Ben Pippenger, cofounder and Chief Strategy Officer at Zylo. Read Ben Pippenger's full executive profile here.
With the sheer number of SaaS applications used today, organizations are often left with lingering questions. What applications do we even have? Are we actually using them all? Who’s responsible for managing and renewing them? The answer delivers a one-two punch.
Companies often have far more applications than they realize, driven in part by business units taking the reins on a growing percentage of software purchases—andreveals a decline in IT’s control over software along with significant waste in unused SaaS licenses. Even as SaaS spend also falls, inefficiencies persist, coupled with looming security risks. But the situation isn’t all bleak. There are substantial opportunities for optimization and for building a program to manage the SaaS applications at your company. Read on for the five key trends I've found are shaping SaaS at the enterprise.While Gerrit Cole Recovers The New York Yankees Are Thriving On The Mound In response to economic volatility and excessive SaaS sprawl in previous years, many companies are now prioritizing rationalization, seeking to streamline their tech stacks for cost efficiency. This rationalization is happening despite the ongoing introduction of new apps into the market. The marketing technology landscape is a prime example of the ongoing software explosion. Withtoday—an 11% increase year-over-year in its 12th year of consecutive growth—it reflects a trend likely mirrored in other application categories. Despite this growth, companies are actively rationalizing their app portfolios and eliminating redundancies. Efficiency and profitability are becoming key priorities for every company, prompting companies to find new ways to optimize their software usage. As a result, organizations have reduced their usage of SaaS applications, leading to a decrease in average SaaS spend and a corresponding decline in spend per employee. leaving the rest untouched. This often results from employees exiting the company or changing roles without their licenses being adjusted accordingly. Some applications also simply don’t achieve the expected levels of utility or adoption. This inefficiency translates to considerable financial waste. The average organization wastes $18 million annually on unused licenses, a figure that has increased by 7% year-over-year. For larger enterprises, that waste is even more pronounced, ballooning to $127 million.The recent surge in AI tool popularity is likely to trigger an increase in overall SaaS spend for several reasons. First, existing platforms are building and integrating new AI functionalities, which they will charge for. Companies will need to factor in these additional costs when managing their SaaS portfolios. Second, there’s a strong desire across organizations to build their own AI capabilities, which will lead to increased costs. Finally, the need to stay competitive will likely fuel the continued adoption of AI-powered tools. Companies will continue to invest in them to boost productivity and automate tasks.Expensed applications represent just a fraction of your total software spend, but they carry significantly higher security and compliance risks than their non-expensed counterparts. This distinction is important. Applications purchased with a credit card, bypassing standard procurement protocols, pose substantially greater risks. Effective SaaS management practices become even more crucial to identify and manage these shadow IT applications. Tools and processes that can provide visibility into all SaaS usage will be in high demand. Additionally, it's important for organizations to streamline their procurement processes to make it easier for employees to get the tools they need, all while maintaining security and governance.SaaS applications are inherently decentralized. Anyone in the organization can purchase an application with no involvement from IT. This shift in ownership, however, has led to a decline in IT’s control over software.of software spend and 17% of all applications . While this affords business units more autonomy, it reinforces the need for clear governance policies and usage guidelines.Despite the considerable waste and inefficiencies in SaaS stacks, there’s a silver lining. Taking control presents a powerful opportunity to optimize your SaaS investments and generate cost savings. Here are a few strategies to turn this challenge into a win. • Rationalize your SaaS portfolio. Conduct a thorough review of your existing applications, identifying unused or underutilized tools. These recovered funds can then be reinvested to fuel innovation. • Create strong partnerships with your IT, software asset management and procurement teams, as well as business units. Break down silos. Together, you can use your combined expertise to jointly curtail costs, monitor adoption and drive efficiencies. • Make visibility and centralized governance a priority. Start by getting a clear understanding of all SaaS tools in use and establish proper governance practices across the organization. The time for reactive management is over. By implementing proactive strategies, IT leaders can transform their SaaS environments into streamlined engines of growth and efficiency.
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