Companies use an average 651 software-as-a-service (SaaS) applications and spend millions per year on subscriptions and licenses. If you’re surprised by that volume, you’re not alone. In a survey last year, executives underestimated their SaaS inventory by two to three times. That’s a signal organizations are losing control of their SaaS strategy.

It's easier than ever for employees to download and expense applications, with or without IT approval. While some SaaS applications are great for innovation and productivity, too many can bring unnecessary expenses and dilute a company’s purchasing power. To regain control, a SaaS management strategy should become a part of your tech management and procurement processes.

Costly inefficiencies

As you would expect, SaaS adoption boomed to accommodate remote work. Spending on SaaS applications rose 14% and application quantity growth doubled in 2020 compared to 2019, according to research by Zylo, where I’m chief marketing officer. While many of these new tools might be integral to your organization's workflow, some are not.

With thousands of SaaS applications available, there has never been so much choice. Experimentation — made easy with free trials — is a great way to discover new tools to unlock productivity. But many organizations struggle to keep up with, or even have visibility into, the volume. Each month, at least 10 new applications enter a company's technology environment, and four exit active use.

Businesses that don’t monitor and manage this inflow risk unnecessary spending on duplicate subscriptions or redundant applications. Here are two examples of how a lack of visibility can impact an organization:

A marketing employee purchases a subscription to an application your customer service department already has. With no visibility, you now unknowingly pay for multiple subscriptions.

Your organization uses several project management tools that fulfill the same function for many departments. This dilutes your purchasing power and makes cross-department collaboration more difficult.

These challenges are becoming more common, especially for large organizations. Here are the most common types of redundant SaaS applications for business:

• Training/LMS/e-learning
• Digital asset management
• Project management
• Team collaboration
• Recruiting
• Web conferencing
• File storage and sharing
• Business intelligence
• Digital analytics
• Sales intelligence

Manual SaaS discovery

To the extent companies track their applications, they tend to do it using a spreadsheet, an inaccurate and burdensome process. In the typical scenario, IT surveys each department’s SaaS tools, reviews accounting receipts and examines reports from a cloud access security broker. For large organizations, this process can take six to nine months and become quickly outdated.

Manual SaaS discovery can’t keep up with the growing pace of SaaS adoption. To make informed decisions on your application inventory, budget accurately and curtail unnecessary purchases, it helps to have an ongoing SaaS management strategy. 

Carta, an equity management platform, has implemented such a strategy. It partnered with a SaaS management solution to improve application visibility and realize cost savings. The company experienced an immediate return on its investment and saw a number of benefits:

• $50,000 in immediate savings by rightsizing SaaS licenses. The company saved $18,000 on one web conferencing application by downgrading features and eliminating unused accounts. The SaaS management solution found that a quarter of purchased accounts weren't distributed to users and another 14% of accounts had premium features that were never used. 
• Improved renewal planning and negotiation. By discovering rightsizing opportunities ahead of renewal time, the company can engage in more strategic negotiations with vendors. Preparation often included commissioning an RFP process to evaluate similar applications and ensure pricing remains competitive.
• Established employee self-service for SaaS tools. Carta and its SaaS management solution created an easy-to-access catalog of approved, best-in-class SaaS applications. The catalog gives Carta’s employees access to all the SaaS solutions available, preventing unnecessary purchases and increasing the use of existing tools.

SaaS management

The future of software is SaaS. As your investment in cloud-based tools increases, the proactive management of SaaS becomes that much more necessary — and complicated — to achieve. A SaaS management solution offers effortless real-time visibility into your application inventory, utilization and spending.

With these insights, you can maximize your investment in SaaS, budget accurately and empower your employees with the tools they need.