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The Hidden Costs of SaaS Subscriptions

Picture of Amy Daly   Amy Daly  ·  3 minute read

If you’re working in the IT industry, you’re no stranger to the benefits of Software as a Service (SaaS) solutions – they are flexible, scalable, and cost-effective. However, what is often overlooked are the hidden costs associated with these subscriptions. For Managed Service Providers (MSPs) and IT, finance, and operations teams, understanding and managing these costs is crucial to maintaining a controlled and efficient IT budget. 

Unfortunately, the waste associated with SaaS is extreme. On average, businesses waste more than 30% of their total SaaS and cloud spend on hidden fees and similar costs.1,2 Let’s take a closer look at what that encompasses.  

Common Hidden Costs of SaaS Subscriptions 

  1. Unused and Underutilized Licenses: This is an issue right from the start. In fact, according to a recent report, 10% of all corporate SaaS subscriptions go completely unused in the first 90 days of the subscription.1 Another issue is that organizations often purchase more licenses than needed or commit to minimum quantities set by vendors. Finding show that the average company has $135,000 worth of unused SaaS licenses each year.3 Over time, these unnecessary expenses can accumulate and significantly impact budgets.  
  2. Duplicate or Overlapping Subscriptions: Businesses may unknowingly maintain duplicate or overlapping subscriptions, leading to unnecessary costs.  
  3. Auto-Renewals and Forgotten Subscriptions: SaaS subscriptions often auto-renew, and without proper tracking, businesses may continue paying for unused services. A similar issue arises with ex-employees. According to Gallup, half of all U.S. employees (51%) are watching or actively seeking a new job.4 Now imagine how many SaaS subscriptions include paying for “seats” belonging to long-forgotten employees.  
  4. Overbuying Features: Many companies pay for higher tiers withing their SaaS plans and end up with advanced features they rarely use. It is estimated that with the correct tiers, companies could save about 20% of the that software’s cost.  
  5. Integration and Customization Expenses: Integrating SaaS applications with existing systems or customizing them to meet specific business needs can incur additional costs. These expenses are often not immediately apparent but can add up overtime, making it an important cost to consider and factor into your initial budget. 
  6. Compliance and Security Risks: 83% of organizations admit staff subscribe to unauthorized tools.1 This, along with other examples of SaaS mismanagement, can pose security and compliance risks that have the potential to grow into even greater losses.  

Combatting the Hidden Costs of SaaS Subscriptions 

There are four main strategies for managing (and reducing) the hidden costs associated with SaaS subscriptions. They include: 

  1. Conducting Regular Audits: Done regularly, audits allow you to identify unused or redundant services. 
  2. Reviewing and Renegotiating Contracts: Carefully negotiating contracts with SaaS providers can help businesses secure better rates and terms, reducing potential hidden costs.  
  3. Automating the Process: Automating tasks such as expense management, subscription and contract renewals, and reminders can streamline SaaS management, preventing service disruptions and reducing your administrative workload.  
  4. Investing in Platform Tracking Tools: The right subscription and contract management platform can give you visibility into all of your SaaS subscriptions and allow you to monitor usage, costs, and renewals from a single platform. The same goes with non-SaaS vendor contracts.  

The best way to implement these cost-cutting strategies is with BetterTracker. Take some time to shop around for SaaS subscription and contract management platforms and you will find that BetterTracker is the only one that combines the very best of all available options. A centralized and easy-to-use platform, BetterTracker provides full visibility and control over contracts, recurring expenses, and SaaS subscriptions. You’ll benefit from: 

  • Automated expense tracking 
  • Contract and subscription management 
  • Custom spending alerts 
  • Comprehensive spending insights 
  • Simplified Tech Stack management 
  • …and more 
Clearly, there is a lot of money to be saved when SaaS subscriptions are well managed. Invest some of those savings in the tool that will keep you compliant and give you the insights you need to protect your profits. Take a moment to schedule a demonstration of BetterTracker today.  

BetterTracker helps finance, IT, and operations teams take control of contracts, subscriptions, and technology spend. By centralizing renewals, eliminating tech sprawl, and providing real-time visibility, BetterTracker empowers businesses to simplify compliance, reduce costs, and make smarter decisions. 

1Source: https://the-cfo.io/2024/05/23/hidden-costs-saas-cloud/ 
2Source: https://www.gartner.com/en/documents/4022188  
3Source: https://www.prnewswire.com/news-releases/blissfully-releases-new-2020-saas-trends-report-301022135.html 
4Source: https://www.gallup.com/workplace/646538/employee-turnover-preventable-often-ignored.aspx