Smart guide to saving on SaaS software

Purchasing Software as a Service can be a game changer for businesses, offering flexibility and scalability without the hefty upfront costs of traditional licence-based software. However, those seemingly small monthly fees can add up quickly and significantly impact your budget if not carefully managed.

Daniel Westlake, Cursor’s Founder and Managing Director, has compiled a set of smart strategies to help you effectively manage your SaaS expenses and maximise your subscription value.

What we'll cover

• Introduction to SaaS.

• Discover why SaaS has evolved from traditional models where software came in big boxes with a big price tag.

• Learn how SaaS can lower your capital expenditure and eliminate the need for managing your own IT infrastructure, allowing you to focus on what you do best as a business.

• Get practical tips to keep your SaaS spending in check and prevent subscription fees from spiralling out of control.

• Understand how AI is transforming SaaS offerings and how to strategically adopt AI-powered tools to stay ahead of the curve without falling into the trap of unnecessary upgrades.

• Get a framework for effectively auditing your software subscriptions to identify what's working, what's not, and where changes will have the most impact.

• Explore approaches to negotiating better deals and maximising value by switching to annual plans for the software you love, ensuring you're not paying for unnecessary flexibility.

• Summing up.

  
  

Introduction

Hello, everybody. I'm Daniel from Cursor. And I'm going to talk about software as a service or SaaS, as it's known, and how to save some money on it; how to use it smartly. So if you're not familiar with the term ‘SaaS software’, you can kind of think of it like a subscription model - it's ‘software as a service’, but it could also be ‘software as a subscription’.

Things never used to be like this, you know, software used to come in big boxes and it had a big price tag. You'd buy the software and it would come in a big box with a load of manuals and you'd get a number of seats. There was a kind of pricing mechanism that really encouraged you to renew because it was cheaper to renew rather than to buy again. So, it encouraged you to keep things up to date, but as the initial cost was high, it was a bit of a barrier, especially to small businesses, to invest in the software that they needed.

And that barrier to entry encouraged a lot of piracy. So you had a lot of fakers distributing pirated versions of software. And really that didn't help anyone else because it just pushed up the prices for the people buying legitimate software. But the big problem really for me, was inflexibility.

You know, you've paid a lot of money for the software, but you’d better keep using it, even if it's not quite what you needed or what you expected - tough, you know, you've invested in it, you might as well use it. So software was hard to change. It was difficult toget updates, you know, onto individual machines or on your office server. It was painful and costly to change.

Evolution of software delivery

So let's fast forward a bit and internet speed's got a lot better. Browser technology has gotten a lot better. So it means that rather than having to run an application actually on your computer and distribute it via, you know, a CD you can run it in the browser.

Of course, there's different distribution channels for software. Anyone that's a gamer will know of Steam - so Steam is an online platform where you can buy your games, but they're all downloaded to your computer. So, you know, it gets rid of the CDs, but you still have to purchase them.

While software as a service generally will be around something that can run in a browser. Not always, but most of the time it is. And, this made sense, you know, this made sense to software, software houses and developers because they don't have to ship big, heavy boxes. And it's much easier for them to issue updates and it just happens over the internet.

Benefits of Saas

And one of the things about subscription is it gets rid of those pesky pirates because no one's duplicating your CDs anymore. So as well as to the software vendors themselves, it made a lot of sense to us. So, for the end users there's no big expenditure of cash, you know, you don't have to put lots of capital into buying the software in the first place meaning that the barriers to entry are a lot smaller.

So, you know, it makes software a lot more affordable for everybody, but also, a lot more predictable. There's a monthly fee, you know what it's going to be, and it's easy to budget for that. Even if you're on an annual subscription, you know when it's coming in. So there's no big surprises.

Also, you don't need to manage your own servers, or infrastructure, or IT, you know, it's someone else's problem. So you can just focus on whatever it is that you do as a business and not having to manage IT infrastructure or servers, if that's not your thing. I mean, it's probably worth noting that IT infrastructure has moved to a different model as well, you know, so there is something called ‘IAAS’ or ‘Infrastructure as a Service’. But before I get too technical, you know, it's someone else's infrastructure, someone else's problem.

So a lot of the appeal of software as a service is - you don't have to deal with stuff; infrastructure as a service - you don't have to deal with stuff. It's someone else's problem. The provider themselves will do the security update and the patches. So everything's always up to date - you don't need to worry about it.

