The Business Productivity Drain

Fixing SaaS & Cloud Spend management procurement processes is the key to workplace efficiency

Buying and renewing SaaS and cloud isn’t just a money problem

The revolutionary shift to the cloud has enabled businesses to cut costs, free staff for more work, reduce errors and improve security. A digital savior to productivity problems.

But over the past few years, unseen challenges have emerged. Costs and visibility issues are now well known. SaaS and cloud are the two largest and fastest-growing areas of IT expenses for businesses worldwide — between 11% and 14% — depending on the product (Gartner).

However, there is a wider problem — one that has been left unseen or ignored for too long. The time, effort and resources it takes to manage and renew tech contracts – and how this drains productivity.

The monumental and monotonous task of contract management affects what each employee can deliver for the business. Consider this from Chris Ortega, CEO of Fresh FP&A:

“A CFOs’ value goes far beyond contract management. This is where technology helps accelerate CFOs’ expertise in shaping strategy, cost savings and safeguarding company assets. Balancing tactical execution vs. strategic direction is where CFOs deliver business value and technology is the accelerant.”

If a CFO’s value is in strategic execution, isn’t contract management getting in the way of this? And it’s not just leadership that’s being affected. Contract holders sit at all levels, with middle managers wasting hours managing low value contracts.

It’s a problem no one is talking about

As SaaS and cloud stacks quietly increase in number as a company grows, cost and contractual administration does too. As everyone focuses on company growth, high costs and administrative pain are holding your productivity levels back without you knowing.

That’s where we come in. We’ve analyzed data from over 900 companies and combined this with industry research to identify the hidden pitfalls of contract management, and how they hold you back from achieving efficiency. And the more you know about each one, the more prepared you are to combat what’s in them.

These are:

  • The time it takes to complete a buying/renewal process
  • The levels of administration in every process
  • Contract management is never ending
  • No visibility into contract administration creates a lack of control
  • Approvals can put a stop to your work
  • The emotional cost of contract management detrimentally affects your teams

Let’s unravel the true picture of SaaS and cloud management, so you can tackle the problem from all angles.

How did we end up here?
  1. “It’s always been done this way”
    Forbes called this “The most dangerous phrase in business.”1 We agree. Contract holders have nearly always been siloed in their departments and teams without a centralized support or operations team because that’s the way it was done before them — dealing with contracts as and when they can, without it ever being a priority.
  2. Contract admin doesn’t earn money, and isn’t creatively interesting
    Ever heard a colleague say, “Oh, I’ll deal with that on Friday afternoon?” Subscription management falls directly into that category — an administrative task that doesn’t drive revenue but just needs to get done. It’s not what gets people out of bed in the morning.
  3. No centralized view
    SaaS and cloud contracts are usually managed individually or at a department level, so having visibility over a company’s entire tech stack is restricted by these siloes. This makes it virtually impossible not only to know who’s using what, but also to control what tech is being purchased or renewed.

These three deep-rooted reasons are entrenched across virtually every company. And without knowing it, they suck you into a vortex that eats your time, effort and resources, and impacts your overall productivity levels.

How? Glad you asked.

A hypothetical scenario:

A Head of Marketing holds the contracts for the marketing-only software. Two of them are up for renewal — they want to replace one vendor and re-negotiate price with the other. With vendor research, internal stakeholder meetings, and discussions with both new and expiring providers required, this could take up to 4 hours in a week. They work a 40-hour week.

That’s 10% of their week spent on their tasks.

In reality, it’s actually more. Amplify this across other departments, stakeholders, teams and the involvement of other colleagues, and you begin to see the scale of the problem. Let’s take a closer look at why.

The contract process

Did you know?

The average end-to-end process to purchase a new tech product takes 100 days

It’s a long process to buy or renew parts of your tech stack. Our research shows that, alongside a buying process taking about 100 days, renewing a SaaS license takes an average of 60 days end-to-end. That means, if a buying and renewals process happened back-to-back, contract holders would spend 61% of their total working days being involved in software contract management processes.

