In the past, all software spending at an organization was funneled through IT procurement or sourcing. And software sourcing typically involved a formal RFP and often, a lengthy decision-making process. But, those days are long gone, thanks, in large part, to the rapid shift to software-as-a-service (SaaS) and other cloud-based delivery models.
Though SaaS is a relatively new business model, it’s one that’s quickly gained traction. According to Crunchbase data, there are more than 15,000 SaaS companies in the world. What’s more, in 2020, SaaS spending grew 14% among Zylo customers, while application quantity grew by 9% – despite budget cuts at many organizations.
Of course, the right SaaS tools play an important role in boosting the efficiency of your employees – and your entire organization. In fact, as a procurement professional, you yourself probably depend on a number of SaaS tools to do your job well.
But SaaS has also caused a big shift in software sourcing – and the way procurement professionals do their jobs. And in many ways, it’s made things a whole lot more challenging.
SaaS Presents Unique Challenges to IT Procurement Professionals
There are myriad good reasons companies are making the switch to SaaS: lower cost, simple implementation, and enhanced security – just to name a few.
But there’s no denying that SaaS can also cause some pretty big headaches for procurement professionals.
Procurement Can Lack Visibility Into Total SaaS Spending
SaaS has never been easier to acquire; it typically often only requires a credit card number and small amount of contact info. And because it’s so easy, business units and individuals often purchase their own applications – without the involvement of IT procurement.
Zylo has found that at an average organization, business units and individuals are responsible for more than half of all SaaS spending – and 75% of SaaS inventory. What’s more, one in four employees has acquired a SaaS application via expense.
When SaaS is purchased by teams and organizations throughout the company, procurement leaders have very little visibility into an organization’s overall application spend and usage. SaaS growth goes unmanaged, and that leads to uncontrolled costs and risk.
And that’s a big problem for procurement professionals.
It’s Challenging to Identify SaaS Cost Savings Opportunities
A key responsibility of every procurement team is to identify cost savings opportunities. But that’s difficult (if not impossible) to do when you’re not sure what applications are in use at your organization.
The unfortunate truth is that you’re probably paying for unused (or underused) SaaS applications. And because so many employees are purchasing SaaS applications via expense reimbursement, chances are also good that your organization is paying for tools with redundant functionality. You might even be paying for the exact same application multiple times!
SaaS Renewals Catch IT Procurement Professionals Off Guard
Procurement’s lack of visibility into SaaS spending and use is especially problematic when it comes to renewals – which are a frequent occurrence at most organizations. Zylo research found that large organizations experience an average of three SaaS application renewals each business day.
If you don’t know what applications have been purchased by your organization, it’s virtually impossible to anticipate renewals. That means you’ve probably found yourself scrambling to meet an unexpected contract renewal more times than you care to admit.
The thing is, without adequate time to prepare for these renewals, decisions are often made reactively. So it’s likely you’re renewing applications you shouldn’t be – or not negotiating as much as you could be.
Why SaaS Management Matters for IT Procurement Leaders
If this all sounds familiar, you’re certainly not alone. The rise in SaaS brings with it a host of frustrations for nearly all procurement professionals.
But SaaS is here to stay. So procurement leaders must adapt their approach to SaaS.
The good news? SaaS management can make the lives of procurement leaders a whole lot easier.
SaaS Management, Defined
A growing number of procurement professionals are developing SaaS management strategies for their organizations. But what exactly is SaaS management?
Simply stated, SaaS management is the practice of proactively monitoring and managing the entire lifecycle of SaaS applications within a company’s technology portfolio, including:
- Discovering all SaaS purchased and maintained at all levels of the business
- Optimizing license costs by rightsizing licenses and features to actual need
- Planning renewals proactively with utilization and cost data
- Governing SaaS acquisition to reduce risk
Organizations that practice SaaS management are able to ensure their teams have the tools they need to be effective – while reducing the unnecessary costs and risk of SaaS growth.
SaaS Application Discovery is Essential for Procurement Leaders
The foundation of effective SaaS management is full visibility into all of the applications your organizations use. After all, you can’t manage something if you don’t even know it exists!
However, SaaS management gives you a clear picture of how much is being spent on SaaS, who’s doing the spending, and how much value each investment is bringing to the organization.
Typically, organizations that practice SaaS management keep all key contract or agreement details for all SaaS applications in a single system of record. That way, Procurement, IT, and line of business owners are all using the same, single source of truth when it comes time to make a decision.
Gaining full visibility into SaaS purchases means you’re better positioned to:
Reduce SaaS Costs and Risk
When you have a clear picture of all SaaS applications in use, it’s a lot easier to identify opportunities for your organization to cut costs and risk. And there are a number of effective ways to do that.
For example, once you’ve discovered all SaaS purchased by your organization, you might determine you’ve got duplicate instances of the exact same application. You can use these insights to combine those duplicates into a single purchase – and negotiate better rates or terms.
Or, you might determine you’ve got a dozen project management applications in use throughout the organization. There’s an opportunity here to consolidate, keeping only the tools that deliver the most value to your organization.
Proactively Manage Renewals
In order to make informed renewal decisions, you’ve got to know when they’re coming. That’s easier to do when you practice SaaS management – and have all key dates and details documented for each application purchase.
You can even put together a SaaS renewal calendar so you aren’t caught off guard. You’ll get an alert when a renewal is coming up. And that way, you’ll have enough time to pull all of the information you need (and collaborate with the application purchaser) to make informed renewal decisions.
How IT Procurement Can Get Started with SaaS Management
Leading organizations are adopting SaaS management because they understand it’s a powerful, proven way to cut unnecessary costs and risk.
But today, the average organization maintains a whopping 651 applications. If you spent your time manually managing each of these applications, you wouldn’t have time for more strategic initiatives.
What’s more, spreadsheet-driven record keeping leaves a lot of room for error – and quickly becomes outdated. After all, new applications enter and leave active use regularly.
Instead, consider partnering with a SaaS discovery and management provider like Zylo.
Working with Zylo is proven to ease the burden of SaaS management and make it easier for you to control costs and risks – while still providing employees with access to the SaaS applications that make them effective.
To see how Zylo simplifies managing SaaS for procurement leaders, request a demo of the leading SaaS management platform today.