SaaS Subscription Management: Eliminating Toxic Spend

By Jim Hussey


September 28, 2020

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As enterprise SaaS usage continues to experience exponential growth, the risk of overspending on SaaS investments grows in lockstep. One culprit is ‘toxic’ spend on licenses or subscriptions that are dormant, or license features that are not being used – Gartner estimates this to be as much as 30% of cloud fees paid by organizations. It’s no wonder governing SaaS services is top of mind for many IT and Sourcing teams.

Despite this focus however, we have found most organizations struggle to achieve true SaaS optimization. Below, we explore facets of SaaS subscription management that will help eliminate toxic spend across the enterprise IT ecosystem.

SaaS Subscription Management: A Framework for Optimization

We believe there are two primary activities that Software Asset Managers (SAM), IT Vendor Management (VMO) and IT Sourcing teams need to master in order to maintain SaaS license optimization:

  1. SaaS Solution Classification
  2. SaaS Usage Monitoring

As enterprise portfolios of SaaS solutions grow, so does the risk of toxic spend. A single enterprise may use SaaS offerings from Microsoft, Oracle, Salesforce, Adobe, Autodesk and many others – each offering numerous licensing/subscription options. This presents an ever-growing level of complexity to optimize SaaS subscription utilization.

NPI recommends SAM, VMO and Sourcing teams develop a SaaS classification that takes into account the level of reporting required to optimize and the level of strategic due diligence necessary. This effectively prioritizes where to focus SaaS subscription efforts. 

A model we have found beneficial is to define each SaaS provider as:

  • Enterprise SaaS
  • Functional SaaS (Targets a single function with a targeted solution)
  • Process SaaS (Targets workflow/process alignment across multiple functions)
  • Task SaaS (Such as storage BOX etc.)

With definition of the SaaS categories most relevant to your organization complete, teams need to decide the level of usage analysis necessary to maintain efficient subscription and license type management to minimize toxic spend.

As SaaS governance matures, we believe organizations will move beyond log-in-based usage analysis and define more robust levels of usage analysis necessary by SaaS provider classification.

For Fast, Material Savings, Start with Enterprise SaaS

Our recommendation is to focus first on Enterprise SaaS applications as ongoing harvesting and leveling of license type in this SaaS category tends to offer the greatest results in terms of savings and cost avoidance.

For Enterprise SaaS to achieve true optimization, our recommendation is to drive usage analysis beyond ‘application access’ and use the data available to triangulate optimization opportunities.

We define SaaS usage levels as follows:

Level 1 Usage Datapoint: Individual Access to SaaS Application

Level 1 provides basic usage data, however this forms the important foundation for harvest and license type leveling. NPI has observed this effort typically yields 50 to 60 percent of an optimization opportunity. This level of analysis may prove adequate for functional or process SaaS offerings.

Level 2: SaaS Feature Usage

Level 2 is a careful analysis of feature usage and identification of individuals who can be potentially assigned lower cost alternatives or completely removed. There is a high degree of customization and sensitivity necessary in a client’s environment to maximize this category requiring a curated approach to achieve the desired results.

With the growth of SaaS continuing to accelerate, governing cloud assets has become a top agenda item for CIOs, CPOs and CFOs. It’s important to perform formal periodic inspections of large SaaS estates – especially as renewals approach.  An accurate baseline will reduce demand and, therefore, cost.

If you are looking to optimize SaaS usage and cost and improve your overall SaaS subscription management capabilities, renew, NPI can help.