It peppers a normal working week with meetings and administration that a contract holder would rather not be spending their energy on. And it becomes a constant distraction that prevents full focus from being applied to other tasks. .

When you break down a typical renewal process into key stages, you can see how long and laborious it is to complete one contract:

  • Requirements gathering: 23 days
    Customer receives a renewal quote/notification from the vendor and schedules a discovery call, whilst also researching other potential options.
  • Negotiation: 19 days
    Terms are negotiated (including pricing) with vendors – usually via email and video calls.
  • Internal approvals: 8 days
    Once a vendor is chosen, offer and vendor information is sent to internal stakeholders for approval e.g. Finance, IT, legal teams.
  • Contracting: 9 days
    A contract is drawn up by the vendor and sent to the customer to be signed by all relevant internal parties.
  • Completion: 1 day
    Contracts are signed, exchanged and the renewal process is marked as completed.
  • Total: 60 days

It's just a timeline though, is it that bad?

It’s a fair question. Ongoing, unfinished tasks cause the mind to constantly recall it — something called the Zeigarnik effect.2 This can distract you from fully applying yourself to other tasks. The remedy is usually to focus on finishing the task quickly, so to remove it from your mind. But what if the task is at a stage that you have no control over? Say, awaiting an email back from a vendor?

The constant on-again, off-again work of contract management becomes a balancing act with regular work. Balancing workloads is a primary skill for any employee, as is time management and focus levels. But when any process is elongated, these become more difficult and productivity suffers as a result.

But why do they take so long?

Administration

Overwhelming amounts of admin in every process

Did you know?

On average, companies are renewing 4.7 SaaS contracts per month

Ever heard of “badmin?” It’s a portmanteau of “bad” and “admin,” and it describes unnecessary administration that can stifle efficiency and productivity.

When Personio found that 44% of employees report their business is being slowed down due to inefficient processes and admin, and a further 42% say too much of their time is taken up with workplace tasks that don’t relate to their core job,3 we couldn’t help but think that this was reflective of tech contract management as well.

A 2023 Microsoft survey found that the top workplace distractions that hurt productivity are inefficient and numerous meetings4

Our research found that companies are, on average, renewing 4.7 contracts per month. These contracts all require meetings, emails, informal chats, demos, zoom calls and back-and-forth negotiations, plus legal, IT security and finance teams’ involvement. That’s a lot of admin tasks, taking time, effort and resources away from more productive projects.

And that’s only for renewals. If you want to purchase a new piece of software, we found that three bids are tabled for every purchase. Which means three sets of meetings, emails and demos to bring this to conclusion — unlike traditional vendor processes where all vendors get a time slot to pitch their solutions one after the other.

We then went further with our research. We found that there are 2.8 meetings per process, 8.6 emails for a renewal, and 5.2 emails per new purchase. These averages are from best-case scenario situations — ones that don’t include back-and-forth negotiations. Initially these numbers don’t sound very high, but they do when you consider the wider context.

In meetings and emails alone, this equates to (per company):

  • 26 hours of meetings and 59.4 emails per month.
  • 312 hours of meetings and 712.8 emails per year.

312 is just a number though. What can it mean for your business?

And contract management isn’t restricted to the timespan of a single month. If we take January as starting from a clean slate, that means that the January contracts are still being administered in February, adding another stack to the pile. It could seem never ending.

Contract management is never ending

Did you know?

The average company has 126 active SaaS contracts

On average, two thirds of these need renewing every year once we discount the rolling licenses, which equates to a whopping 4.7 contracts per month. That’s a nuclear amount of admin involved to just keep them all rolling.

Those 126 SaaS contracts are purely the “official”, without counting Shadow IT – software, services and devices that are unauthorized for use by the business. When 80% of workers admit to using Shadow IT,5 it means there are many more contracts on the table that require management.

