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What is SaaS Management?

SaaS management

Zylo is a 2023 G2 Leader

SaaS Management is the business practice of proactively monitoring and managing the purchasing, onboarding, licensing, renewals, and off-boarding of all the software-as-a-service (SaaS) applications within a company’s technology portfolio.

It was developed in response to the unique attributes of SaaS applications in a business environment. And it’s quickly becoming a specialized practice for IT, Procurement, and business leaders. Listen to the podcast below for a quick rundown of SaaS management, and read on for a more detailed deep-dive.


Goals for SaaS Management

The goal of SaaS Management is to reduce risk from unmanaged tools or technologies, improve the value of purchased software, and increase the effectiveness of users who deploy SaaS applications. Companies deploy SaaS management to:

Why Deploying SaaS Makes Sense

Cloud-based delivery creates several advantages over previous software distribution models:

SaaS Applications Don’t Require Physical Distribution

Because SaaS is distributed online, software distribution based on shipping physical memory devices like compact discs is no longer required. This makes it easier to obtain, access, and distribute the software. New software features, upgrades, and patches can also be deployed more quickly.

SaaS Applications Don’t Require Long-Term Commitments

The subscription basis for SaaS enables companies and users to use software that suits their purposes without fear of becoming “locked in” to lengthy contract commitments.

For many users, this enables a “best in breed” approach to software use. Tools can be adopted quickly (and old tools jettisoned) if a new application offers improved functionality or design.

Most SaaS Applications Don’t Require Special Knowledge or Training

Because it doesn’t require physical storage on the premises it’s deployed, SaaS tools do not necessarily require a specially trained IT specialist for deployment. And many are designed to be user-friendly, frequently eliminating the need for software-specific training.

SaaS Can Be More Cost-Effective

Along with the lack of long-term commitment, SaaS tools can be attractive due to their relatively low cost. Some applications cost just tens of dollars per month per user or less, making them attractive and easy to acquire.

SaaS Scales Effectively

Without minimal physical storage requirements and low cost, SaaS can quickly be deployed throughout an organization without significant costs or the need for complex deployment planning.

When additional users need the software, you simply purchase more seats or licenses. If and when user demand decreases, seats or licenses can be eliminated, saving costs.

Why Businesses Need SaaS Management

SaaS now represents the default delivery model for business software. It’s overtaken traditional on-premises practices for software deployment and management. Given its soaring popularity and ubiquitous adoption, what are the downsides to its widespread adoption?

SaaS management drives business value by eliminating blinds spots in visibility, reducing costs to your business, and fending off potential disaster. To take that a bit further, here are a few reasons why businesses should consider deploying a SaaS Management strategy:

Prevent and Reduce Shadow IT

Chart: SaaS Ownership by Send vs Number of Apps 20233Shadow IT occurs where technology applications or systems are bought or built within an organization without the IT department’s direct approval or knowledge.

In many cases, the growth of shadow IT has a direct correlation to increased frequency of lines of business, teams, and individual users purchasing SaaS applications directly. In fact, one in six employees now expenses SaaS.

Frequently, the motivation for purchasing shadow IT solutions makes business sense. When lines of business can independently purchase best-in-class SaaS solutions, the business overall can innovate more quickly than if centralized IT teams handled all purchases.

A strong SaaS management process hinders the growth of shadow IT by first making all SaaS applications discoverable and visible. According to Zylo’s SaaS Management Index, nearly 70% of all software acquisition and management now occurs outside of IT.

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SaaS License Management

As more lines of business or teams purchase SaaS tools, the potential to mismanage SaaS licenses is high. After all, few business unit managers undergo IT management training for best practices. Foremost among the concerns for license mismanagement is under-utilized or unused licenses.

Without the clear attribution of ownership to individual teams or employees, an unused license can pose a security threat. For example, how can the organization be sure a former employee no longer has access to sensitive company data stored in a SaaS application? Without active management, an unused license can also have the potential to trigger an automatic renewal and incur unnecessary costs.

Underutilization of licenses represents a diminished practical value of the SaaS investment. Optimizing SaaS licenses ensures the number of licenses or seats meets the organization’s actual need and helps preserve value.

SaaS Renewal Management

Chart: Annual number of SaaS renewals by cohortAlong with the unique advantages of subscription-based SaaS tools comes one notable SaaS-specific drawback: Renewals. With the average organization having 291 apps in their stack, that equates to a ton of renewals. On average, that’s about one every business day.

