It takes adequate insight into your SaaS data to understand and identify crucial opportunities for cost savings. However, this insight is only useful if you act on it. Identified savings are of no use until they become realized savings or avoidance. Thankfully, it’s only a matter of utilizing the right SaaS management platform to identify cost savings and avoidance opportunities while providing recommended action to cure your analysis paralysis.
That’s why today we’re going to take a quick look at how inaction keeps you from realizing savings from actionable data.
Cost Savings vs Cost Avoidance
There’s often some confusion regarding the difference between cost savings and cost avoidance.
Let’s start with cost savings. These are tangible savings that your organization can see reflected in financial statements and budget records. That’s why this type of savings is also known as “hard savings.”
In terms of SaaS, organizations see cost savings anytime they cut unused applications, rightsize licenses, eliminate redundant applications, and use benchmarking to lower pricing at renewal. All of these actions have immediate and visible results to an organization’s SaaS budget. You can think of it as the practical application of SaaS portfolio insights.
Cost avoidance, as the name implies, is any action taken to reduce foreseeable costs in an organization. Rather than creating immediate savings, cost avoidance means lowering potential increased expenses as well as decreasing future costs rather than current ones. That’s why the soft savings of cost avoidance is about playing the financial long game.
Identified Savings vs Realized Savings
The same can be said for identified savings and realized savings. Though the terms are similar, they are conceptually miles apart.
Identified savings are theoretical in nature. These are savings that could be potentially made by negotiating license agreements or the like. Contrast this with realized savings that are tangible and easily calculated after an action has been taken. There are often varying levels of discrepancies between these two metrics as what could be saved and what is saved are entirely different.
The Costs of Inaction
Failing to take action is a choice. And that choice is costing you money. SaaS inaction costs more than you think. The average company today overspends 15% on software licenses, putting the cost of inaction between $2.29 million and $36.5 million per year.
This cost will only continue to grow the longer you wait to take action. In fact, Gartner predicts that IT spending on cloud solutions will grow to more than 45% by 2024.
However, acting on meaningful insights into your SaaS portfolio can lead to serious cost savings and cost avoidance.
When it comes to SaaS license management, there are many ways that inaction can keep you from serious cost savings.
40% of the average company’s SaaS licenses are underutilized. This is simply wasted spend that contributes nothing of value to an organization or its employees. Failing to act to cut down on this wasted spend is essentially money left on the table, and means an organization is operating on 60% of its SaaS capacity at best.
We here at Zylo recommend a utilization rate of at least 90% to ensure your investment in your SaaS portfolio is maximized while allowing flexibility for further growth. To achieve this, Zylo offers a SaaS management platform to identify cost savings and rightsizing opportunities so every dollar invested in SaaS is put to good use. In addition, Zylo Benchmarks can show you what your peers are paying and empower you to leverage that data to negotiate better pricing with your vendors.
You can begin by reclaiming these unused licenses. All you need is visibility into your application usage to take action. Start by looking at the users that haven’t logged into a given service ever or in longer than 90 days to determine when it’s right to rightsize. To make this easier, leverage automation in your SaaS management platform. For instance, Zylo’s Workflows help automate workflows for license downgrading and de-provisioning.
Redundancy and Application Rationalization
Another common problem that accumulates due to SaaS management inaction is redundant applicants. Many enterprises, especially large enterprises with SaaS portfolios of well over 600 applications, find themselves with apps that effectively compete with one another to perform the exact same function. This robs organizations of purchasing power and results in SaaS sprawl.
Worse yet, redundant applications result in operational inefficiencies as the organization’s user base is split amongst several applications rather than standardized enterprise applications. This results in both increased costs and the proliferation of shadow IT in the SaaS stack.
Often unvetted, each of these applications carries unique risks and compliance issues without a proper software review. Even then, redundant applications drive up compliance and overhead costs when they are finally reviewed, and offer little to nothing in terms of productivity. In this, we see that taking action against redundant applications is not only a means of cost savings but cost avoidance as well.
To take action against redundant applications, begin by evaluating the functional overlaps between sets of applications such as your project management tools. Take the time to understand the utilization of each and the user sentiment around them. Then you can determine which to keep and which to drop.
This extends to orphaned applications as well.
Often when employees leave a business, the SaaS applications they were using remain and are often abandoned. As such, these applications offer only continued costs and may no longer serve their function. As such, terminating these applications is a quick win for cost savings.
Not only will consolidating your redundant and orphaned applicants lead to direct cost savings, but allow your enterprise to negotiate better contract terms, which in themselves equate to cost savings.
Identify Cost Savings Opportunities with a SaaS Management Partner
Unfortunately, due to the rapid growth of SaaS in recent years, the cost of inaction will continue to grow year over year. It cannot be ignored. It will not go away. Inaction will only allow these costs to grow unchecked.
Thankfully, there are options to make cost savings easier to achieve. Zylo not only makes it easy to identify cost-saving opportunities but provides resources to act on them.
- Zylo Insights – With Zylo Insights, SaaS managers are empowered to take action easier than ever before based on Zylo data-driven recommendations to optimize their SaaS portfolio. Receive personalized and prioritized views of your cost-saving opportunities ordered based on the level of impact from usage and portfolio insights.
- Zylo Managed Services – Zylo is more than a platform. We provide a suite of SaaS managed services that save organizations time and money. How? With a team of industry experts that not only help you build a strategy and manage the day-to-day of your SaaS management program but also end-to-end procurement – from managing intake and vendor negotiations to acting on optimization opportunities to drive ROI.
All this to say, the only wrong action is inaction. Failing to act on your SaaS portfolio’s optimization opportunities will only lead to more and more costs in the long run. Confront redundant and underutilized licenses today, and realize cost savings tomorrow. Discovery is only the first step.
And don’t forget, there is more than just cost savings on the line. With SaaS sprawl and shadow IT, there comes inherent risk to the overall well-being of the business. Don’t fall victim to analysis paralysis when it comes to addressing your SaaS cybersecurity gaps.
Act today. Request a demo with Zylo to make your identified savings realized savings.