We all know IT departments often have an uphill battle. They attend to the immediate needs of users and all the technology needs of the business. They deal with the increasing costs of modernizing the network, adapting to a globally connected world, security risks, and shrinking budgets. It’s hard to imagine having to do all those things and many others, not just well, but exceptionally well.
In 2007 - 2009 users disrupted IT on a massive scale by bringing their iPhones into the work network environment. IT departments everywhere tried to stop it, but users prevailed. Now, another great challenge has presented itself to IT departments, and this one might grow bigger than the iPhone issue.
Just when IT got control of smartphones, along comes cloud computing and SaaS!
It started years ago as a subtle shift and the flow toward the cloud became stronger and stronger. Now, software companies like Adobe are doing away with entire compliance departments because everything is in the cloud, and revenues are way up due to the subscription model. While that’s great for software companies, it has crushing effects on the P&L at many companies who use cloud SaaS.
What can you do to deal with the growing SaaS challenge?
There are many things businesses can do to chip away at the growing SaaS challenge. The first and possibly most important objective is to see everything you’re paying for. With visibility comes possibility. However, SaaS can be very stealthy. It hides in unexpected places and jumps out at you just when the quarterly reports are due. If you’re going to get control of SaaS, first you need to find it.
Here are 8 places SaaS expenses hide inside your company.
- Personal Credit Cards
This one is straightforward. An employee starts a SaaS subscription and expenses it later, and sometimes without a clear description or categorization on their expense report.
- Duplicate Subscriptions
Here, an employee wants to use a SaaS product, and is unaware that the company already has an active subscription for the very one they want, so they start another account and create a duplicate subscription.
- Overlapping Functionality
We all have seen this one. Marketing has their favorite SaaS project management app. Implementation uses a different one. Product Management, another. Developers – well, you see how this goes. Why do we need 7 different project management apps? Can’t we get together on this and reduce the number a little, to say 3 or 4? When employees activate Multiple SaaS vendors with partial or total overlap in functionality, it drives costs up.
- Free Trials
This one is very common. Employees start free trials which do not usually appear on SaaS vendor reports. Then, when the trial period is over, the SaaS activates billing without your company’s awareness or approval.
- Corporate Credit Cards
This one is similar to #1 above, but due to automation, there’s a slightly better chance that the corporate card statement or expense reporting system will at least have included the correct SaaS software category.
If an employee has sufficient rights, they may upgrade to higher levels of service or storage capacity with an increase in cost and no visibility or approval by your company.
- Free Accounts
This one is less common, but it happens occasionally. When you have too many free accounts, you can generate penalties or fees at some SaaS providers if they number more than paid accounts.
- Mergers & Acquisitions
This one is especially tricky. Usually, your new acquired company or new division will bring a wide variety of SaaS applications already in use, creating and sustaining higher expenses until such time that you might optimize your new SaaS estate to reduce vendor count and address duplicate products and subscriptions. Businesses really need to assign appropriate resources and effort to this, as there are multiple changes that will need to be tracked through to the next invoice.
SaaS usage and expenses are growing at very high rates.
The numbers vary somewhat, but if you search the web for the growth rate of SaaS adoption you find it’s greater than 20% and some data show up to 50% yearly. That’s huge.
In one study, Finances Online predicts SaaS growth to $76 Billion by 2020.
Also, according to Gartner, SaaS remains the largest segment of the cloud market, and if trends continue, SaaS will reach 45% of total application software spending by 2021. Again, huge.
What should you do to properly manage SaaS?
We trust that you appreciate the many places SaaS expenses can hide in your company, and their effect on your P&L report. There’s one point that should be clear by now. You have to do something. You cannot wait. You must solve SaaS management now or pay dearly later.
Having a system to manage SaaS is another concept that should be firmly in place. Without a system, you’ll at best address different points and get some results. At worst, the growing SaaS expense sprawl will just continue.
However, don’t be too troubled by this. If SaaS sprawl and the increasing costs that come with it are a challenge at your company, take heart. There are a number of things you can do to better deal with SaaS. We’ll cover the best actions you can take to properly deal with SaaS and how we can help in more detail in our next post.