Today, software is bought across the organization. Consequently, every line of business (LOB) owner must operate like a CIO: LOB leaders must purchase, implement, and manage technology investments within their unit, function, or department.
In the age of SaaS, forecasting your department’s technology investment is especially difficult. For one, utilization data on your current software subscriptions is not readily available in a single system of record. Secondly, rogue, expensed SaaS subscriptions are nearly impossible to run down. Combined, these two challenges greatly reduce your effectiveness when negotiating pricing with software vendors.
In this blog, we’ll go step-by-step to answer the questions pros ask to forecast software needs.
- When do I need to begin preparing for SaaS renewals?
- Am I investing in the right software?
- How do I measure the utilization of an application?
- How can I determine how many licenses my department need?
- Should I let IT know?
When do I need to begin preparing for SaaS renewals?
The length of time you will need to prepare for a SaaS renewal depends. But in general, experts begin preparing 3-6 months before the renewal date. While 3-6 months may seem like an overestimation, a thorough investigation into your departments’ use of each application takes time. When all is said and done, allotting plenty of time is the only way to protect yourself from scrambling up to the date.
With large renewals (size or cost), business owners must deeply understand their departments use of the software subscription. Whether through survey data or stakeholder meetings, LOB owners must uncover the application’s actual utilization and ROI. As CIOs well know, wrangling that information is no easy task.
When you see a large renewal on the horizon, it is always good practice to loop in IT or Procurement. With security and enterprise-wide cost containment in mind, these professionals help you drive efficiencies while building technology strategies that benefit the entire enterprise. Additionally, IT and Procurement leaders have invaluable experience to help you drive implementation of your SaaS subscriptions.
More often than not, you will have many renewals to tackle around the same time period. To keep your renewals under control, create a renewal calendar. Either through a spreadsheet or a solution like Zylo, make sure you capture the renewal date, application overview, and a copy of the contract.
Are we investing in the right software?
Once you have a full calendar of your software renewals, ask the questions that take a bit more digging. As mentioned, whether through survey data or stakeholder meetings, LOB owners must uncover the actual utilization and ROI of all applications in their software stack.
In short, the right software for any enterprise is measured by the success of its implementation and ongoing usage. If your employees are utilizing the application at high rates and sending you raving reviews, you have made a good investment.
However, if your employees are covertly adopting an equivalent application simply because its interface is more intuitive than the enterprise’s standard solution, you may need to request IT support. IT can build an enablement strategy to help you increase the adoption and utilization of your software.
In order to research software favorability outside of the enterprise, services like G2 Crowd provide you with user data and reviews. Currently, Zylo partners with G2 Crowd to provide you benchmarked user data as well as sentiment data within your own company.
How do I measure the utilization of an application?
To forecast software licenses for the next three years (more or fewer years depending on the length of your subscription), requires both growth estimates and utilization data. As mentioned, many business owners rely on stakeholder meetings or survey data to gauge utilization.
Another option is to contact the vendor to request utilization data. However, as you can image, when requesting data that you will later use to negotiate against them, vendors aren’t always forthcoming.
Our customers highly value the Zylo’s utilization data. Our direct integrations provide utilization for many software giants (such as Salesforce, O365, GSuite). Through this integration, our customers can see accurate numbers of total licenses, provisioned licenses, and active licenses. For applications with which we do not directly integrate, Zylo can access utilization data through your SSO solution (provided you enforce SAML).
How can I determine how many licenses my department needs?
A deep understanding of each application’s utilization data is vital to forecast software licenses in the following years. For example, in the case that an underutilization has occurred, step back from the problem to identify the cause.
In some instances, employees abandon a software solution because a point solution has been adopted under the radar. At times, this covertly adopted Shadow IT is actually the right solution for your department (the reason some IT pros support Shadow IT). That said, if point solutions run rampant through your organization, you could be facing massive cost savings opportunities by consolidating all like subscriptions into a single solution negotiation.
While some argue that Shadow IT has its benefits, most IT professionals agree that Shadow IT can too easily be harmful to the enterprise. Security cannot be ensured and cost cannot be contained. Therefore, If your goals are security and cost savings, your best option is to enforce adoption of a software solution that is the best balance of efficiency and security.
For their largest SaaS negotiations, as a general rule, our customers keep about a 5% buffer for inactive/non-provisioned licenses. Keep this rule in mind to forecast software licenses: best case, you’ll grow faster than expected and hit the roof.
Should I let IT know?
SaaS, a soon-to-be $76 billion per year sector, has forever changed how software is bought and IT functions. In fact, the 2018 State of the CIO reports that over 70% of respondents said IT and LOB leaders now collaborate more than ever.
In other words, build the bridge: include IT in your software stakeholder meetings. IT and Procurement professionals have invaluable insights and experience that will help you drive efficiencies and ROI within your department.
Prepare your enterprise to forecast software like a pro.
Download our webinar “Predicting the Impossible: Forecasting a SaaS Budget for 2019” to deepen your SaaS budgeting knowledge.