We're getting worse at SaaS Management, 37% of spend is wasted

Best practice

We're getting worse at SaaS Management, 37% of spend is wasted

The latest figures from SaaS Management tool vendor Zylo show that companies are getting worse at SaaS spend management. Typically, tool vendors in this market usually quote 30% wastage as part of their pitch – Zylo’s research shows that figure has risen to 37%.

There are several potential reasons for this rise.

Rapid Growth

SaaS Spending is growing month by month across all sectors. Fellow vendor Blissfully report that spending will DOUBLE from current levels by 2020. Given that most organisations are busy finalising 2019 budgets that is a remarkable figure and presents a large, clear, and present cost management opportunity.

Delayed Deployment

Zylo’s report states that 12% of SaaS spend is for unprovisioned subscriptions. SaaS often avoids the contract minimum approach favoured by perpetual license agreements (such as Microsoft EAs) but there is still an inevitable lag between purchase and deployment. This was perhaps a bigger problem with perpetual licensing – an Office rollout was rarely a quick process – but it shows that the song remains the same in the SaaS world.

Recommendation: Try to negotiate contracts with deployment pace in mind and minimise upfront commitments unless they are good value.

 

Pace of change

Zylo report that on average their customers are processing 2 SaaS subscription renewals PER DAY. That’s a very different cadence to managing and renewing an EA or ULA. It requires automation coupled with additional staff.

Recommendation: Whilst the 80/20 rule will continue to apply, you still need to have visibility of a renewal schedule so you can focus your efforts. Pick a large contract, gather usage stats, and find some optimisation opportunities.

 

Shadow IT

Of course, you need to know about the SaaS subscriptions in use if you want to manage them. Shadow IT is business as usual in the SaaS world. Departments often procure SaaS without IT involvement and are increasingly likely to have their own budget line for such tools. Rather than being Shadow IT this is Business IT, sometimes involving significant spend. On average, across all industry types and sizes, Zylo report that around 50% of SaaS spend hasn’t been allocated to software General Ledger (GL) codes, meaning that software spend will be under-reported.

Recommendation: If you don’t have a SaaS Discovery tool you will need to work with your Accounts Payable team to uncover this spend manually. Engaging directly with SaaS-using departments may also be an option.

 

Our role as SAM Managers

There is a very clear opportunity here to deliver considerable cost savings for your organisation. I’ll be covering how to do this at our Australian and US conferences. I recently co-hosted a webinar on the subject – you can access the audio transcript and slides here. I’ve also published several articles on the technical aspects of SaaS Management, including a Market Guide listing some key players in this area.

As we gain an understanding of the challenges around SaaS Management we become able to speak with confidence and gain buy-in from our senior leaders. With over $30bn in wasted spend on the table per annum by 2020 it should be easy to justify a SaaS Management program on cost alone, and that’s before we consider the risk and compliance aspects of SaaS Management. In this recent article I suggested that cost is the least important pillar of your SaaS Management program which merely highlights the impact of privacy breaches to modern organisations.

That the report highlights we’re not getting any better at SaaS Management proves one thing – companies simply aren’t focused on it at present. If we want to grow our roles and influence, then now is the time to leverage our advantage and take on this task for our organisations.

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