Software-as-a-Service (SaaS) applications have become essential in almost every company. The number of subscriptions grows every year, making cost management increasingly complex. As the number of tools multiplies, understanding SaaS-related expenses has become a central concern for finance and IT teams.

Uncontrolled costs, duplicate subscriptions, and partial use of features are common challenges. Without a structured method, managing these aspects exposes organizations to significant waste and loss of visibility over their software portfolio.

This guide explains what SaaS spend optimization means, how it differs from standard spend management, and what its main components are.

What Is SaaS Spend Optimization?

SaaS spend optimization refers to a set of actions aimed at analyzing, controlling, and adjusting the costs associated with subscription-based software. This process goes beyond monitoring invoices — it includes verifying the alignment between purchased licenses and the organization’s actual needs.

The distinction between spend management and spend optimization is crucial:

• Spend Management: Tracking, centralizing, and controlling who pays what, when, and how much.

• Spend Optimization: Proactively reducing total cost, improving ROI, adjusting license volumes, and streamlining tools.

The main components of SaaS spend optimization include visibility into all costs, monitoring actual usage, optimizing vendor contracts, and eliminating waste such as unused licenses or redundant applications.

Why SaaS Budgets Are Exploding in 2025

In 2025, SaaS budgets are rising rapidly across many organizations. Several factors drive this growth, notably the influence of artificial intelligence, the proliferation of tools purchased by different departments, and evolving vendor business models.

Price Increases and AI-Based Models

Software vendors increasingly integrate AI features into their offerings. This trend results in:

• New “premium” editions with AI modules billed per use (tokens, credits).

• Higher prices for existing plans that now include AI features by default.

• Variable pricing based on AI usage volume.

These practices lead to sustained subscription increases and make budget forecasting more complex.

Tool Proliferation and Shadow IT

Shadow IT refers to the use of applications not approved by the IT department. In many companies, business units purchase SaaS apps without central validation. This leads to duplicate subscriptions across departments and functional overlap where multiple tools serve the same purpose.

Key Risks and Hidden Costs to Monitor

Optimizing SaaS spend requires awareness of the risks and hidden costs associated with subscription management:

• Dormant licenses: Paying for seats that are rarely or never used.

• Tool redundancy: Multiple applications serving the same need.

• Lack of visibility: Decentralized purchases creating budget blind spots.

• Indexation and hidden fees: Unexpected clauses and additional costs.

• Security/GDPR non-compliance: Audit risks and potential penalties.

Underutilized Licenses

A license is underutilized when a user logs in rarely, not at all, or when advanced features are unused despite being billed. Rightsizing plans and reallocating licenses helps reduce this waste.

Redundant Subscriptions

Several subscriptions may fulfill the same function — for example, messaging, project management, or e-signature tools. This causes fragmented usage, double payments, and increased IT complexity.

7 Steps to Achieve Spend Optimization

SaaS spend optimization requires a structured, repeatable, data-driven process. Here are the key steps:

1. Conduct a full portfolio audit

   Identify all active subscriptions (ERP, corporate cards, SSO, MDM, expense reports). Detect shadow IT by analyzing email domains, SSO systems, and bank statements. Build a centralized registry with vendor, internal owner, cost, renewal dates, and contract clauses.

2. Map usage and access rights

   Match each license to a user, cross-referencing provisioned accounts with real logins and feature usage. Spot inactive accounts, duplicates, and non-compliant access.

3. Identify critical and costly applications

   Classify apps by business importance (critical, support, optional). Use Total Cost of Ownership (TCO) analysis to flag apps consuming a large share of budget.

4. Rightsize licenses and cut excess

   Adjust license counts and service levels to match real usage. Remove unused modules, consolidate overlapping environments, and eliminate duplicates.

5. Negotiate or renegotiate vendor contracts

   Base negotiations on usage data, pricing benchmarks, and knowledge of alternatives. Discuss pricing per user, volume tiers, multi-year discounts, indexation clauses, SLAs, and exit terms.

6. Establish continuous governance

   Implement centralized approval processes involving finance, IT, and security. Define policies for standard tools, purchase thresholds, and stakeholder roles.

7. Automate monitoring with alerts and benchmarks

   Set automated alerts before renewals, usage overages, and budget deviations. Use price/usage benchmarks to flag overpriced subscriptions.

Key Metrics to Measure SaaS Optimization

SaaS spend optimization relies on indicators to track performance and guide decisions. Finance and procurement teams use KPIs to steer management and ensure data-driven actions.

• License utilization rate: Compares active users over 30/60/90 days to total licenses purchased. Helps quickly identify oversized plans.

• Total Cost of Ownership (TCO): Includes subscriptions, implementation, training, integration, support, security, compliance, and exit costs. Provides a full picture of real SaaS costs.

• ROI and payback: ROI measures net benefits (time saved, productivity gains, revenue growth, risk avoidance) vs. total costs. Payback tracks the time required for savings to offset optimization project investment.

How to Reduce SaaS Spend with a Dedicated Platform

Dedicated SaaS spend management platforms automate many tasks: they centralize the application inventory, analyze license usage, benchmark prices, and send alerts. They gather all financial and technical data needed to prepare objective vendor negotiations.

Core features include:

• Data aggregation: Connect ERP, banking, SSO, MDM, and expense systems.

• Market benchmarks: Pricing references by industry, company size, and volume.

• Automated alerts: Notifications before renewals and for overages.

• Advanced reporting: Dashboards by business unit, application, and owner.

Take Action with Data-Driven Negotiation

Data-driven negotiation means using precise information in discussions with SaaS vendors. It starts with centralizing all SaaS spend, providing a full view of subscriptions, usage, and actual costs.

Teams relying on data can present concrete evidence: utilization rates, active licenses, per-user costs, and benchmark gaps. This transparency enables factual discussions on pricing, volume discounts, indexation clauses, or SLAs.

Solutions like Freqens deliver real-time market insights and consolidated usage data, making renegotiations and portfolio rationalization easier. To explore how data can transform your SaaS negotiations, you can request a demo.

Frequently Asked Questions About SaaS Spend Optimization

How does artificial intelligence impact existing SaaS contracts?

Generative AI can create added costs through premium modules or early price revisions. Some organizations renegotiate contracts to add AI-specific pricing clauses and limit these impacts.

How often should SaaS portfolio audits be performed?

Quarterly audits help detect budget deviations and usage shifts. Some organizations track KPIs monthly for faster reaction.

Do multi-year SaaS contracts always guarantee savings?

They often include discounts but reduce flexibility to adapt solutions to evolving needs and technologies. Balancing immediate savings against long-term flexibility is key before signing.

How can GDPR compliance be maintained during SaaS tool consolidation?

Mapping data flows between applications clarifies where data is stored and transferred. It’s critical to verify that each tool complies with data localization rules and GDPR requirements while preserving security and user rights during consolidation.