All of these contracts involve research time, discussion, negotiation and approvals. And considering these processes take around two months to complete, you get a real sense of just how constant these must feel to contract holders and key stakeholders.

An auto-renewal scourge

“In the realm of SaaS contracts, opting for auto-renewals often becomes the default for contract owners. Suppliers strategically provide minimal notice, mitigating churn risk and seamlessly enforcing price increases. In this landscape, the practicality of inertia tends to overshadow the need for proactive engagement.”

– Nick Riley, Global Head of Purchasing at Vertice

It’s contract cost vs the value of employee time. And since auto-renewals become the default, it’s clear that employee time is more valuable than company cash. But that’s not solving the problem, it’s simply shifting it.

With vendors giving minimal notice for renewals, it’s hard for contract owners to get ahead of the game. It doesn’t help that they lack total visibility over their tech contract situation.

A lack of contract oversight

Without comprehensive oversight, you lose control

Did you know?

Workers are using twice as many applications to do their jobs than they were in 2019

The number of software tools used by workforces is expanding — and rapidly. According to CIO Dive, employees use approximately 11 applications to do their job7 — and this number has doubled in the past five years. The majority of these applications are department-specific (marketing, sales, engineering etc), rather than used across the whole company.

The burgeoning numbers of siloed tools increases the difficulty in tracking all of the software used across a company. This is needed for financial modeling and predictions, IT and security audits, and legal requirements.

When we consider that SaaS and cloud spend is the second biggest overhead after headcount, knowing what software is being purchased and renewed is of huge importance to any efficient financial oversight.

We’ve talked at length about the importance of having total visibility over your SaaS stack from a monetary angle — but what about from a time, effort, and resource angle?

Within the average company, 33% of SaaS licenses are either barely used or not used at all by intended employees

Put simply, duplicate and unused licenses cause contractual headaches, as your employees spend more time renewing licenses they don’t need.

For example, Sales and Product departments have been found to have the highest rates of products being underutilized — 49% and 45%, respectively.

“A lot of the time, there are multiple dates that impact a SaaS renewal which wouldn’t be reflected in a typical spreadsheet tracker, not to mention you wouldn’t get any notifications.”

– Lily Siddiqi, Purchasing Team Lead at Vertice

Not having clear visibility here can duplicate work for the team member who engages in the renewal. It also means deadlines can be missed, at which point you spend a huge amount of time unpicking the renewal and extricating your business from a situation that could easily have been avoided. The worst case scenario is you end up with a suboptimal outcome, whereby you are subscribed to far more than you need.

Internal decision makers

And how they can block a procurement process

Did you know?

SaaS contracts take approximately seven days to be checked by legal teams

When administering software licenses, processes are seldom as smooth as Barry White’s voice. Internal decision makers who have to review and approve your contracts can hit your progress with unexpected delays, emergency stops and even U-turn.

“A lot of the time, there are multiple dates that impact a SaaS renewal which wouldn’t be reflected in a typical spreadsheet tracker, not to mention you wouldn’t get any notifications.”

– Marta Poliuha, FP&A Manager at Moss

In some cases, finance teams may unintentionally act as blockers due to reliance on manual methods for contract tracking, renewals, and payments with different spreadsheets and documents – leading to delays in processing contracts and payments.

Without automated systems or visibility of real-time data, contract management workflows may be difficult to streamline, resulting in inefficiencies, errors and missed opportunities to optimize supplier relationships.

They tend to be placed in teams that are removed from where the core license will be held. Areas like legal, IT and security, and finance are classic examples of stakeholders who are required to review each contract and give their sign off.

Their reviews take time. Our research shows that not only does it take on average seven days for a contract to get through legal, it can spend an additional three days being approved by IT. If passed from one to another, rather than viewed at the same time, that could be an extra 10 days at least that you need to accommodate for in any contract process.

