Cloud software can contain significant amounts of easy-to-cut costs. Like an orchard of low-hanging fruit.
If you’ve worked in finance, procurement, financial planning, or accounting, you may understand the good feeling that comes with reducing costs. If you can cut costs with little time or effort – even better!
This week, we’ll focus on what those cloud costs tend to be, and on the next blog post, we’ll discuss the tools you can use to cut those costs quickly.
What Kinds Of Cuttable Costs Hide In The Cloud?
Many cuttable costs may lurk within your cloud. We prepared this list so you have some things to look for.
Important note: multiple research sources, including Gartner, indicate that hard-to-find cloud software expenses represent 30-50% of overall IT spend (See our prior post on shadow IT).
If you’re interested in some real-life scenarios that include some of the examples below, check out our horror stories blog.
Hidden Hard Costs
Sometimes contracts stipulate a number of licenses. But when they do not, extra licenses can add up and make ideal cost-cutting targets.
Inactive Users (Including Former Employees)
Some people never use software. And if IT does not manage an app, some employees may could still need to be de-provisioned. In our experience, some organizations have hundreds or thousands of inactive accounts.
Duplicate Apps Or Multiple Instances
Some employees or departments decide to get their own apps. Even when a corporate subscription for a similar app exists. Likewise, sometimes employees start separate accounts for an app that’s already paid for.
Unoptimized Licenses And Off-The-Shelf Pricing
Some licenses cost more than others, offering access to more advanced features. But what if not everyone accesses these premium features? Those people should use less expensive licenses. Without visibility into the cloud environment, these cases can be hard to find.
Tiered Pricing, Easy Signup
Whether it’s the number of emails, transactions, contacts, or some other metric, some software prices change based on volume. If users can easily sign up on an enterprise account and use more of the app… suddenly you’re at the next tier and paying substantially more than anticipated.
Non-Compliant License Fees
You’re supposed to pay for every license. But some people may start using a freemium version. Or the marketing department shares one login using their marketing@ email address. Little did these users know, the software provider will charge you significant fees for these violations after they audit your account. Oops.
Users can start signing up for premium features with little tracking or oversight until money has already been spent.
Some users or departments sign up on their own and simply expense the cost with little or no question as to how the software purchases may fit in a larger purchasing decision.
Converted Free Trials Or Free Tiers
When free trials end, costs add up and may not be reversed. Or as more people sign up at a free tier, the software may then require payment. And as people have become accustomed to using the software, they demand the software stays.
What if cloud software contains sensitive data, it shouldn’t contain that data, and a regulator finds out? Then they may fine you, substantially. GDPR alone could result in a fine of 4% of revenue or $24M (whichever is greater).
Basically, take all of these problems and multiply them in a merger scenario. As the merger shakes out, tracking cloud software may not be anyone’s highest priority, but the bills still get paid.
Sneaky Soft Costs
Managing Issues And Relationships
If IT, procurement, or finance do not manage a software vendor relationship, who does? Invariably, department heads or other staff take on this burden, often to the detriment of their other responsibilities.
Tracking And Audits
Someone should at least try to track or audit these cloud expenses. If they’re doing so manually, it creates costs both for them and the departments they must hound in order to determine cloud costs. Who wants to waste time running around with a spreadsheet? No one ever.
Want to see how Alpin can help you find and take action on these costs? Stay tuned for our next post.
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