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Imagine you’re cleaning your home. You start in the living room—straightening up the couch, wiping off the tables, and vacuuming the rug. With one room pristine, you feel rather accomplished, then move on to the kitchen. As you finish room after room, that feeling of success grows. That’s because you didn’t try to clean everything at once. By focusing on just one room at a time, you get a quicker win, helping you build cleaning momentum across all the rooms.
When it comes to SaaS Management, you need to take a similar approach. Trying to address all of your applications at once is much like trying to boil the ocean. It can feel overwhelming, and it’s difficult to drive program value and reach your intended business outcomes.
“10-15 years ago, we’d look at our top three or four big enterprise agreements. Now, the problem is that there are hundreds of software titles. Without SaaS Management, you won’t have the ability to scale and bring rigor to every one of those renewals.”
— Keith Sarbaugh, CIO at Zoetis
By organizing your SaaS apps into tiers by their strategic importance—a component of strategic portfolio management—you can more effectively build and scale your SaaS Management program.
What Is Strategic Portfolio Management—and Why Does It Matter?
Gartner defines strategic portfolio management as “a set of business capabilities, processes, and supporting portfolio management technology to create a portfolio of strategic options that focus an organization’s finite resources to execute the enterprisewide business strategy.”
In short, it’s aligning resources with your business strategy and operations. SaaS is a critical component of strategic portfolio management. Often, you may hear of it as IT portfolio management or application portfolio management. Strategic portfolio management is the second step in Phase One of the Enterprise SaaS Management Framework.
Strategic portfolio management includes:
- Creating and maintaining a system of record for all SaaS applications
- Monitoring and optimizing software licenses
- Rationalizing application assets
- Managing SaaS renewals
- Ensuring compliance and governance across the whole organization
To be effective at strategic portfolio management, you must prioritize. With so many applications in your environment, this is critical for scaling your SaaS Management program. This involves creating tiers of applications, arranged by their level of criticality to the business.
The Importance of Strategic Portfolio Management & App Tiers
Strategic portfolio management is critical to control costs, mitigate risk, and increase efficiency for your business. Average SaaS spending and portfolios have increased for the first time in three years (now $49M on average). It’s more critical than ever to ensure every application is driving value for the business, while also mitigating the financial, security, and operational risks to your business.
To set up your SaaS Management program for long-term success, you must take a phased approach. Arranging your SaaS applications into tiers helps you prioritize which are most critical to manage. Alongside that are the following benefits:
- Drive quick wins to secure executive commitment to your program. By prioritizing the most critical apps first, you can get measurable results more quickly. Time to value is essential for long-term executive commitment.
- Scale SaaS Management across the organization. Start by focusing on your most critical business apps. Securing wins with these applications helps validate your program and gets other business leaders bought in.
- Realize long-term business value. Companies that practice SaaS Management to reduce software spending, increase efficiency, and mitigate risk. Aligning your SaaS program with your strategic objectives will drive ROI and protect your business from financial, operational, and security risk for the long haul.
- Improve alignment between strategy and execution. Strategic portfolio management helps ensure that the actions you take—whether that’s license reclamation, rationalization, shadow IT remediation, and so on—make sense with what you’re trying to achieve as a business.
- Improve program efficiency and effectiveness. With the right processes and tools in place, you can operationalize SaaS Management across the enterprise.
How to Tier Your SaaS Applications
How do you figure out what apps go into which tier? It’s a process that involves discovering all your SaaS, defining your app tiers, and assigning tiers to each app.
IT is often the team responsible for leading this process, as they’re accountable for managing software, security risks, and the overall employee technology experience.
Step 1: Discover All Your SaaS Applications
Before you can place your applications into tiers, you need to take stock of all the applications in your environment. Today, IT is responsible for purchasing just 15.9% of SaaS applications. While you likely have a solid list of what you manage today, you don’t want any to slip through the cracks.
