Vertice: Accessing pricing data can reduce Fintech costs by 20 percent

Companies spend billions annually on their software-as-a-service (SaaS) stack while enduring countless hours of buse, renew, negotiate and manage their services.

In accordance Apex, a series A startup founded to help businesses save money on SaaS, not only is monitoring and managing SaaS renewals an ongoing headache for businesses of all sizes, it’s also costly. Vertice estimates that some companies may be overpaying by as much as 20 percent per year for their products.

Here Joel Windels, VP marketing at Apex, explores how to help startups manage their SaaS costs in a sustainable way.

Fintech startups, not surprisingly, have one eye on finance and one eye on technology. In more volatile markets, the financial component becomes more important. This means that as the broader economic landscape continues to put pressure on fintech companies, attention to the bottom line is growing in importance.

When cash flows are tight, CFOs look to variable cost centers for ways to extend runways and adjust forecasts. In the end, it often means reducing the number of employees. More than 19,000 employees have been laid off across 190 fintech and crypto providers in 2022 alone.

Reduce consumption without reducing the number of employees

Not much of the cost of a start-up is variable. Even those that do tend to be relatively inflexible – cloud costs have a heavy baseline and office space is difficult to adjust. The easiest place to quickly manage your bottom line is to tackle payroll. Employees eat up a large portion of the attrition rate, so making layoffs and cutting wages is an effective way to balance the financial forecast. The problem, of course, is that letting people go can be incredibly painful, both for those who leave and for those who remain, and will leave the company in a weaker and less resourceful position.

A growing number of fintech companies are finding ways to avoid this while still implementing meaningful cost-cutting measures. SaaS procurement has spiraled in recent years, with the 2020 pandemic accelerating the pace of investment in the tools that enable digital work.

Few businesses in the area could effectively operate without licenses for products such as Slack, Teams, Figma, Salesforce, Google Workspace and so on, regularly creating a Frankenstack of technologies. What tech company could realistically support digital-first growth without them? Productivity software like this is fundamental to getting work done, but the cost to support this enablement has increased.

The average startup/scale-up now spends between $4,000 to $5,000 on SaaS per employee, which is about $1 out of every $8 spent as a business overall. Strategic reduction and management of this order line provides an intelligent option to reduce costs without cutting staff.

The difficulty of reducing SaaS consumption

Reducing SaaS costs is a challenge. A really big challenge, actually. That’s because so much of the buying process takes place in secret. Over half of the suppliers mask their prices, so it becomes difficult to have a benchmark for list prices. Encouraging prospects to speak to the sales team is a common technique, with the intention of the supplier trying to charge as much as possible on a customer-to-customer basis.

Discounts are also a widely accepted practice in SaaS. Some customers pay €15 per license, while others pay only €0.50. Getting transparency about what you should pay is almost impossible. Ultimately, SaaS providers have designed their business models to maximize their revenue, of course, but the result is that customers are disempowered to manage their costs.

There are several issues that further complicate SaaS purchases. Duplication of off-the-shelf products and tools is present everywhere – licenses that are not used and multiple products with similar functionality are distributed in different corners of the business. Effectively managing the total cost of SaaS also requires universal visibility of the SaaS stack. This is almost impossible with siled decision-making, Shadow IT and dispersed purchasing power across finance, IT, department managers and procurement.

Using real price data to get significant discounts

Reducing the total amount spent on SaaS by a third would amount to a net savings of five to six percent in most startups. It is a significant financial lever to pull. But to be able to do that, companies need to understand how their SaaS consumption compares to that of others.

While services and products are available to compare functionality, such as Gardener or G2, the options for collecting information on prices are more fragmented. It is not unusual to have to crawl through forums and Reddit post just to gain insight into the discount option during a renewal. Asking your peers and connecting to the wider startup network is another way to drive a more informed negotiation.

Ultimately, however, getting the best possible price for dozens of different SaaS products can quickly become a full-time job. New solutions have emerged to fill this gap in recent months, helping startups manage their SaaS costs in a sustainable way.

Apex, for example, maintains a database of tens of thousands of supplier contracts. This allows customers to measure real price data, comparing the actual purchase price of thousands of products with the list price – a number that is also often hidden. Knowing that a customer with a particular requirement on a particular scale is paying $5 instead of the list price of $10 can help a similar customer renegotiate the $9 renewal.

It also helps to be aware of the different characteristics of each provider, such as automatic renewals, price increases, economies of scale, bundling, term length, shopping centers, time of year and more.

Cut costs without financial risk

Combining pricing insight with deep knowledge of the SaaS industry changes the balance of contract negotiations for customers, helping startups save 20 to 40 percent on total SaaS spend. Vertice even offers its customers a savings guarantee, meaning organizations will dramatically cut their SaaS costs or get their money back.