What are you doing to rein in SaaS sprawl? The explosion in Software as a Service (SaaS) subscriptions and licenses that happened during the pandemic hasn’t reversed course. Instead, companies have become ever more reliant on an even wider range of centrally-hosted, cloud-based tools like Salesforce, Salesloft, HubSpot, Google Workspace Suite, Office 365, NetSuite, and many others. While these solutions play an important role in business operations and particularly in supporting new trends in remote working and collaboration, escalating and unchecked SaaS spend create a significant source of waste and bloat that many companies don’t even realize is there.
SaaS sprawl is a more expensive problem than most companies realize.
When companies do decide to take a closer look under the hood, they find a complex SaaS ecosystem made up of multiple independent environments, many of which lie outside the purview of IT. It’s not uncommon for companies to have hundreds of thousands of licenses across a variety of different platforms, portals, and information sources, many operated by individual business units, departments, or individuals. As a company’s software usage needs change over time, the complex contracts, rate structures, and costs rarely keep pace. As a result, very few companies have a clear picture of their SaaS needs, current inventory, contractual obligations, and what it’s all really costing the organization.
In most cases, companies have an opportunity to cut between 12-20% of their current SaaS spend, amounting to hundreds of thousands in savings per year. So, it’s well worth the effort to better understand and manage SaaS across the enterprise.
4 ways companies can take back control of their sprawling SaaS spend.
Introduce SaaS discovery, centralization, and visibility.
The complexity of SaaS environments and the large number of suppliers make SaaS usage and spend extremely difficult to manage, especially in the enterprise environment. The trend toward dispersed SaaS governance only complicates the situation further. On average, IT controls just 27% of SaaS spend and directly manages just 23% of an enterprise organization’s SaaS applications, leaving individual business units in charge of everything else. And this decentralization has accelerated quickly in the post pandemic era; business units manage 22% more of the company’s total SaaS spend today than they did one year ago.
Completing a comprehensive SaaS inventory and utilization study is an important first step to truly understanding the landscape. This should ideally be done as a collaborative effort between IT, HR, Finance, and representatives from other business units that are independently making SaaS decisions. It typically requires the use of an automated support and monitoring platform that assists with discovery and serves as a single pane of glass for centralizing inventory and managing the associated expenses.
To conduct an appropriate inventory study and to get to the core of the challenge, discovery and implementing supporting tools is key. Invoices alone will not properly account for all spend considerations, nor are they wholly accurate. Therefore, it is incumbent upon the business to work across internal functional organizations to gain buy-in. Partner with a forensic audit provider to use tools such as SSO access and browser and desktop extensions to build on the existing data set.
The results of the discovery will help companies identify unused or underutilized licenses, redundancies, and other sources of overspending. Redundancies are particularly common in solutions for collaboration, project management, recruiting, file storage and sharing, digital analytics, and other web tools. They often happen following mergers or acquisitions or when there is little coordination between business units. It’s not unusual for companies to find different departments operating on completely different platforms or to uncover numerous instances of the exact same SaaS application. This not only creates unnecessary spending but also more headaches and operational inefficiencies for the organization.
Beyond eliminating redundancies, completing an SaaS inventory and usage study ensures companies are paying for the right number of licensees at the right level. The average organization is only utilizing 60% of their provisioned licenses, resulting in significant waste. Sometimes companies are paying for robust licenses when a basic or even free version will do. We recently worked with one company that was considering a Microsoft E5 license for every user, but the usage study and application requirements revealed that roughly a third of the user community, or about 150 employees, only needed a basic license, allowing the company to avoid $25,600 in additional SaaS expenses per month.
Once an SaaS environment is right sized and optimized based on real usage needs, companies can often uncover further savings by renegotiating rates, fee structures, and renewals and by ensuring they are paying best-in-market rates for all their subscriptions.
Incorporate SaaS governance controls and supporting workflows.
Companies that are optimizing their SaaS usage for the first time can save 20% or more of their current SaaS spend. But it’s important to remember that SaaS usage is extremely dynamic, and the optimization won’t last forever. New inefficiencies and overspending can creep back into the equation quickly.
The best way to prevent SaaS sprawl from spiraling again is to introduce SaaS governance practices as part of an automated management and control solution, allowing IT to regain and keep control over the full landscape. Many studies suggest that IT has as little as 30% or less visibility into enterprise-wide SaaS spend and justification, especially as dispersed workforces and business departments are allowed to enroll in programs and subscribe to new applications without any approval process or oversight by IT. While it might make sense for business units to maintain some level of input into the software solutions they deploy, enterprises still need to see the big picture. And they need to safeguard against rouge or shadow IT that can wreak havoc on operations and the bottom line.
Establishing or reestablishing IT oversight starts with using a SaaS inventory and management platform to organize contracts by supplier and contract end dates. This allows IT to get ahead of the renewal cycle and to look for opportunities to further consolidate, eliminate waste, and save. It’s also best practice to insert workflow management and a strict approval policy for new subscriptions. This can include introducing single sign on (SSO) integration and putting in a series of browser-based extensions. A management platform with robust API capabilities can serve as a single-pane of glass for provisioning and de-provisioning purposes. Armed with hooks into your AP, HRMS, and Work Flow/Ticketing systems, you enforce collaboration, stay informed, and avoid future sprawl.
Add centralized security checks and balances.
Managing and maintaining the SaaS environment isn’t just about controlling price creep and eliminating waste. Considering that the average enterprise sees eight new applications enter its environment every 30 days, there are also significant compliance and security risks to manage. When employees can enroll independently, from any device, including edge devices, and using their own networks, it jeopardizes security protocols and puts the enterprise and its data at risk. A good SaaS management solution, in conjunction with the deployment of SD WAN, SASE, or virtual desktop, further solidifies security at the edge to enable ongoing security compliance.
Leverage new operational efficiencies across the organization.
When companies adopt an automated approach to SaaS management, they benefit from new opportunities to design an optimized IT environment and introduce more efficient operations across the organization. As just one example, companies can set up an automated workflow to de-provision a terminated employee’s SaaS licensing, eliminating the need to address each individual subscription and license manually.
Another advantage is a better understanding of operating costs, leading to improved forecasting and budgets. Companies do not need to worry about the influence of shadow or rogue IT expenses on their financials. Instead of unwelcome surprises, companies often find that optimizing SaaS environments frees up additional resources that can help fund other tech initiatives that drive further operational efficiencies for the enterprise.
SaaS should improve your business, not hinder it.
Companies everywhere are overspending on SaaS and underutilizing their subscriptions, and many don’t realize it. Reliance on SaaS will only increase as enterprises continue to digitally transform their operations. This makes adopting an enterprise SaaS expense management strategy critical, not just from a bottom-line perspective but also to ensure operational efficiencies, security, and compliance. To learn more about SaaS sprawl and SIB’s approach to SaaS management, download our SaaS spend reduction info sheet.