See which companies overpay, for what, and by how much, by comparing spend on the same terms.
Software spend benchmarking across a portfolio answers a question most sponsors cannot: is each company paying a fair price for what it uses, and how does that compare to its peers in the same portfolio. Without a benchmark, a renewal quote looks reasonable simply because last year was similar. With one, the fund can see which companies overpay, for which products, and by how much.
Benchmarking turns scattered invoices into a comparison. When every portfolio company reports spend on the same products in the same units, the fund can rank cost per user, cost per metric and uplift rate side by side. The outliers reveal themselves immediately, and each outlier is a negotiation waiting to happen.
Benchmarking needs a common unit. Raw spend tells you little, because a larger company should spend more. Normalised metrics, such as cost per named user, cost per processor, or software spend as a percentage of revenue, make companies comparable regardless of size. The fund collects these from the same dataset that diligence and audit management already assemble, then arranges them so peers sit next to each other.
The comparison works on three axes. Internal benchmarking compares portfolio companies against each other, which is the most actionable because the fund controls both sides. Vendor benchmarking compares what different companies pay the same publisher for the same product, exposing pricing inconsistency. Market benchmarking compares portfolio pricing against typical market rates, which is useful directionally even where public data is thin. Together they show not just that a company overpays, but by how much and against what reference.
A benchmark only creates value when it drives a renewal decision. The discipline is to attach each outlier to its renewal date, so the gap between what a company pays and what its peers pay becomes a target for the next negotiation. Where several companies use the same overpriced product, the benchmark also builds the case for consolidated buying, because it quantifies the prize. This is where benchmarking connects directly to portfolio buying leverage and to cost reduction.
Benchmarking also protects against a subtler problem. A company can be paying a reasonable unit price yet still be overspending because it holds far more entitlement than it uses. Cost per user looks fine, but utilisation is poor. A good benchmark pairs price with utilisation, so the fund sees both the price problem and the volume problem, and addresses whichever is larger.
| Axis | What it compares | What it reveals | Action |
|---|---|---|---|
| Internal | Portfolio companies vs each other | Outliers the fund controls | Level pricing up to best in class |
| Vendor | Same publisher across companies | Pricing inconsistency | Consolidated negotiation |
| Market | Portfolio vs typical rates | Whole portfolio overpaying | Reset at renewal |
| Utilisation | Entitlement vs actual use | Volume overspend | Rightsize at true up |
Benchmarking is the lens that turns spend data into negotiation targets and consolidation cases. For the full approach see the PE portfolio software advisory hub and the PE portfolio advisory service. Related reading includes cross portfolio software buying leverage, reducing software spend to lift EBITDA, and software cost as a value creation lever. This is commercial and licensing advisory, not legal advice.
A benchmark is only as good as the comparability behind it. The common trap is comparing headline prices without normalising for what each company actually bought. One company list price with a deep discount can look worse than another net price with no discount, even though the first is the better deal. A defensible benchmark strips back to the unit that matters, the effective price per named user, per processor, or per unit of consumption, net of all discounts and including the uplift trajectory, so the comparison reflects what each company really pays for the same thing.
Context matters too. A company in a regulated sector may legitimately pay more for a product configured to meet compliance requirements. A company mid migration may carry temporary duplicate cost. The benchmark should flag these so a higher figure is understood rather than blindly targeted. The goal is to find the outliers that represent genuine overspend, not to force every company to an artificial average that ignores why differences exist.
The output of benchmarking should be a ranked list of opportunities, not a wall of numbers. Each opportunity pairs the size of the gap with the date the company can act on it, which is the next renewal. A large gap on a contract renewing next quarter is the top priority. A large gap on a contract with two years to run is a plan to prepare for. A small gap is noted and left. This ranking turns benchmarking from an analytical exercise into a sequence of negotiations the operating team can actually run.
The most valuable patterns are the ones that repeat across companies. When benchmarking shows that five portfolio companies all overpay the same publisher for the same product, the response is not five separate negotiations but one consolidated approach that uses the combined demand. Benchmarking is often what first reveals the case for portfolio buying leverage, because it quantifies how much the fragmented approach is costing in hard numbers the fund can act on.
Repeated annually, benchmarking becomes a control rather than a project. Each year the fund refreshes the comparison, checks that last year savings held, and identifies the new outliers that drift in as contracts renew and usage changes. Over a hold period this steady discipline keeps software spend tracking down rather than creeping up, and it gives the exit data room a clean, defensible story about how cost was managed.
Good benchmarking depends on assembling the right data, and most of it already exists if the fund runs diligence and audit management with discipline. Contracts give the metric and the price. Invoices give the net of discount figure. Deployment tooling gives the utilisation. The renewal calendar gives the timing. Pulling these into one normalised view per company is the real work, and it is the same dataset that powers diligence, audit readiness and buying leverage, which is why the investment compounds across all four uses.
Where external market data is thin, internal benchmarking carries most of the value, because the fund controls both sides of the comparison and can act on the gap immediately. The best evidence that a company overpays is often simply that a sister company pays less for the same thing.
Used this way, benchmarking stops being a report and becomes a recurring discipline that keeps software spend honest across the portfolio, renewal after renewal, year after year.
Book a confidential software M&A risk assessment and we will benchmark spend across your portfolio to find the outliers.
Book a confidential call