[ITFM#12] SaaS Spend Optimization and License Models – Making Every Subscription Count

Introduction

Cloud migration is only the beginning. As companies transition to the cloud and shift toward OpEx-based models, a second wave of financial transformation follows: SaaS proliferation.

From CRM to collaboration platforms, modern enterprises rely on dozens—if not hundreds—of Software-as-a-Service tools. But with flexibility comes complexity. Costs can spiral. Licenses go unused. Renewals auto-execute without review. Welcome to the SaaS sprawl.

To regain control, organizations need a structured, insight-driven approach to SaaS spend optimization. That’s where IT Financial Management (ITFM) becomes critical.

“If you cannot measure it, you cannot improve it.” – Lord Kelvin

This quote resonates more than ever in the world of SaaS. Without visibility into usage, value, and spend, optimization is impossible.

The SaaS Licensing Landscape: From Simplicity to Sprawl

SaaS has made software consumption easy—but cost control harder. The rise of decentralized buying, shadow IT, and varied pricing models (seat-based, usage-based, tiered) introduces major challenges:

·       💸 Overprovisioned Licenses – Users are licensed but inactive.

·       🔄 Auto-Renewals Without Review – Subscriptions continue by default.

·       🧩 Fragmented Ownership – Departments manage tools in silos.

·       📉 Lack of Cost Visibility – Finance sees spend, but not utilization.

For example, a company may have 1,000 Microsoft 365 licenses but only 700 active users—or pay for advanced Salesforce seats where basic plans would suffice.

Key Cost Drivers in SaaS Environments

To optimize SaaS spend, ITFM teams must understand what drives it:

Driver	Description
Number of users/licenses	Directly tied to headcount and provisioning
License type/tier	Premium vs. basic functionalities
Utilization levels	Are users actually using what they’re licensed for?
Contract terms	Discounts, renewals, auto-escalations
Redundancy	Tools with overlapping features (e.g., Zoom + Teams)

Applying the Gartner® TIME Framework to SaaS Rationalization

 

LeanIX’s playbook on the Gartner® TIME framework (Tolerate, Invest, Migrate, Eliminate) is the industry standard for application rationalization—and it applies equally well to your SaaS portfolio.

[1]

1.       Tolerate – High technical fit, low functional fit. Keep the subscription active but don’t invest further. – Example: A departmental analytics tool still technically solid but rarely used—monitor for shifts in need.

2.       Invest – High technical fit, high functional fit. Prioritize premium licenses and explore deeper integrations or expansions. – Example: Your core CRM platform driving revenue—expand seats, train users, and integrate new modules.

3.       Migrate – Low technical fit, high functional fit. Plan to replace with a modern, cloud‑native alternative. – Example: An on‑prem collaboration suite that meets needs but is costly to maintain—migrate to a managed SaaS tool.

4.       Eliminate – Low technical fit, low functional fit. Decommission completely and reallocate budget to higher‑value tools. – Example: A legacy survey app no longer supports key workflows—cancel the subscription and retire the tool.

By categorizing each SaaS subscription into TIME quadrants, you immediately know which costs to freeze, where to double down, which tools to swap out, and what to retire.

A Strategic Approach to SaaS Spend Optimization

1. Discover & Inventory

– Identify all active subscriptions and map technical vs. functional fit.

2. Measure & Analyze Usage

– Compare assigned licenses against actual usage and chart them on the TIME matrix.

3. Rationalize via TIME

– Tolerate: Defer action, monitor usage.

– Invest: Upsell, deepen integrations, maximize ROI.

– Migrate: Roadmap replacements to cloud‑first solutions.

– Eliminate: Terminate redundant subscriptions.

4. Renegotiate Contracts

– Leverage volume, co‑terming, and elastic licensing based on your TIME outcomes.

5. Monitor Continuously

– Embed TIME reviews into your ITFM cycle—quarterly or bi‑annually.

How ITFM Elevates SaaS Management

ITFM provides the frameworks and discipline to manage SaaS as a dynamic cost category:

·       🎯 Cost Allocation – Assign SaaS costs to departments or cost centers

·       📊 Performance Metrics – Track cost per active user, cost per login, feature utilization

·       🔁 Scenario Modeling – Forecast the financial impact of headcount changes or vendor shifts

·       🔍 Governance Dashboards – Ensure stakeholders have visibility and accountability

With SaaS consuming a growing share of the IT OpEx budget, integrating these practices is essential.

 

Beyond SaaS: The Bigger Licensing Picture

While this article focuses on SaaS, the TIME‑rationalization approach also applies to:

·       Infrastructure subscriptions (IaaS, PaaS)

·       On-prem software with hybrid entitlements

·       Enterprise-wide agreements (e.g., Oracle, SAP)

Conclusion

SaaS isn’t inherently expensive—mismanaged SaaS is. By applying the Gartner® TIME framework and ITFM rigor, you can transform your SaaS portfolio from a blind spot into a strategic asset.

💬 Which SaaS tools fall into your Eliminate quadrant? Or, where are you investing for maximum impact? Share your insights below!

References

[1] (SAP) LeanIX GmbH. Expert guide Using the Gartner® TIME framework for application rationalization. From: https://www.leanix.net/en/wiki/apm/saas-spend-optimization

👤 Authors: Maltrim Ebipi, Junior Associate ; Alexandre Gay, MD and Head of Delivery at BG&A  

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At BG&A, we specialize in IT Financial Management, cost optimization, investment cases, and TCO analysis. This article is part of our ongoing newsletter, designed to provide deep insights, expert opinions, case studies, and practical tools to help organizations navigate IT financial management successfully.

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The BG&A Team