The Three R’s of SaaS Management: Rationalize, Rightsize & Renew 

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SaaS management is like taming a dragon. Worth it? Absolutely — but you’d better be up to the challenge, and you might have to endure some burn marks in the process.

Every year, companies spend an average of $4,000 per employee on SaaS (including both the products and managed services).

Among Zylo customers, that number grew 14% in 2020, and that growth rate is expected to continue or accelerate in 2021 — a year when cloud-based subscription software is expected to be a more than $120 billion market.

These numbers show that, while SaaS ultimately drives productivity and business value, there is a lot of room for inefficiency. That’s where effective SaaS management comes in.

Zylo suggests tackling these in three parts: Rationalize your SaaS purchases along your goals, rightsize according to need, and renew only when it makes the most sense.

Rationalize

The first critical step of SaaS management is to rationalize your current SaaS purchases and licenses. A review of your current stack — from enterprise licenses approved by the CFO to a hodgepodge of individual seats from employees — will give you the clear picture you need for effective SaaS management.

“It’s never been easier to acquire and purchase software as an employee: Swipe a credit card and you’ve got a subscription.”

– Hugh Drinkwater, Head of Procurement, Carta

Zylos’ playbook for rationalization:

  1. Establish your baseline inventory. Take stock of what you currently have in place, whether it’s controlled by IT or not. This process requires app discovery, categorization of each app and setting up tracking for renewals.
  2. Determine your standard toolset. Your baseline inventory will likely reveal redundant SaaS applications. Instead of keeping these in place, narrow down the SaaS tools you want to use across the application — and then communicate that across teams. With a SaaS management tool, you can whitelist these standard tools.
  3. Identify & eliminate non-business critical tools. If you can’t tie a SaaS application to specific business outcomes or team processes, it might be time to retire it.
  4. Eliminate applications and subscriptions tied to departed headcount. Shadow IT is a real threat to effective SaaS management. You can ‘nip it in the bud’ by reducing the number of apps that are not under direct IT control.

In short: a robust application inventory audit will give you the depth of understanding around your IT stack and SaaS spend to move forward with efficient SaaS management.

Rightsize

Over any 30 day period, more than a third of SaaS licenses go unused. That’s 38% of your SaaS tools that are not driving value for your business — or your employees.

If the average company spends $4,000 per employee on SaaS every year, that means a company of 1,000 could be wasting up to $1.5 million every year on unused SaaS licenses. The upshot? Rightsizing your licenses is an important step in reducing SaaS waste.

Zylo research finds that CIOs and technology leaders underestimate the number of SaaS applications in use by two to three times. The average company anticipates finding 200 to 300 applications. In reality, the average company holds 651 SaaS applications.

Read More: Zylo’s Guide to Rightsizing and Renewals

Rightsizing can be a clunky and time-consuming process if you don’t have the right usage reports set up (hint: most companies don’t).

Here’s what the rightsizing process looks like with Zylo and its license workflow feature:

  1. Analyze application data to identify users that aren’t fully using their licenses.
  2. Send users an alert, asking if they’re willing to give up their licenses.
  3. You can quickly deprovision users who have been inactive for a set period of time and/or voluntarily returned their license.
  4. Unused licenses are given to another user or eliminated altogether to reduce costs.

An example of the ROI of license rightsizing: Carta, an ownership and equity platform, identified more than $50,000 in savings by rightsizing SaaS licenses for its video conferencing, DevOps monitoring, and CRM applications.

Renew

Rationalizing your SaaS tools with a full application catalog will give you better visibility into your spending. Rightsizing your licenses will give you a ‘reset’ with applications that continue to drive value.

But it’s proactively managing your SaaS renewals that will ensure you’re able to continue to manage SaaS value moving forward.In the average company, IT manages just 25% of SaaS applications. That means there’s plenty of room for renewals that aren’t adding to business value and productivity.

 

The answer? Set up a renewal calendar (based on your full inventory of applications determined in the rationalization stage). Include details like:

  • SaaS agreement documents and contracts
  • Renewal dates
  • Notification periods
  • Internal buyers
  • Users with licenses

With the calendar in place, you can set up automated alerts for when a contract is coming up for renewal. This will give you sufficient time to partner with business units, teams, or employees to proactively plan renewals.

“Thanks to Zylo’s renewal alerts, we caught an auto-renewal for an application we no longer used before the 90-day notification period, saving us a headache and more than $50,000.”

– Ryan Johnson, Director of IT, Keap

Manually setting up this calendar can be time-consuming. That’s why SaaS management platforms like Zylo work with companies to automate contract data updates, keeping the renewal calendar and notification process up-to-date. This empowers organizations to make data-centered renewal decisions quickly.


Ready to rationalize your SaaS applications, rightsize your licenses, and set up a proactive renewal process? Let’s talk.

About the Author

Zylo

Zylo is the leading enterprise SaaS management platform that transforms how companies manage and optimize the vast and accelerating number of cloud-based applications organizations rely on today. The platform provides one system of record for all cloud-based software purchased across a company, enabling customers to discover, manage, measure and optimize cloud investments with real-time insights into spend, utilization and feedback data.