SaaS Cost Optimization: Key Metrics Every Business Should Track

As SaaS (Software-as-a-Service) adoption continues to grow, businesses are enjoying increased agility, collaboration, and scalability. However, the convenience of SaaS also comes with a price: the risk of overspending. Many organizations unknowingly pay for unused licenses, redundant applications, and premium features they don’t need. Without clear visibility into SaaS spending, businesses can quickly lose control of their software budgets.

The good news? Optimizing SaaS costs doesn’t require drastic measures—tracking the right metrics can make a world of difference. By monitoring SaaS usage, ROI, and other key indicators, businesses can ensure they’re getting maximum value from their subscriptions while avoiding unnecessary expenses.

In this blog, we’ll break down the essential metrics every business should track to manage and optimize SaaS costs effectively.

Why SaaS Cost Optimization Matters

In the era of digital transformation, SaaS tools are critical for driving efficiency and innovation. From project management platforms to marketing automation tools, businesses often rely on dozens—if not hundreds—of SaaS applications. However, the ease of adoption also makes SaaS spending notoriously difficult to control.

Here’s why SaaS cost optimization is so important:

• Wasted Resources: Studies show that businesses waste up to 30% of their SaaS budgets on unused or redundant software.

• Scalability Risks: As organizations grow, unchecked SaaS sprawl can lead to skyrocketing costs and inefficiencies.

• Budget Constraints: For startups and SMBs, every dollar counts. Optimizing SaaS spending frees up resources for other priorities.

• Compliance and Security: Redundant or untracked SaaS tools can create compliance risks and data vulnerabilities.

By focusing on cost optimization, businesses can reduce unnecessary expenses, streamline operations, and ensure their SaaS ecosystem aligns with their strategic goals.

Key Metrics for SaaS Cost Optimization

To optimize SaaS spending effectively, businesses need to track specific metrics that provide actionable insights. Below are the most important SaaS metrics to monitor:

1. License Utilization

One of the biggest culprits of SaaS overspending is unused licenses. License utilization measures how many of your purchased licenses are actively being used by employees.

• Why It Matters: If licenses are sitting idle, you’re essentially paying for nothing.

• How to Measure It: Most SaaS management tools, like BetterCloud or Torii, can provide utilization reports. Look for the percentage of active users compared to total licenses purchased.

• Actionable Insight: Reassign unused licenses to new users, or reduce your subscription tier to better match actual usage.

2. Application Redundancy

In many organizations, different teams use multiple SaaS tools that perform similar functions. For example, one department may use Trello for project management, while another uses Asana.

• Why It Matters: Redundant apps increase costs unnecessarily and can lead to inefficiencies.

• How to Measure It: Conduct a SaaS audit to identify overlapping tools across departments.

• Actionable Insight: Consolidate apps with similar functionalities into a single, company-wide solution.

3. Feature Utilization

Many SaaS providers offer premium plans with advanced features, but not all businesses use these extras. Feature utilization tracks how often your teams use specific features within an application.

• Why It Matters: Paying for features you don’t use wastes money.

• How to Measure It: Ask your SaaS provider for a feature usage report or track internal feedback on what features are most valuable.

• Actionable Insight: Downgrade to a plan that better matches your team’s needs, or negotiate a custom pricing plan with the vendor.

4. Cost per Active User (CPA)

Cost per active user measures the average cost of your SaaS subscriptions per employee who actively uses the tool.

• Why It Matters: This metric helps you evaluate the ROI of each app.

• How to Measure It: Divide the total cost of the subscription by the number of active users.

• Actionable Insight: If the CPA is too high, consider whether the app delivers enough value to justify its cost.

5. Renewal Forecasting

SaaS contracts often auto-renew, leading to unexpected charges if not managed properly. Renewal forecasting involves tracking upcoming renewal dates and evaluating whether to continue, renegotiate, or cancel the subscription.

• Why It Matters: Failing to evaluate contracts before renewal can lock you into unnecessary spending.

• How to Measure It: Use SaaS management platforms like Lurel to track renewal schedules and send reminders in advance.

• Actionable Insight: Cancel underutilized subscriptions before renewal, or renegotiate for discounts or better terms.

6. Application ROI

Measuring the return on investment (ROI) of each SaaS application helps you understand its overall value to the organization.

• Why It Matters: Not all apps deliver the same value—some may not justify their cost.

• How to Measure It: Compare the app’s cost with the benefits it delivers, such as time saved, productivity improvements, or revenue generated.

• Actionable Insight: Replace low-ROI tools with alternatives that deliver more value at a lower cost.

7. Shadow IT Detection

Shadow IT refers to SaaS applications adopted by employees or teams without the knowledge or approval of IT.

• Why It Matters: Shadow IT can lead to redundant spending, compliance risks, and data security vulnerabilities.

• How to Measure It: Use SaaS discovery tools to identify apps being used across the organization.

• Actionable Insight: Bring shadow IT tools under official management or replace them with approved alternatives.

Tools to Track SaaS Metrics

Tracking these metrics manually can be time-consuming and prone to errors. Fortunately, there are tools specifically designed to help businesses monitor and manage SaaS usage:

• BetterCloud: Focuses on SaaS governance, offering insights into usage, compliance, and license optimization.

• Torii: Detects shadow IT, tracks costs, and provides usage analytics for SaaS tools.

• Lurel: Offers comprehensive SaaS management, including license utilization reports and renewal tracking.

• Vendr: Specializes in SaaS procurement and helps businesses negotiate better contracts with vendors.

These tools automate the collection and analysis of SaaS metrics, making it easier for businesses to optimize costs and maximize value.

Best Practices for SaaS Cost Optimization

To get the most out of your SaaS investments, consider these best practices:

1. Conduct Regular Audits: Review your SaaS usage and costs every quarter to identify unused licenses, redundant apps, and potential savings.

2. Involve Stakeholders: Collaborate with department heads to understand their software needs and ensure apps align with business goals.

3. Negotiate Contracts: Use SaaS usage data to negotiate better pricing, discounts, or custom plans with vendors.

4. Set Policies for SaaS Adoption: Establish guidelines to prevent shadow IT and ensure new apps go through proper approval processes.

Conclusion: Take Control of Your SaaS Spending

SaaS tools are invaluable for modern businesses, but their costs can quickly spiral out of control without proper oversight. By tracking key metrics like license utilization, feature usage, and application ROI, businesses can make informed decisions to optimize their SaaS ecosystem.

With the right strategies and tools, SaaS cost optimization becomes a straightforward process, helping your organization save money, improve efficiency, and maximize the value of every subscription.

Ready to take control of your SaaS costs? Start by implementing a SaaS management platform and tracking the metrics outlined in this guide.