Responsibility for managing SaaS sits across different departments and involves stakeholders at all levels of the organization. Without a clear process powered by a SaaS management platform, procurement and IT professionals respond reactively when it comes to governance and renewal strategy, often exposing the organization to risk and overspending on software.
Zylo Senior Solutions Consultant Terra Ickes discussed what manual vs. operational SaaS management looks like in practice, specifically from an IT and procurement perspective. Watch her talk from our SaaSMe 2023 event below or read on for the highlights.
The Challenges of Managing SaaS
SaaS acquisition typically happens two ways in an organization:
- Via request for an application through procurement
- User expenses an app
With the first scenario, the spend goes through an accounts payable system, and the procurement professional might add the application to a tracking spreadsheet. When a user or line of business expenses a solution, often called decentralized purchasing, the app may be miscategorized and never make it to the tracking spreadsheet. And low dollar amounts often fly under the radar of your AP system.
“You’ve got applications that are part of that manual source of truth, but then others that exist in the organization and are used by teams, but not part of that SaaS source of truth that you’ve tried to create,” Ickes said.
Regardless of whether the app goes through AP or is expensed, the critical data like contract, usage, spend data, and ownership data becomes siloed as soon as the application is purchased.
“While you’ve established this manual spreadsheet to track to the best of your ability what your SaaS stack looks like, your organization is dynamic,” Ickes said. “People leave, people change applications, they move departments. A manual source of truth cannot keep up with the dynamic nature of your SaaS portfolio and how it changes to meet the needs of your business.”
A Day in the Life: Manual SaaS Management
A manual approach to managing a dynamic SaaS environment affects all employees, departments, and budgets. In particular, the key personnel charged with managing SaaS applications are constantly surfaced with challenges that prevent them from hitting both their personal goals and broad organizational goals, like OpEx reduction.
Let’s take a look at how manual SaaS management impacts procurement and IT professionals.
As an example, Wendy is tasked with application renewals. Her ultimate goal is to maximize renewals to drive value, cost savings, and vendor consolidation. Throughout the renewal process, she asks a lot of questions.
- What do I need to renew? For this, Wendy goes to her manual spreadsheet, which shows 15 upcoming renewals. Zoom is the biggest one, so she tackles it first.
- How can I maximize value? Wendy received an email from Zoom about a price increase, which they’ll waive if she adds to their license count. She doesn’t know what a proper license count should be, so she needs to engage the app owner in the process.
- Who owns this app? Wendy spends a lot of time tracking down the application owner, Steve.
- How many licenses do we need? Wendy asks Steve what the current user count of the app is, but he doesn’t know how to find that data. He tells her they’re adding headcount, so it might be wise to increase the users.
- What is a fair price to pay? With no data points to leverage, Wendy renews with Zoom, adding the additional users to avoid the per license increase.
- How can I scale my efforts? Wendy realizes she wasted a lot of time looking for basic data to make a decision, and ultimately thinks she left money on the table.
Despite Wendy’s best efforts, the results were:
- Time-consuming inefficient process
- No license optimization
- Increased contract value
- No visibility into redundancies
- Unscalable coverage
“As Wendy does this once and realizes she has 14 more apps to renew, she knows this is unscalable and she’s not going to be able to increase her procurement coverage as she continues down this manual road,” Ickes said.
For an IT perspective, consider John. His goals are to manage systems and applications at scale, manage his IT budget, and enact governance around application acquisition and license optimization. To reach these goals, he asks a number of questions. We will use the example of shadow IT.
- How can I standardize employee apps? Unfortunately the spreadsheet he shares with Wendy only provides limited visibility, so he doesn’t know his organization’s true SaaS inventory. Because of that, he finds it difficult to enforce app standardization.
- What are business units buying? Because decentralized purchasing happens across their organization, it creates shadow IT and redundancies he can’t uncover.
- What apps are users expensing? A marketing manager expenses Asana and categorizes it as “office supplies.” Due to the miscategorization and low cost of the app, no information security (InfoSec) review is triggered, so John remains unaware of the app.
