The Risks of SaaS Subscriptions: How to Avoid Overpayment and Underuse

Software as a service (SaaS) has transformed the way businesses access and use software. Instead of purchasing expensive licences, organisations can instead subscribe to cloud-based tools on a monthly or annual basis. This model offers flexibility and scalability, as well as potential savings.

However, it can also open the door to unintended waste. Many companies either overpay for or underutilise their SaaS subscriptions. What’s more, as the number of available SaaS tools continues to proliferate, the risks of overpayment and underuse are only likely to increase.

This poses a problem, particularly for smaller businesses with limited financial resources. Understanding the common pitfalls of SaaS management is therefore the first step to making smarter decisions about your software investments and getting the most bang for your buck.

Common SaaS pitfalls for small businesses

Overlapping or redundant tools: Many businesses unknowingly pay for multiple tools that perform the same function. Time management software is a common example; teams might subscribe to several tools even though their core functions overlap. Similarly, lesser-known features within Microsoft 365 or Google Workspace, which most businesses have access to, often replicate capabilities offered by standalone solutions.
Unused licences: Paying for unused licences is another common issue. This often occurs when businesses purchase bulk licences with future growth in mind, or deactivate accounts for former employees. The result? Companies can spend hundreds or even thousands of pounds on services that deliver no real benefit.
Free trials gone wrong: Free trails can be a great way of trying new tools on for size, but they often turn into costly subscriptions when businesses fail to cancel before the trial period ends. For instance, many VPN solutions offer steep introductory discounts on long-term plans but then auto-renew at full price, catching businesses off guard.
Vendor lock-in: Switching providers can be challenging due to contractual obligations, proprietary data formats or migration costs. Vendor lock-in therefore limits flexibility and forces businesses to stick with solutions that may no longer serve their needs.

How to identify if you’re overpaying

Conducting a SaaS audit on a regular basis is essential for identifying overpayment and underuse of software tools. Here are some key points to bear in mind.

Review usage metrics: Most SaaS platforms provide usage analytics. Check these metrics and make sure that tools are being actively used. If not, ask yourself whether you still need them.
Compare costs and benefits: Evaluate whether each subscription provides tangible business value. If a tool’s benefits are outweighed by its costs, it might be time to cancel or downgrade.
Ask your employees: Survey your team members and ask them which applications they use regularly – and which they don’t. This can be valuable for identifying underutilisation of specific tools, identifying which subscriptions your business can do without.
Check login histories: Many platforms track login activity. Tools with minimal activity are obvious candidates for cancellation or downgrading.

Strategies to optimise SaaS spending

Consolidate tools: Choose multifunction platforms over single-purpose tools. For example, project management software often includes task tracking, file sharing and time tracking, reducing the need for separate solutions.
Negotiate contracts: Vendors are often prepared to offer discounts, especially for long-term commitments or bundled services. Don’t be too reticent to haggle – you might well get better terms if you do.
Downsize subscriptions: Adjust subscription tiers or license counts based on actual usage. For example, if only 10 employees use a particular tool but you’re paying for 20 licences, you need to scale back.
Utilise free alternatives: Free or open-source tools can be excellent substitutes for paid services, especially for small teams or non-critical functions.

Implementing a SaaS management plan

Effective SaaS management starts with assigning ownership. Designate a team member to oversee software and ensure they do the following:

Schedule regular reviews, evaluating software usage and functions every quarter.
Maintain a database tracking all software subscriptions, including their costs, functions and renewal dates.
Set alerts for renewals. This can help your business avoid unexpected charges by setting reminders for renewal dates.

SaaS management platforms are also available. While these tools can simplify SaaS oversight, be careful to ensure they don’t become part of the problem by overcomplicating your stack.

Conclusion: Take control of your stack

SaaS tools have incredible potential for small businesses, but without effective management, they can easily become a financial drain. Understanding the risks of overpayment and underuse, and the importance of regular audits, tool consolidation and haggling, can help businesses make their tech budget go further.

Take the time to evaluate your current subscriptions, as it’ll help you make more informed decisions about your software investments. This should leave you with a leaner, more efficient SaaS stack that helps your business achieve its goals without breaking the bank.

Solsoft is driven by a passion for helping small and medium-sized businesses, and not-for-profit organisations, get more out of technology. To find out more about what we can do for you, contact our friendly team and book a call.