These approvals might be frustratingly long, but they are critical. They safeguard the business from potentially disastrous scenarios like cyber attacks, financial mismanagement, and fraud. So they are absolutely key — and there are a lot of them. EY found that in large businesses, legal departments are handling 350 contracts a week.8 That’s 18,200 a year. Your SaaS license is not likely to be top of the priority list, so all you can do is sit and wait for their answer.

If it doesn’t pass approval, there isn’t a lot you can do either. You may have to look at an alternative, which resets your entire process.

The emotional cost

Boredom, stress and negative workplace emotions

Did you know?

86% of people waste time doing workplace admin not related to their core jobs

Managing SaaS and cloud contracts usually triggers two emotions: boredom and stress. And both of these can negatively impact performance and productivity.

Boredom

If you’re hired to sell products, keep customers happy, or write code, that’s what you want to be doing — and that’s what your company wants you to be doing.

Renewing and negotiating technology contracts, as we’ve seen, takes a lot of time and effort away from these primary and preferable tasks. This means contract holders and stakeholders are spending a lot of time doing things they don’t want to be doing, or sitting around waiting for answers. According to Business Standard, 86% of people feel they waste time in admin unrelated to their core job, with 41% of these spending over an hour a day mired in it.9

A drop in mood decreases the commitment to core projects and overall productivity. Oxford University found that happy workers are 13% more productive10 than those that aren’t. Combine this with a study by Korn Ferry that found 33% of people leave jobs primarily because of boredom11 (as opposed to 19% who leave for a better salary), and we can plainly see the sheer impact boredom can have on the workplace.

There is also the more human element to consider. The National Center for Biotechnology Information notes that boredom causes decreased productivity, poor mental health and even physical health issues. A cited study by the University of Virginia found that, given the opportunity, 67% of men and 25% of women would rather administer themselves with an electric shock than experience boredom.12 Such is the human desire to avoid being bored and the negative effects it causes.

If SaaS and cloud license management is contributing to this, you should try and alleviate it by changing how your contracts are handled — can you spread the responsibility around so it doesn’t all fall on one person or team? Can you centralize tasks across an operations team?

Stress

The other side of the emotional coin is stress. Consider the following:


A contract holder who has limited experience in negotiating contracts, and little interest in doing so, but is under pressure to keep to a strict budget.


A vendor that waits until the last minute to start the renewals process, to maximize the pressure on the contract holder and also the chance of them signing something off quickly and without due diligence.


A leadership team that’s keen to reduce costs and is balancing headcount vs tech.

All of these contract-related scenarios can be the cause of stress. And stress at work can reduce happiness, productivity and can eventually lead to quitting. In the US alone, one million workers miss days at work to stress, depression, and anxiety.13

Stress is rarely attributed to a sole factor, but by eliminating as many of them as possible, you can reduce the rate of stress and burnout and increase overall productivity.

” If your SaaS stack is well managed (and the wider business is well aware), making prudent purchases of new technologies that have the potential to unlock growth for your organization is much easier. It helps avoid the far more stressful alternative of cutting headcount — something leadership teams rarely want, or like, to do.”

– Mark Thomas, VP of Customer Experience at Vertice

Cloud spend management

Fewer contracts, but still tons of administration.

Did you know?

Engineering teams spend up to 20% of their time optimizing and managing their cloud instances

Having undergone explosive growth, we discovered spend on cloud can range from 5-20% of a company’s budget (depending on its size). And to show the speed of its growth, 55% of companies are spending more on cloud year over year, with 24% describing their upward spend as “significant.”

But does this growth necessarily mean extra administration? There are fewer contracts. For example, cloud products tend to be more “plug-and-play” and are controlled by the engineering department, rather than spread across the whole company. This helps increase visibility, maintain cost control, and reduce administrative tasks.

But we’ve found that nearly a third (32%) of cloud spend goes to waste, due to idle, underused and/or poorly optimized cloud resources. While this could indicate inefficiency or a lack of oversight, it also highlights the complexities and effort required to effectively manage any cloud instance. Managing the cloud is less about contracts and more about consistent product monitoring and optimization — which is still administrative and draws focus away from revenue generation.