One of the benefits of a subscription model is the fact that you can add users or remove users usually pretty easily. So if you're scaling up your business, great, well done - you don't have to invest in all that infrastructure yourself, you just pay a bit more on your monthly fee. And it also means you can, you know, pivot and change when circumstances change.

So, if you were a business who was operating using the SaaS model for the majority of your software in the beginning of, say, 2020, it was fine to adapt to working from home, you know. It was easier for you than someone that invested in software that runs on a server in your office - because VPNs are dog slow, and a lot of the time, it's not flexible and you've got to be in the office to use it properly.

So going into the pandemic, SaaS software seemed to be on a bit of a high, I would say, but then maybe coming out the other side, things don't look so rosy. So what are the downsides of SaaS software? I think the main one is well, individual subscriptions may be quite affordable, but the total cost of those monthly fees do add up, and they add up over time to be quite a lot.

The price of things is not under your control. You can't negotiate. Every software vendor has put their prices up. And as many businesses run entirely on a SaaS model, you know, you've got no choice - you've just got to upgrade and absorb the extra cost. And that extra cost is multiplied by the number of users. So as your business grows, there's more users, there's more SaaS cost and it's not always about inflation.

You must have seen these ‘low tier’, ‘middle tier’, ‘high tier’ things, ‘enterprise’ levels for pricing - that happens all the time with subscription models. A lot of the time there's one or two things that can be left out of a standard package that you really need, but they don't want to put it in the ‘standard’ package because they want you to upgrade, they want you to upgrade to the ‘business’ package. And it's annoying because if you've got quite a few users, that might be a big chunk in price, but you only want one or two features - but they're not going to put that in the basic plan because they want you to upgrade.

So a good example of that is Google Docs, which, if you're on the basic plan, you can't get a template that you can build yourself, you know - if you want to create a template for your letterhead, or you want to do an invoicing template, or set something up so that your team can use it in a repeatable way? Nah, you can't do that. You can use off-the-shelf templates, but if you want to use custom templates, no, you've got to upgrade to the business plan.

And we see this all the time, with SaaS products, you know, your IT department, they want single sign on? Sure, great - but that's only available on the enterprise plan. We've seen cases where two factor authentication, which I think is just a basic security requirement - you've got to upgrade to get that. So bad news on you, who was it? Miro. Yeah, Miro - you've got to upgrade to the enterprise plan to get two factor auth, which is just crazy.

But as well as not having control over the pricing, you don't have control necessarily over the data that you’ve put in these software systems. You know, your software is in the cloud. It sounds safe, but it's not a vault in the sky. It's just someone else's computer. And you're putting your critical business data into that computer.

Have you checked the backups? Do you know that they're having a backup? And, this is where you start to have a bit of a problem because there is an assumption that, okay - your cloud software provider needs to handle their infrastructure, they need to handle their own security. But that doesn't necessarily extend to the security of your data in their systems.

So if you do something wrong and it gets deleted - do you have a backup? Or are you betting your business on that they have a backup, and they're going to be able to restore it for you? It's not always the case, so please check - if you're putting stuff into a piece of software please check that you can back it up. Because, you know, you don't want that pain later.

Getting data into a SaaS system can be easier than getting it out. We've had instances where it's easy to migrate from something to something else, but if you want just the ability to download your own data, you've got to contact support. And then you go through this whole rigmarole of: ‘Oh, you want to close your account?’ No, no, I just want to have a copy of my data, please. Of course, you can hire developers that connect to APIs and do all sorts of stuff, but it's something that often gets overlooked.

The main problem really is price, but there's also that lack of control over data. I mean, the last thing I'm going to say about prices - it feels okay if you get new features all the time - if you're getting extra bits, so the software is growing. But if you're paying a monthly subscription and it doesn't look like the software is going anywhere and you're not getting any of the new features and they're just talking about: ‘Oh yeah, it's on the roadmap…’

It's like, well, hang on a minute. I've been paying for 10, 20, 30 users on this thing for X number of years now. Surely I could have bought it by now? And there's starting to be a bit of a movement away from that, which is kind of where I came into this piece.

AI-powered tools

But I think it's important to talk about something else, and that is, there has been a big ‘FOMO (fear of missing out) experience’ that adds to the cost of software as a service. And the FOMO experience that I'm talking about is AI.

