates, companies can get locked into another billing cycle before they have a chance to review the subscription.

Auto-renewals are especially costly when they include price increases, minimum license commitments, or annual contracts. To avoid surprises, maintain a renewal calendar or spreadsheet that includes contract owners, notice periods, renewal dates, cancellation deadlines, and expected cost changes. Companies should also push for renewal protections during contract negotiations, such as price increase caps, flexible license reductions, and clear cancellation terms.

SaaS tools are essential to modern business, but unmanaged SaaS spending can become a major drain on IT and operating budgets. The biggest savings often come from basic actions: finding unused licenses, eliminating duplicate tools, reviewing renewals early, and making purchasing more visible.

The goal is not to cut software blindly. The goal is to make sure every SaaS dollar is tied to actual usage, productivity, and business value. With the right visibility, governance, and renewal discipline, organizations can reduce SaaS costs while still giving employees the tools they need to work effectively.