Many SaaS applications feature automatic renewals including notification periods of 30, 60 or 90 days (or more). If the user does not explicitly notify the company they won’t be renewing for another term, the contract automatically renews. Unfortunately, that locks the users into another payment cycle.

This problem becomes magnified without a centralized management approach that focuses on ensuring all renewal dates within the business are defined and documented.

SaaS Spend Visibility and Analysis

One of the biggest challenges to managing SaaS in an organization is understanding spending and value. Low-cost SaaS applications – especially when purchased via credit card or as a reimbursed expense – frequently create unplanned and untracked technology spending.

Primary motivations for managing SaaS include gaining insights into how much is being spent on SaaS applications, who is spending it, and how much value that investment brings to the organization.

SaaS Data Security, Risk Reduction, and Compliance

Across the globe, the average data breach costs $4.35 million in mitigation costs, lost business, and subsequent process improvement. The average cost of a data breach climbs to $9.44 million in the United States. And with the increasing use of SaaS by more employees, the risk of a data breach or cybersecurity event grows.

Every SaaS application used for business stores business data the moment an employee uses a company email account to purchase or demo the application. Sensitive data such as customer information or business records also eventually makes its way into SaaS and other cloud-based software.

A SaaS Management approach that discovers and identifies all SaaS applications in use in the business bolsters security via visibility.

SaaS Utilization and Value

Beyond insights into spending, many businesses want to understand and analyze user behavior for adoption and utilization.

Measuring utilization provides a more complete picture of how users interact with applications through deployment, adoption, and long term usage. This can inform decision-making for future application selection.

SaaS Governance and Distributed Access

Decentralized SaaS that grows organically via user adoption without direct IT management contributes to shadow IT. But not every organization necessarily seeks to wrest control of application management back from teams or users into a centralized management strategy.

Many IT resource managers and companies find that their organizations are more nimble, agile, and effective when teams can acquire and control their SaaS applications directly.

Deploying a SaaS Management process can help make a hybrid, best-of-both-worlds approach possible. IT or sourcing teams can oversee and monitor the SaaS application inventory as a whole. They can enable strong security, spending, and best-practices protocols, but empower lines of business owners to manage the day-to-day of their respective applications effectively.

How to Build a SaaS Management Strategy

Enterprise SaaS Management strategies focus on SaaS discovery, IT collaboration, and the SaaS application lifecycle.

Steps to SaaS Discovery

The first step toward managing SaaS is to gain an understanding and awareness of the current state of applications in use within the business. Frequently, completing this process in-house means technology resource managers such as IT or Procurement create an inventory of SaaS applications through a shared spreadsheet.

While straightforward, this approach can be problematic because it relies on each business unit, team, or individual user to recall and document every SaaS application they’ve purchased in a given period or continue to maintain.

The spreadsheet inventory model also expects SaaS users to supply all relevant details about the applications under their control. This includes renewal dates, license or seat count, associated users, application purpose, and cost. Relying solely on the user’s recollection or their ability to access application details frequently leads to missing or inaccurate information.

Lack of accuracy aside, this discovery method frequently proves ineffective. That’s because it’s difficult to continue actively maintain a manually updated spreadsheet to reflect current inventory status. Without significant and consistent effort, the spreadsheet quickly becomes outdated.

How a SaaS Management Platform Provides Value

When using a SaaS Management provider, methods for SaaS discovery vary by vendor, solution provider, or consultant.

For its customers, Zylo’s SaaS management platform analyzes financial transactions to identify transactions linked to SaaS applications continuously.

These transaction records are then uploaded to a patent-pending matching model that algorithmically compares the data against a comprehensive library of known SaaS application profiles.

The result of this process is an analysis and categorization that includes:

  • The total number of SaaS applications
  • Application ownership, including cost center, business center, team, and user
  • Count of licenses or seats
  • Spending per application
  • Application category and function info
  • All subscription renewal dates

From this information, technology teams and stakeholders can begin to identify opportunities to optimize their SaaS inventory by identifying:

  • Instances of rogue spending contributing to shadow IT
  • Applications without clear ownership or active users
  • Applications with functional redundancy
  • Duplicate instances of applications or multi-sourced applications
  • Applications without security vetting and/or prohibited applications
  • Applications with too many or too few licenses or seats

Tracking a continuously updated inventory of SaaS applications is one of the most effective ways to prevent wasted spend, unplanned renewals, and shadow IT.