On average, companies have 275 apps in their stack. We often find that companies underestimate what they have by nearly 2X. So it’s likely your company has more software than you realize. Having the big picture from the start enables you to be thoughtful about your SaaS Management strategy.
SaaS discovery ensures that all the applications in your environment are uncovered—even shadow IT. A SaaS Management Platform like Zylo is the most effective tool to do this. That’s because expensed software is frequently miscategorized in expense reports and not flagged as software.
“The first thing we’ve got to do is figure out what technologies exist. That helps with everything we’re doing with app tiering and discussions around how we do SaaS Management. It’s a concrete, foundational step you’ve got to take to be able to take steps beyond,” explained Trenton Cycholl, VP, Digital Business at ModMed on SaaSMe Unfiltered.
Step 2: Define Your App Tiers
Once you have a complete inventory of your applications, it’s time to prioritize them by their strategic importance to your organization. Determine what’s most important as you get those quick wins and start to operationalize SaaS Management.
Consider the following criteria for your application tiers. Ultimately, it’s up to you to determine how each tier is defined at your organization.
Tier One Applications
Tier One applications are essential, enterprise-wide “birthright” applications. Often, they’re either centrally managed by IT, core strategic solutions, and/or those that involve the highest spend. As you begin thinking about which apps fall under this tier, consider what applications IT already owns.
Examples of Tier One applications include:
- Google Workspace
- Microsoft 365
- Zoom
- Slack
- Salesforce
Tier Two Applications
Tier Two applications are those critical to business processes—but they’re supported rather than owned or managed by IT. Multiple departments may use Tier Two apps, and they often integrate with your Tier One apps.
Often, these are apps that need to be tightly managed immediately. Consider including your high-spend applications (e.g., Salesforce, Netsuite) and applications coming up for a high-value renewal.
Tier Three Applications
Finally, Tier Three applications are those adopted by individual employees and/or departments. Typically, they’re intended for specific needs and use cases. They don’t directly integrate with core systems, nor do they require IT support.
Step 3: Arrange Applications into Tiers
Once you’ve defined all three tiers for your organization, evaluate your applications and determine which ones fit the criteria. Then, track which applications fit under each tier.
If you’re using a SaaS Management Platform (SMP) as your system of record, your apps will be listed there following discovery. Ensure that each application is labeled with its corresponding tier, wherever app information is saved. For instance, in Zylo, each application has an App Info section where you can track application tier, among other important information you may want to track.
Step 4: Onboard Your Tier One Apps
As we mentioned before, SaaS Management is most effective as a phased approach. Once you’ve tagged your applications by tier, it’s time to onboard them into your system of record so that your data is centralized in one place. Begin with Tier One apps.
Application onboarding means pulling in all the data about a SaaS application—contracts, usage, app owners, among others. This becomes critical for analyzing the state of your software environment and informing the best course of action.
Why start with Tier One?
Often, these are IT-owned and represent a significant amount of spend, making them a high priority. Because they’re already managed within the IT organization, it’s easier to drive quick and measurable results. Also, SaaS Management is often led by the CIO, so it’s likely your colleagues are already aligned to their goals.
Once you demonstrate success with Tier One, it helps get the rest of the business on board with SaaS Management. Then, you can begin operationalizing your program across Tier Two and Three apps and drive value around each of them.
Get Started with the No-BS SaaS Management Playbook
SaaS Management is a relatively new category and practice, so it’s okay if you’re not completely sure how it works. Instead, let us be your guide on your SaaS Management journey!
Since pioneering SaaS Management 8+ years ago, Zylo has helped hundreds of customers successfully implement a SaaS Management solution and program. The No-BS SaaS Management Playbook distills our experience, offering a step-by-step approach to building an effective, programmatic practice — and avoiding the most common pitfalls we’ve seen.
Start your program off on the right foot! Download the playbook to take a deeper dive into strategic portfolio management and all the steps in Phase One of the framework.
The No-BS SaaS Management Playbook
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