So, spring last year, 2023 - AI exploded onto the mainstream with ChatGPT and others. And we know AI is going to transform the workplace - no doubt, but it's kind of created this FOMO effect where businesses need to experiment with yet another subscription-based service because they need to be able to adapt, and adapt to, and adopt AI before their competitors do, because that's the way to say competitive these days.

But the problem is there's an AI for everything. You want to write better proposals? Yeah, there's an AI for that. Do you want help with your email marketing? Great, there's an AI for that. You want to use AI to transcribe your meeting notes? Sure. But we're going to have to upgrade your plan because AI is not included. So, I think you get the picture.

Auditing your software subscriptions

SaaS software used to be really flexible. Now it just feels really expensive. So what can we do about it?

Now, okay, disclaimer. I'm a developer, you know, so you're going to expect me to say well, the way around this is to build your own software - and building your own software can be a good solution, but I'm not going to advise that at this stage. There are certain points where actually, it makes sense to do that but I'm not going to say, oh yeah, the thing you need to do is invest and build your own software. When you get to a certain scale of business, yeah, it makes sense.

There is an alternative to commercial software, and that's open source software. But I think I need to do a video on that. You know, there's a whole thing there, and there are starting to be open source alternatives to a lot of commercial packages. There are some pitfalls because you're taking more of a risk, and you need to be aware of that. So I think that's probably a video in itself. So what I'm going to do now is kind of concentrate on the cost bit, and see what we can do.

And obviously, the easiest thing to do is to turn it all off. But I'm assuming that's not going to be helpful for your business, let alone your business growth. So, how can we make our software as a service costs go further and do more for us?

So the first thing we need to do is literally work out how much we're spending on all this stuff. And don't get a notepad and think: ‘Oh yeah, I've got this one, I've got that one, I've got that one…’ No, that's not going to work. You want to go to your accounting package, to Xero or QuickBooks or whatever it is, and then run off a report.

So you might have stuff under IT software and consumables, you know, sales and marketing software - all sorts of bits and bobs, or even go to the bank statements. And you need to look at about 18 months. The monthly ones are easy to see, but it's those annual ones that will catch you out, because you've forgotten about it, and it just comes around, and before you know it, you've renewed it, and it's just such a pain.

So, get all your stuff into a spreadsheet, and what you need is just a list of software, and they'll probably come in one of two categories - there'll be an annual subscription, and a monthly subscription. So, what you want to do is , total all of that up, so that you've got a list of all the different types of software, and what you're paying annually for it. Pretty easy to do, you know.

So, first thing is you'll notice if you sort it, especially by the total, you'll see - yeah, there's a lot of cost here, or potentially a lot of cost if you're a growing business. And rather than just saying: ‘Let's just get rid of 50 percent of it…’, the next thing that we've done, and I've found really, really helpful actually, is to look at the software knowing how much it costs and put it into one of four categories. And I've chosen four because there isn't a middle one.

So, if it's a 4, you love it. You know, this is a piece of software that you really, really like to use. It's a fundamental part of your business and you can't really see changing from that. What would I give a 4? Harvest. You know - time tracking system. We've been using it, oh, I don't know, 10 years. It's kind of fundamental to a load of processes we've got here. I can't see that we’re going to change. So that would be one of my fours.

So, what's a three? A three is something that you want to keep, but it's not kind of working as well as you'd hoped. There's maybe something wrong with it. It doesn't do ‘that’ thing. Or, it just feels a bit pricey, or maybe you're not using all of the features, or maybe some of the team aren't using it properly.

So although a four is just like: ‘Oh yeah, we love it. It's great’, a three is a little bit of a question mark. There's something that doesn't quite feel right.

So a two is basically - look, we don't like this anymore. You know, we tried a few things, but it's just not working out for us. But annoyingly, we can't separate now. We've got a lot of data in that system. We might not have an alternative. We might have an alternative but there's a reason why we haven't jumped yet. You know, we might be stuck in a subscription until a certain date. Adobe - I'm looking at you there! So we would like to go, but for one reason or another, a two is like, okay, we're stuck for now.