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SaaS Management Requires a SaaS System of Record

One of the most critical outcomes of SaaS management is developing a system of record to track and maintain all SaaS applications.

Following the initial discovery process, the next step should be to develop, organize, and actively maintain a system of record for all application stakeholders and the organization as a whole.

A system of record also provides visibility, collaboration, and information on SaaS applications to business units, teams, and end users.

A continually updated system of record:

  • Counteracts the lack of visibility by serving as a single pane of glass for all SaaS applications
  • Improves collaboration between teams by creating a shared foundation for application information as well as reporting
  • Helps technology managers and users monitor important subscription information such as spending activity, licenses, and renewal dates

SaaS Application Lifecycle

SaaS discovery represents capturing the current state of the organization’s SaaS inventory, including known and unknown applications. A SaaS system of record stores all information about the SaaS application inventory on an ongoing basis.

A SaaS application lifecycle represents the conceptual framework for documenting and managing all activities associated with its journey within an organization. This includes SaaS Management processes for each lifecycle stage from pre-purchase to onboarding to monitoring and measuring effectiveness to renewal or retirement.

At each stage of the application’s journey, developing best practices helps safeguard the organization from undue risk.

SaaS Application Pre-Purchase Review

A strategic pre-purchase review of SaaS applications can preserve value, prevent risk, and help plan for a new tool’s introduction.

Review processes vary from organization to organization, based on capability, capacity, and resources. A review process may take the form of a review process performed by an IT manager. Other organizations may employ review boards comprised of stakeholders from IT, Legal, Procurement, and Finance.

The purpose of the pre-purchase review is threefold:

  • Preserve value by cross-checking the new application against existing applications already in use in the organization.
  • Check for compliance with cybersecurity, data, certification, legal, or financial protocols
  • Provide a set of objective criteria to approve or reject the purchase

SaaS Application Onboarding

If and when a SaaS application receives purchase approval, it’s essential to develop an onboarding plan to manage the process. This plan should specifically outline ownership, roles, and benchmarks that will define success for the application’s adoption and use.

An effective onboarding plan helps:

  • Eliminate cases of unclear SaaS ownership by clearly defining ownership and cost center information
  • Document dates for the adoption, on-boarding, renewal notification period, and renewal to ensure the proactive management of the application.
  • Create benchmarks for adoption, utilization, spending, and application value to ensure informed decision-making

Continuing SaaS Management

Ongoing management of SaaS applications represents the longest lifecycle stage in the lifecycle, but arguably the most important.

Without proactive maintenance and measurement, this stage also represents the most significant potential for mismanagement.

Regularly, SaaS application owners and stakeholders should examine:

  • All SaaS applications currently in use within the organization, especially new applications
  • Show all upcoming SaaS renewal dates and associated notifications
  • All SaaS costs or spending incurred
  • Any redundant applications or duplicated functionality
  • Unused or underutilized applications

SaaS Renewals

A SaaS application renewal (enabled by an effective SaaS renewal calendar) represents a fork in the road. All the SaaS application’s stakeholders should participate in the renewal decisions.

Regularly measuring established benchmarks or metrics will inform deliberations for renewal. Finally, when appropriately planned, a final renewal decision should occur well ahead of the actual renewal date, preventing reactive decisions.

A sound SaaS management renewal process:

  • Creates and maintains a renewal calendar that drives proactive decision-making by alerting stakeholders to upcoming notification periods and renewal dates.
  • Evaluates each SaaS application’s renewal value from a holistic perspective, including cost, user experience, utilization, business need, and other factors.
  • Improves SaaS tool value by creating informed renewal negotiations with SaaS vendors.

SaaS Retirement

When a SaaS application no longer meets renewal criteria, an off-boarding plan ensures it exits the organization safely. The primary concern is preventing the loss of sensitive customer or company data information.

As part of a SaaS application lifecycle, an off-boarding process:

  • Creates a transition plan to ensure continuity for functionality, users, and associated data.
  • Defines processes to ensure the removal of company and customer data from outgoing applications.
  • Ensures that off-boarded SaaS applications don’t re-enter use as new shadow IT.
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