The Software-as-a-Service market continues to explode as enterprises increasingly adopt cloud-based applications to fuel business growth. According to a 2022 State of SaaS Management Report from Gartner Peer Insights and Zluri, companies spend 10% of their revenues on SaaS. There are many benefits to SaaS: cost savings, scalability, agility, etc.
However, there’s a dark cloud growing around the silver lining of SaaS – wasted spend. While SaaS can provide notable savings due to no upfront installation or ongoing maintenance costs, at scale (dozens or hundreds of applications), an unmanaged sprawl of software can quickly become a leaky bucket for cash. In the current economic environment, this is something all companies must pay attention to.
In large enterprises with thousands of employees and countless SaaS applications, this waste can easily reach millions of dollars very quickly. Cloud-native applications are expected to continue dominating the business world due to their enormous benefits, but a new need is emerging: Oversight and management of SaaS and its aggregate cost.
The root cause of SaaS overspending
Without a centralized method of oversight, teams and departments purchase the software they require, but the rest of the organization isn’t aware of the availability of those tools. In fact, 56% of IT teams currently don’t tackle Shadow IT effectively.
Along with a plethora of other issues, such as security and data governance, one problem with the lack of visibility of cloud applications is a problem called dark billing.
Auto renewals and continuous subscriptions can easily go unnoticed. It’s a common scenario: a team subscribes to a particular app to complete a project, finishes the work, and moves to the next project. The manager thinks, “that app was useful. We may need it again” and keeps the subscription. But, the team doesn’t need the app again and the auto renewals continue.
A pervasive problem in the enterprise world is siloed information. When it comes to cloud computing, siloes are a serious issue. The lack of visibility of subscriptions and apps means that teams may unknowingly subscribe to overlapping services, creating expensive redundancies. Two departments may have similar subscriptions that auto renew in the dark, multiplying unnecessary spend.
A related problem is that financial data and app data can remain siloed away from each other. No one sees a report that shows use of an app alongside the cost of that app. Analysis of how and what SaaS spend actually pays for requires breaking those siloes.
Consider the SaaS ecosystem
Consider the difference between an ecosystem that springs up in an untended vacant lot and that of a carefully manicured garden. The vacant lot quickly becomes weedy and chaotic, perhaps overrun by pests and invasive species. In a cared-for garden the ecosystem is thoughtfully controlled, paths are kept clear, and only approved species are allowed in.
In a SaaS ecosystem, four important elements must be considered: applications, users, spend and processes. By putting governance in place for each of these elements, “shadow IT” becomes well-lit, information moves through the organization better and the right people have access to the right information at the right times.
Application redundancy and high-risk applications can be eliminated, creating a safer environment with better functionality for less cost. Cybersecurity and compliance are always a concern and a steadily deepening one. With appropriate governance, usage can be restricted as necessary, and high-risk applications kept out of the ecosystem. Wasted spend in shadow IT is rampant, largely due to a lack of appropriate controls.
Processes to authorize apps, users, and spending within IT must be clear so that teams understand what to do when they need a SaaS tool, and so that decisions regarding applications are carefully considered, rather than made in the moment. In implementing appropriate processes, specific questions should be addressed:
- Which elements of the SaaS process does the company control?
- Where is the data generated by applications going? Is there a process for that data?
- Which processes create synergy across applications, users, spend and process?
Roadmap to optimization
The solution to the common enterprise SaaS problems is optimization, and it’s achieved through building a cycle of continuous improvement that penetrates all the elements of the SaaS ecosystem. A systematic course of small steps, establishing protocols and instituting processes, results in a system that runs flawlessly on autopilot.
The goal is to reach a point where each new application, user, and license is added, iterated and optimized effortlessly, so the ecosystem continues to become increasingly efficient and spend is limited. Maintenance becomes routine.
A multi-dimensional approach that includes a data layer and an intelligence layer is the best way to achieve cost efficiencies. At the enterprise level, one of the surprising difficulties is discovering software tools that work well, so discovery and integration are important steps in optimizing the SaaS ecosystem.
Along with the data layer, there must be an intelligence layer with usage insights and forecasts. Data alone doesn’t improve business. It must be analyzed and placed into context. Price discovery, budgeting, and a plan for automation are additional elements of efficient cost optimization.
With the right applications and the knowledge of how, when, and by whom they’re being used, it’s possible for enterprises to rightsize their tech stack. Identifying duplicates and eliminating high-risk apps to improve security and limit costs keeps the ecosystem flourishing within boundaries. Processes and automation limit the need for intense maintenance.
Establishing the ecosystem is one thing, but it’s not the end goal. It must be monitored so that subscriptions can be ended when appropriate, the right users continue to have access to information they need and controls are implemented where necessary. These ongoing actions allow for forecasting spend, as well as encouraging buying subscriptions strategically and renewing thoughtfully with an eye to savings.
The economic landscape requires due diligence when it comes to enterprise level SaaS spending. Shadow IT hides wasteful spending, and organizations must manage costs associated with bulky and hidden SaaS platforms. Appropriate controls can reduce buying and renewal costs by 30% or more, improve security and create a safer environment.