- Have those apps gone through InfoSec? Without an InfoSec review, there is no visibility into the security posture of an app, such as whether it is SOC 2 compliant. Users and customer data are added to Asana with no security review conducted.
- How can I reduce risk? John wants to reduce risk across the organization. With the Asana example, the opposite is happening. Usage is increasing, additional users are being added, and financial waste is occuring, because the app was never budgeted for in the first place.
- How can I improve governance? Remember, one of John’s goals is implementing SaaS governance. But in this case, he doesn’t even find out Asana is in use until a new employee reaches out a couple months later for access. Simultaneously, Asana contacts him asking if he’d like to upgrade to an enterprise level.
For John, this scenario results in:
- Ungoverned spend
- Application redundancy (The company uses Wrike for project management, and has available licenses.)
- Compromised compliance
- Increased risk
- Reduced adoption for approved app (Wrike)
A Day in the Life: Operationalized SaaS Management
With operationalized management, Wendy and John’s stories would be a lot different.
“Instead of a user going straight to purchase, what if they had something like Zylo App Catalog to look at the applications that exist in their organization first?” Ickes asked. “Instead of those really key data sources like contract data, spend, and usage being immediately siloed, what if they were captured as part of a continual source of truth?”
Here’s how it would change things for Wendy.
Here are the same questions, but this time Wendy employs a more proactive approach to renewal management.
- What do I need to renew? Rather than referencing a manual spreadsheet, Wendy has a renewal calendar within Zylo that alerts her of renewals 90 days in advance. She has time to prepare for the Zoom renewal.
- How can I maximize value? She still needs to engage the app owner in the process.
- Who owns this app? Unlike last time, Wendy doesn’t have to spend days tracking down the app owner. It is part of the app information stored within Zylo’s application overview of Zoom.
- How many licenses do we need? Zylo Insights shows that 229 licenses are inactive and 50 can be downgraded. Wendy and Steve set up a workflow to kick off that process, which will leave space for the new hires Steve plans to onboard.
- What is a fair price to pay? Wendy leverages Zylo Benchmarks data to gauge what the SKU cost should be and uncover similar apps within their organization. She negotiates a 10% cost reduction from the average cost, as well as a downgrade in license count.
- How can I scale my efforts? With key ownership, usage, contract, and spend data in a single source of truth, Wendy can continue to renew with confidence and ease.
The results of operationalized SaaS management for Wendy include:
- Proactive, strategic renewal process
- License optimization
- Redundant app visibility
- Price decrease via benchmarking
The Practical Guide to Rationalizing, Rightsizing and Renewing SaaSLearn More
A day in the life with an operationalized SaaS management practice for John results in shadow IT governance. Here’s how his situation changes.
- How can I standardize employee apps? John provides an app catalog where employees can choose from pre-approved apps. Because it still happens, the marketing manager purchases Asana, which wasn’t in the catalog.
- What are business units buying? John has comprehensive visibility into SaaS spend across business units, whether it comes through AP or expense.
- What apps are users expensing? John receives immediate notification that an employee purchased Asana.
- Have those apps gone through InfoSec? John sees the app hasn’t gone through InfoSec. He reviews Asana’s security posture to gauge risk.
- How can I reduce risk? To reduce risk, John reaches out to the marketing manager letting them know Wrike is the approved project management app and offering them a license.
- How can I improve governance? John now has the ability to optimize and create governance around SaaS acquisition. He reminds the marketing manager about the app catalog and how to request access to apps they need.
Results from John’s efforts include:
- App catalog standardization
- Shadow IT visibility
- Increased compliance
- Improved governance
- Reduced risk
Evolving Your SaaS Governance Framework for the Digital WorkplaceLearn More
Unlock Business Value with SaaS Management
Continual discovery and a single source of truth for key data unlocks the ability to operationalize SaaS management, resulting in license optimization, cost savings and avoidance, and risk mitigation. Schedule a demo to learn how Zylo can help you discover, optimize, and govern your SaaS stack.