Take Reserved Instances, for example. We found that up to 20% of an engineer’s focus is on Cloud Cost Optimization and monitoring RIs per month. In terms of their time, that’s 32 hours a month, or 384 hours a year — enough time to become fluent in another language.

With DevOps, Engineering and their management teams responsible for this, their time, focus, and ultimately productivity is being drawn away from operations that help drive revenue and growth. A clear indicator that SaaS and cloud spend management administration affects more than just finance — its claws dig into all departments.

In summary

You should now be painfully aware of the hidden challenges in any purchasing or renewals process.

  • Wasted time within a long process
  • Overwhelming administration
  • Never-ending contract management
  • Minimal license visibility
  • External decision makers
  • Cloud product management
  • Emotional strains

You see what your teams are going through to simply administer the myriad of SaaS and cloud contracts and licenses, and keep technology going within the business. You’re aware of the distractions, the stress and the constant work they take that are outside of core revenue-driving activities.

You also know that the current processes can disengage people, which negatively affects overall productivity, too. Not to shock you, but a recent Gallup study found that unengaged employees cost the world economy $8.8 trillion,14 which equates to 9% of global GDP. And workplace communication platform Slack found that poor productivity also leads to a drop in creativity — possibly resulting in a creative brain drain.

We know that SaaS and cloud license management is not causing all of this, but if it even contributes to it, it’s worth looking into it. Efficient and effective use of employees’ time, effort and resources are all incredibly valuable to the success of any business, so tidying this area up to release a wealth of other more productive ones is ideal!

But these processes are so ingrained, it’s hard to solve them all at once. There are steps you can take to remedy each one individually, but creating a dedicated team to centralize all contract administration is what many companies have looked at in the past. Though, this is expensive, slow and still doesn’t guarantee total real-time contract visibility.

There is another way.

Vertice does the admin for you

The Vertice platform is not just designed to save you money. Yes, it can save you 25% by getting your SaaS and cloud usage under control and with better discounted vendor contracts. And your business can see a financial return on Vertice in approximately 90 days, with an annual 7x ROI.

But it is so much more than just a money-saver. With access to a dedicated and experienced purchasing team, you can boost your own team’s efficiency and maximize results by shifting the administrative work to Vertice.

Vertice cut the volume of emails per SaaS contract renewal for Encompass by over 90%

Extend your team
With expert buyers, we can negotiate your licenses on your behalf – alleviating the admin and enabling you to concentrate on strategic procurement, as well as your normal revenue-driving activities.

Get optimal pricing
We know a thing or two about proper pricing. With over $1.1bn in spend management across our customers, and over 15,000 price points to benchmark against, we can get you the best deal for your license. No need to worry about research or negotiation, we’ve got all of that handled.

Streamline approvals and get contract visibility
The Vertice platform brings all of your agreements, vendor information and contract details under one roof. Customizable workflows and intuitive usage data helps you regain control of license utilization with ease.

Our Diligence Insights reduces the countless hours spent buying, managing and renewing software into a few clicks. The Vertice platform identifies key conditions you can use to assess or negotiate on, and benchmarks your agreement with thousands of others so you get clarity on where yours stands. With pre-completed security questionnaires, streamlined processes for compliance and approvals and detailed information on each vendor, your security, IT, and legal teams have a massively reduced load too.

Our Cloud Cost Optimization platform takes the resource intensive optimization and management away from your busy teams and automates them. Our proprietary algorithm buys and sells RIs on your behalf based on sophisticated optimization tests, so you don’t have to spend time and focus doing this yourself.

With zero-hassle implementation and the ability to also slash your cloud costs by up to 25%, you can focus on other key projects knowing your cloud instance is being managed and optimized effectively and automatically.

If you want to reduce the hidden administration that is tying your teams down, and release their productive potential, then Vertice is your answer.

References

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