Ready or not, your business now operates in the digital age. For many companies, that means ever-increasing reliance on cloud-based subscription software which is also known as software-as-a-service or SaaS.

And the SaaS industry is booming; it’s projected to be worth more than $100 billion in 2020, according to technology analyst Gartner. One reason this industry continues on a steep growth trajectory is the increasing purchase and use of SaaS by businesses of all sizes.

However, as more customers see the value that SaaS products provide, for many organizations, this proliferation can create problems.

What Exactly is SaaS?

SaaS is all but ubiquitous in modern businesses. More businesses now choose software deployed via the cloud for a monthly or annual subscription fee, making SaaS the first choice for most companies.

Examples of popular SaaS business tools include Google Docs, Sheets and Slides, Slack for messaging, email marketing platforms such as MailChimp, and extensive, mission-critical tools such as Salesforce’s CRM platform.

However, when deployed at scale, the very tools designed to simplify tasks or increase employee productivity can create complex new challenges.

Here are a few indicators that your business should take a look at developing a software management strategy that includes a SaaS management approach:

Challenge No. 1 – Unknown SaaS Inventory and Cost

For most organizations, total spending on SaaS tools is unknown and once it’s accurately identified, the actual costs can be shocking.

For enterprise-level organizations, at Zylo, we find that the average company’s total investment in SaaS tools represents more than $10,000 per employee per year in spending. To put that in perspective, according to the National Business Group on Health, it costs around $15,000 per employee to cover healthcare costs.

Why do SaaS tools cost so much? One reason is that most companies dramatically underestimate the number of SaaS applications that are actually in use throughout the organization – usually by about two to three times.

With our clients, there are typically more than 595 Saas applications in inventory on average. These same companies anticipated only finding 200 to 300 applications prior to completing a discovery and identification process. You can find more benchmarks like these in Zylo’s most recent State of SaaS Management report.

The primary reason for this poor estimating is the lack of visibility or insights into precisely who in the organization is purchasing SaaS tools. Since it’s widely available, extremely accessible, and relatively low-cost, cloud-based software frequently lends itself to employee-led purchasing via expense reimbursement, rather than IT- or procurement-based sourcing.

According to our study of customer data, typically one in every three employees purchase SaaS tools on behalf of their employer – and they frequently do so without any involvement or approval from their IT team.

What’s the Risk of Unmanaged SaaS Inventory or Spending?

How can something like a $9.99 per month subscription to a simple tool cause friction – or risk – within your organization?

Number one, if your employee is using a tool for business, it’s likely they’re exposing some form of company data to a third party. If this exposure involves sensitive company information or customer data, it risks a future data breach – which cost on average more than $8 million each in the U.S., according to IBM. It also carries the risk of non-compliance with consumer protections such as the European Union’s GDPR, which can lead to hefty fines.

Secondly, if an employee is using a standalone application to complete work tasks, that can silo or cut off that data from IT-approved applications. If and when that data needs to be identified or integrated to perform a business function, finding siloed or hidden data slows down the process, or worse, prevents it altogether.

Lastly, unplanned or unmanaged SaaS spending can wreak havoc on the bottom line. Organizations can begin improving the long-term value of SaaS applications by employing a SaaS management strategy that includes processes for discovering all applications in use and identifying costs.

Challenge 2: Missed SaaS Renewals

Another source of unplanned spending – and headaches – for SaaS users are automatic renewals. Automatic renewals can be a time-saving convenience, but they become problematic if the application renews and its purpose, ownership, or utilization is unclear.

Effective SaaS management planning includes the use of a proactive renewal calendar that prioritizes decision-making well ahead of renewal dates.

Frequently, after identifying all SaaS applications present in the organization and their costs, the next step is identifying application ownership and renewal dates. In both instances, a company’s expense record can provide clues to these attributes.

Once a discovery process establishes ownership and renewal dates, proactive planning can include cost-benefits analysis for each application well before its planned renewal date. By factoring cost together with utilization or usage metrics, stakeholders can make informed decisions about which applications should or should not undergo renewal.

Proactive renewal planning also gives stakeholders the opportunity to negotiate with SaaS vendors for better rates or discounts

Challenge 3: Redundant SaaS Applications

Does our company use Box or Dropbox for file sharing and storage? For video conference meetings, do we use Zoom or GoToMeeting? Which project management tool – Basecamp, Trello, or Asana – should we be primarily using?

For many organizations, there are multiple SaaS applications available to accomplish a single business function like file sharing, online meetings, or project management. While the plethora of choices for SaaS encourages a best-of-breed competition where the consumer typically wins, the array of tools can create conflict and confusion within any company.

When we begin working with clients, we frequently find more than one tool in use for the same function. One of the fastest ways to get more value from these tools–and reduce friction in the workplace–is to standardize on a single SaaS application to be used across the organization by all or most users. This way, there’s no more confusion about which tool to use.

Reducing SaaS application redundancy also improves purchasing efficiency. When a company can purchase a single tool that’s appropriate for most or all its workforce, it can leverage more purchasing power than if employees purchased the application on an individual-by-individual basis.

Further, this purchasing power can carry additional benefits beyond price: Negotiating an “all in” agreement for a company-wide deployment offers the opportunity to add sweeteners such as multi-year discounts, other contract clauses such as added privacy measures, or freezes on renewal price increases.

The Future of SaaS Management

While today companies operate in the digital age, the future decidedly belongs in the cloud. As more companies transition their technology stacks to primarily SaaS-driven tools, it’s more important than ever to deploy SaaS management strategies to maximize these investments.

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