Dusan Omercevic, Cleanshelf, and AJ Witt, The ITAM Review
"We’ve seen government schemes designed to cover wages on a short-term basis to prevent redundancies and layoffs but that doesn’t cover technology spending, and that’s where you can make a vital difference."
Effective SaaS Management positively influences organization's efforts to preserving cashflow. The quote above sums up perfectly why the initiative needs to be high on the list of companies' priorities. To help readers better navigate the current situation and offer practical advice, Dusan Omercevic, CEO & Founder at Cleanshelf and AJ Witt, SaaS Management Analyst at The ITAM Review collaborated on an article “Five Steps to Preserving Cashflow with Effective SaaS Management.
See, companies spend millions per year on software subscriptions and routinely find significant cash-saving opportunities when they look into their SaaS investments a bit closer. The co-authored article focuses on ways to support and ensure organization's cashflow, in a time of crisis especially.
How can SaaS Management help cashflow?
Many organizations have seen a major decrease in their cashflow practically overnight. When companies lack sufficient cash reserves and lines of credit, the health of their business tends to suffer because they are affected by the sudden fall in demand for their offerings.
The most significant characteristic of cashflow is that it’s a short term measure of the business health. That is either week-to-week, month-to-month, or quarter-to-quarter. This means that initiatives aimed to preserve cashflow need to have positive results that are, equally, short-term. Consequently, organizations should primarily focus on achieving quick wins. For example, there is little to no point in negotiating contracts with vendors that expire a year from now if a business is going to run out of cash as soon as next month.
Most spending on Software-as-a-Service (SaaS) will be on a short timeframe – typically one month rolling contracts or annual contracts. By paying close attention to this spending you can immediately preserve cashflow in the short and medium term, which is vital to keeping your business alive. How do you go about it?
The authors recommend a five-step SaaS Cashflow Management plan
Step 1: Ban new subscription purchases
Implement a blanket ban on new software purchases. This step will be challenging and will require recruitment of internal stakeholders to be successful. Cooperation between IT, HR & finance is of paramount importance for successful implementation.
Step 2: Take control of renewals
The first step will make sure your problem won’t deteriorate. The second step will take care of your subscription renewals. With organizations using hundreds of SaaS apps to power their business, renewal activities are crammed with various items to cover. An enterprise SaaS Management solution helps find what’s being renewed and when. If you haven’t already implemented one, you will need help from Finance, specifically the Accounts Payable department.
Step 3: Assign business owners
The next step is finding business value in your subscriptions. You will need to identify the business owner of each SaaS app. Again, Finance will be able to help. For example, a good starting point for finding business owners is finding out who authorized payments of the invoices. Along with assigning business owners, the authors also recommend all SaaS spending is categorized into three categories: optimize immediately, down-size if required, and essential.
Step 4: Deprovision Licenses
So far, we’ve implemented a ban on new subscriptions, the renewals are now under control, and you’ve assigned the business owners to define the value. The next step is the deprovisioning of unused software subscriptions. Here, your key stakeholders are HR and User Account Management. HR will have most recent information on team members, while the User Account Management teams will help with data such as the last logon date for users.
Step 5: Negotiate concessions and manage consumption
The last step can actually be done in parallel with the first four. The authors recommend talking to your key SaaS vendors about your requirements to secure a deal catered to your specific needs. Conversations between your procurement teams and the SaaS vendors' salespeople will help preserve your cashflow until the crisis is over.
For more on this subject please see Cleanshelf’s session at the recent Online Summit (available on demand here) or download Guide to Software Cost Optimization in a Shrinking Job Market, available here.