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Building the Team to Manage Enterprise SaaS Vendors

Software as a Service (SaaS) has transformed the enterprise software market over the course of this decade as it has evolved from a niche solution to solve specific use cases to the dominant delivery method for software both in consumer and enterprise environments. Both the SaaS business model and support model have led to multiple corporate trends that have built a complex spend environment that includes a combination of strengths and weaknesses where each strength in terms of adoption can lead to multiple challenges from an enterprise management perspective.

Strengths

Weaknesses

Easy to buy

  • Difficult to track payments
  • Finance may have no direct visibility to services
  • Easy to purchase duplicate accounts
  • No business-wide view of users or accounts
  • Buyers often are not responsible for cost management or renewal management

Easy to deploy

  • Unexpected integrations
  • Support may cross duplicate accounts
  • IT may have no visibility to apps or services
  • Varied or non-existent SLAs for individual accounts

Wide variety of solutions

  • Enterprises may have duplicate solutions
  • Employees may choose non-compliant solutions
  • Employees may choose sub-optimal solutions

 

As a result, SaaS can be difficult to track. This issue was marginal when enterprise exposure to SaaS was limited to individual Dropbox or Adobe subscriptions that fell under the radar. But in this day and age, enterprises greatly underestimate the scope of their SaaS usage. Symantec found in late 2016 that enterprise CIOs estimated that their organizations used between 30 and 40 SaaS applications, but the median number of SaaS vendors identified on their networks was 928. There is a tremendous number of long-tail accounts being supported on corporate networks.

In addition, SaaS is growing in general. Amalgam estimates that the SaaS market is growing over 25% per year, meaning that global SaaS revenue will double over the next three years. Successful SaaS companies are also growing their wallet share within each organization year over year, meaning that your most valuable SaaS application deployments will likely be growing in scope soon.

Putting all of this together, enterprises must have a defined strategy for managing enterprise SaaS now that large enterprises must deal with hundreds, if not thousands, of apps that represent a multi-million dollar spend management challenge and may have 20-30% in potential savings hiding in these unmanaged and sub-optimally tracked accounts.

To gain control over SaaS, Amalgam Insights recommends starting by building a cross-functional team that can aggregate SaaS spend together into a consolidated portfolio. Large enterprises often have an IT asset management or Software Asset Management solution used to handle entitlements for large enterprise software platform solutions such as SAP, Oracle, or Microsoft. For those who are not familiar with the billing and cost management of SaaS, it can be easy to just assume that this IT asset manager will be able to handle all the details of SaaS. However, managing SaaS subscriptions is a fundamentally different challenge from auditing and managing entitlements. SaaS is typically related to corporate growth and productivity while traditional software and IT asset management have been focused on defensive compliance for monolithic accounts where usage and seats are well-monitored.

Amalgam Insights suggests adding one or more of the following roles to the SaaS spend management team to aggregate SaaS spend and accounts to gain control of enterprise SaaS:

Accounts Payable clerks and controllers will have visibility to the expense management solutions and payments going through credit cards and expense accounts. For one-off spend, it will be important to find these individual spend line items and to aggregate them. Much like the Bring Your Own Device challenge in enterprise mobility, this Bring Your Own SaaS phenomenon is alive and well in the business world and needs to be managed from a cost and productivity perspective.

Sales and marketing operations managers often bring in new SaaS applications to directly support their teams. Although SaaS applications often do not require direct IT support in isolation, IT visibility becomes more important when these applications integrate with core business systems. In addition, IT visibility and discussions may also uncover that the business already has a similar or better solution in place as part of its current software investments.

IT sourcing and procurement personnel need to be involved as businesses find duplicate accounts either within a specific vendor or a specific category, such as CRM, project management, sales enablement, or marketing automation. By allowing sourcing and procurement to negotiate and reduce costs, enterprises can potentially reduce costs. Frankly, it is unlikely that operations and technical personnel will dig deeply into contracts or have a full understanding of the discounting, contracting, and compliance definitions that sourcing experts take for granted, which makes this role especially important as the spend for any SaaS sub-category rises to $100,000 a year or more.

Finally, Amalgam believes that telecom and mobility expense managers should be consulted in managing SaaS spend. Telecom, network, and mobility spend have traditionally included a complex combination of services, features, transactions such as calls and text messages, usage metrics, usage tiers, overage charges, distance-based charges, time-based charges, peak vs. non-peak charges, and more in determining the costs that they are responsible for managing. In addition, telecom expense management (TEM) managers dealing with mobility have often been tasked with scaling their expenses with business growth rather than simply managing commoditized technology costs. Overall, the complexity that telecom expense managers are accustomed to is well-aligned to the new challenges of SaaS.  

On a going-forward basis, Amalgam expects that enterprise SaaS will become more complicated and that the task of software entitlement management will continue to be important. However, SaaS adds the complexity of subscription and usage-based contract and invoice management that has been missing in traditional software or IT-specific solutions. This bifurcation of responsibilities between operational security and license compliance vs. financial invoicing, sourcing, and optimization will be increasingly common in enterprise SaaS and result in the need for a separate expense management solution.

As your organization starts to tackle the enterprise SaaS management challenge, start by building this team of SaaS managers and IT expense management experts to consolidate the portfolio and gain visibility. A well-developed SaaS inventory will be invaluable to controlling this rapidly growing spend category: enterprises that prepare now will reap financial and productivity gains in the future.

About the Author

Hyoun Park is the CEO and Founder of Amalgam Insights, a firm focused on the technology, analytics, and financial tools needed to support emerging business models. Over the past 20+ years, Park has been at the forefront of trends such as Moneyball, social networking, Bring Your Own Device, the Subscription Economy, and video as the dominant use of Internet bandwidth. Park has been quoted in USA Today, the Los Angeles Times, and a wide variety of mainstream and technology press sources.