With some form of cloud adoption and digital transformation touching every industry, there has been a dramatic increase in the number of Software as a Service (SaaS) applications.
Today, managing every phase of the SaaS lifecycle is challenging. From procurement and onboarding, to integration and training, to security and compliance, to usage and cost optimization, and to licensing and subscription management, it’s easy to make missteps or see costs spiral out of control.
As more companies phase out perpetual licenses in favor of SaaS products, software subscriptions and monthly fees are continuing to rise. Gartner suggests licenses will increase by more than a third by the end of 2025. Managing subscriptions and costs will become crucial to prevent toxic SaaS costs.
Table of Contents:
- What is SaaS Management?
- Benefits of SaaS Management
- How the Surge in SaaS Subscriptions Shaped Our Present State
- Why Businesses Need SaaS Management
- Tips on How to Prioritize Your SaaS Spend: How to Get Started
- Classifying SaaS Assets
- Defining Usage Levels
- Reclaiming Inactive Licenses
- Right-sizing Underused Licenses
- Know What You Can Negotiate
- What are SaaS Management Platforms?
- How to Get Started Reducing SaaS Costs
What is SaaS Management?
So, what is SaaS management? SaaS management is the practice of procuring, managing, and monitoring SaaS applications as part of your tech portfolio.
Benefits of SaaS Management
One of the biggest benefits of effective SaaS management is transparency. You get a holistic view of all the apps that are being used throughout your organization. This provides a foundation for optimizing your licenses and providing the tools your enterprise needs while avoiding overspending on resources that are not required.
SaaS management helps minimize spending by right sizing your tech, eliminating shadow IT, maintaining compliance, and managing your SaaS contracts and providers.
How the Surge in SaaS Subscriptions Shaped Our Present State
Since the pandemic drove companies to accelerate the enablement of remote and hybrid work arrangements, the shift to SaaS versus desktop software has grown at an incredible rate. The average enterprise business now has as many as 130 different SaaS products, more than a 62% increase from 2020 and a dramatic jump from the 16 utilized just five years ago.
It’s not unusual for companies to have more than 200 subscription-based apps in their IT portfolio.
Why Businesses Need SaaS Management
In most enterprises, SaaS sprawl is common. And more than half of the average company’s app ownership and management is dispersed rather than centralized.
In some companies, there’s nobody actively taking a proactive, holistic approach to managing all SaaS assets. About a third of total IT spending may be wasted on duplication or inefficient spending. To optimize spending, you need a comprehensive approach that crosses departments and divisions for optimal results.
Tips on How to Prioritize Your SaaS Spend: How to Get Started
As enterprise SaaS portfolios grow, Software Asset Managers (SAMs) and vendor management teams need to be proactive about classifying SaaS assets as well as monitoring usage levels.
Classifying SaaS Assets
There’s often duplication in the tech stack, leading to wasted spending. It helps to classify each SaaS provider into one of these four categories to look for overlap and usage levels for efficient subscription and license management:
- Enterprise SaaS: Used across an enterprise
- Functional SaaS: Targets a single function/solution
- Process SaaS: Targets workflow across multiple functions
- Task SaaS: Fulfills specific tasks, such as storage
Defining Usage Levels
You’ll want to prioritize your focus for maximum benefit. While every classification can yield savings and efficiencies, it’s best to start at the enterprise level because the savings potential is greatest. Within the portfolio of enterprise SaaS products, there may be hundreds, thousands, or tens of thousands of users.
Bloat is common and it may be costing you. Internal audits almost always reveal a significant number of abandoned or unused SaaS and software licenses. Perhaps someone left your company and a license was never reassigned or, during the onboarding phase, extra licenses were bought assuming future growth. Either way, these costs impacting your bottom line unnecessarily.
Reclaiming Inactive Licenses
Finding users that are no longer active, multiple licenses assigned to single users, or “no pulse” users like printers or smart devices can quickly add up. A SaaS license optimization assessment can uncover wasted spend so licenses can be dropped at the next renewal cycle or reassigned.
Right-sizing Underused Licenses
An assessment can also help find areas where licenses are underutilized. For example, an enterprise may have Microsoft 365 E5 subscriptions for all its team members, yet many frontline workers do not require the full E5 functionality.
Know What You Can Negotiate
We find that enterprises overpay for 85% of their IT purchases. IT pricing and terms are inconsistent from vendor to vendor and make it challenging to know what is a reasonable price and track whether you’re getting what you pay for. You need to know current market-based pricing and terms to make an informed decision about procurement, management, and renewals.
Armed with data, you can negotiate better deals and right-size your subscriptions.
What are SaaS Management Platforms?
SaaS management platforms (SMPs) help companies catalog their SaaS applications in a centralized way. SaaS management platforms help identify SaaS sprawl and duplication, which is the first step toward rationalization and optimization and managing asset allocation more efficiently.
But SaaS Management Platforms are not always a comprehensive solution for SaaS cost management. While companies that deploy SaaS management platform solutions get greater visibility into what they’re paying for, these solutions often fail to identify licenses that aren’t being used or under-used. It takes a SaaS license and cost optimization solution that combines deep vendor-specific licensing and IT price benchmarking expertise to understand usage patterns, align licenses with best-fit options, and make sure you’re paying a fair price for the licenses you purchase.
How to Get Started Reducing SaaS Costs
NPI offers SaaS license and cost optimization services that help companies:
- Reclaim inactive licenses
- Right-size license types based on actual demand/usage requirements
- Create a license purchase and deployment strategy that aligns with your company’s current and future-state requirements.
- Negotiate best pricing and terms
NPI provides vendor- and transaction-specific analysis so you have the right licensing, pricing and negotiation intel to help you negotiate a world-class outcome for your SaaS purchases and renewals. While SaaS management platforms offer spend visibility, material savings can only be achieved by paying for only what you need, when you need it, and at a fair price. This outcome requires NPI’s SaaS License Optimization Assessment services.
At NPI, we help enterprise IT procurement teams identify and eliminate overspending on IT purchases, accelerate purchasing cycles, increase decision-making confidence, and align internal buying teams. This helps you get the best price possible, optimize your deal, and maximize the impact of your IT investment. Contact NPI to learn more.