Anthony Hall -

Software spending getting chief financial officer scrutiny

The cost of SaaS tools is getting attention from those that have the power to tighten budgets

The channel is already finding the chief financial officer (CFO) the main issue in getting deals signed off, and the bean counters are now focusing some of their scrutiny on software spending.

Research from software as a service (SaaS) player CloudEagle has revealed chief financial officers have looked to cut between 10-30% of their software budgets.

The firm’s EagleEye SaaS spend report cast an eye over a large amount of IT spending, discovering software accounted for the third-biggest expense, after employee and office costs.

Because of its position on the expenditure sheet, the spending has naturally come to the attention of CFOs as they look to trim their sails and encourage those departments that are not using tools, with marketing, sales and customer success teams the worst offenders, to reduce waste.

CFOs are starting to look at software spending through the lens of per-employee, and finding the results make for difficult reading, with some firms spending a couple of thousand per head. Firms with 10-100 employees come in with a total SaaS spend between $250,000 to $1m, which is being spent on between 50 to 70 apps.

“In today’s business world, every dollar counts for more than ever before,” said Nidhi Jain, CEO and founder of CloudEagle. “Given that software spend ranks as the third-largest expense in organisations, it has become vital for CFOs and chief information officers (CIOs) to scrutinise how they allocate their software budgets to ensure that every dollar spent returns significant value.

“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,” he added.

Big spenders

The departments that were spending the most on software were led by engineering, marketing, sales, finance, customer success and HR. Products in demand included CRM, project management and data analytics.

One other consideration for the channel to juggle was the tendency by vendors operating in crowded segments to be willing to negotiate on price. That practice was particularly prevalent in video conferencing, testing, collaboration, storage, helpdesk, payroll management and mail automation.

Software products that were more entrenched in operations were less likely to be flexible on pricing, giving those channel players pitching CRM, enterprise workflow and business intelligence a slightly easier time.

“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,” said Jain. “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, recognise departments with the highest costs, identify instances of low utilisation and application redundancies, and establish a well-defined procurement process.”

There have been reports from the channel that CFOs are becoming the main stumbling block to getting deals signed off as they look to protect cash and avoid making too many long-term spending commitments.

The channel is being advised to offer flexible terms to make some projects more palatable for those in the customer finance departments.

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