And then a one? You're gonna guess where this is going - it's like: ‘Oh my God, you know, are we still paying for that?’ We don't use it and we haven't used it. And I didn't know we were still paying for that, and let's cancel it and let's cancel it straight away. And you might find some of them, and they're quite annoying if you do. But just look at it the other way around, rather than saying: ‘Oh, I've been accidentally paying for something for six months that I thought I'd already cancelled,’ it's better to have done that and then cancelled it rather than to have it continue any further.

So what are you gonna do with these different categories?

Well ones - just cancel. Go through the list - if you want to get rid of it, and you thought you’d got rid of it already just get rid. The problem ones here are the annual subscriptions because some of them don't give you a warning. So you might have thought: ‘Oh, I don't need that anymore, I'll cancel it before the subscription runs out.’

So just put it in your diary, you know. You've got to think, right, okay, I've paid up until July next year or whatever it is, but I don't want to get caught out. Put it in your diary and follow up on that and make sure you cancel it. If you don't need the software, just cancel it right now.

Some people will make you go through loads of hoops - you can sign up and upgrade, but unfortunately you've got to call support. There's no way around it, so just do it, get rid of it. You don't need it - don't pay for it.

So, the number twos - if it's not just about subscription price, if your data's in it, or you don't have a replacement, you need to come up with a plan. Because you don't want software that's not working for you holding your business back. So ones - get rid of now, twos - come up with a plan that means that you're not here in six months time, because you're just wasting money.

Come up with a plan, get your data out of it. At the end of the day - it's your data. So stick your elbows out, get a bit shirty with their technical support. If it's not working for you, just come up with a plan to get rid of it.

Negotiating better deals and maximising value

Now, on the other side of it, the threes and fours - so the threes and fours are the ones that you want to keep. And I will bet a load of money that the vast majority of your SaaS products fall into the category of three.

So these aren't things that you super, super love, which are the fours. They're kind of the things that there's something not quite right.

But before I talk about those, I'm going to talk about the fours. The thing to do with fours is - you're not going to leave, so why are they on a monthly subscription? You just need to upgrade them, you need to get a discount. Most SaaS software gives you 20 percent off, so, if you put something in a number four, then pay annually.

Get a discount. You're not going to move - so why are you paying for that flexibility? You really like the product. If they don't offer a discount, get in touch with them and say, can I have a discount? And if they say, great, yeah sure - put a testimonial on? Yeah, great. I'll do that as well. You are their advocate, you love the product, so why don't you get a discount?

But then onto those pesky number threes. You've got to make sure that you spend the time and work out, how do I solve this problem? If there's something that you're not using or is not being adopted by your team, how do you solve this problem?

Get back in touch with the vendor themselves and say, okay, well, you introduced this and we're not really using it. It's up to them to help you, but you need to work through your list and say, why aren't we getting as much value out of this as we want to? And just in the same way as the twos where you've got to get a bit of a plan to get rid of it, really the big opportunities are in the software that you just really want to work a bit harder.

And I have found things that I genuinely did not know software that I was paying for did. And I was like: ‘Oh, yeah, this is quite good. You know, I like this. I had no idea it was doing it.’ So jump into the documentation, go to the webinars that you keep spamming because you're on the newsletter but you don't really follow up on it - because these are where the opportunities are.

And the SaaS model really is all about giving the vendor the opportunity to add new updates. Maybe you're not using it right. Maybe a bit of a training session is going to be the difference between you thinking: ‘Oh yeah, it's all right, but it's quite expensive’ to actually, now we understand x or y, or we've got some training or we've understood what that meant - finally, for the first time. You can get more value out of the software.

Summary

So anyway, in summary, SaaS can be great, but don't let it get out of control. Do an audit, go to your bank statements, go to your accounting software, put things into categories - make up your own if you want, but I suggest:

Love it.

Like it, but there's problems - you know.

Slow death - I want to get rid of it, but there's a bit of a problem here. We need to think about it. We need to plan.

And there's - get rid of it now.

Be aware of those renewal dates. If you've got Adobe products, there is only a month where you can cancel. So even though it's a monthly subscription, it's an annual contract. So if there's anything like that, you need to put it in your diary and you need to be on form. Because otherwise you're paying for an extra year and you had the opportunity and you missed it.

So that's it. I hope it was helpful! SaaS software can be great, but just like at home with your Netflix subscriptions and your Apple TV and your Paramount Plus - if you let it get out of control you're wasting your own money. I don't want you to do that, so hopefully you'll find it's a useful guide.