SaaS management is the business practice of proactively monitoring and managing the purchasing, onboarding, licensing, renewals, and offboarding of all the software-as-a-service (SaaS) applications within a company’s technology portfolio.
Developed in response to the unique attributes of SaaS applications in a business environment, SaaS management is quickly developing into a specialized practice for IT, Procurement, and business leaders.
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.
Goals for SaaS Management
Companies deploy SaaS management to:
- Contain costs of SaaS applications
- Manage SaaS licenses
- Plan SaaS renewals
- Manage SaaS vendors and contracts
- Ensure visibility into all SaaS purchases
- Prevent and reduce shadow IT
- Secure SaaS applications
- Maintain an active SaaS inventory
- Improve IT collaboration across the organization
SaaS Spend is on the Rise Worldwide
Cloud-based subscriptions, including SaaS, are dominating the software market. Industry analyst Gartner projects that the worldwide SaaS market will grow to more than $98 billion in total revenue in 2020.
Worldwide SaaS Market Growth
Today, a user can log in to a website, enter a credit card for payment, and quickly gain access to a new application. Then the application is essentially “leased” or rented from the software provider because it is typically purchased with an ongoing, recurring fee or subscription.
This subscription model undoubtedly accelerates the growth of this software category. Additionally, advances in cloud computing have enabled SaaS to meet business goals faster and with greater accuracy, further accelerating its growth.
Examples of SaaS applications include consumer-focused technologies such as Netflix or Hulu, but also include large-scale enterprise-grade applications such as Salesforce CRM, Dropbox, Adobe Creative Cloud suite, and many more.
Why Enterprises Are Investing in Cloud-Based Software
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 such as a compact disc 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 where 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 where it’s deployed, SaaS business tools do not necessarily require a specially trained IT specialist for deployment. And many SaaS tools are designed to be extremely user-friendly, frequently eliminating the need for any 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 SaaS applications cost just tens of dollars per month per user or less, making them attractive and easy to acquire by users.
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 Enterprises Need SaaS Management Strategies
SaaS now represents the default delivery model for business software, overtaking traditional on-premises practices for software deployment and management. Given its soaring popularity and ubiquitous adoption, what are the downsides to widespread adoption of SaaS tools?
For many businesses and enterprise organizations, the advantages of SaaS also bring tradeoffs. Due to the very fact that SaaS is so easy to purchase, deploy, and scale, it can quickly become more difficult to monitor and manage.
This is especially true for organizations with centralized IT teams who are expected to audit, monitor, and manage all technology within use in their environment.
Here are a few reasons why businesses should consider deploying a SaaS management strategy:
Prevent and Reduce Shadow IT
Shadow 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.
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 data, more than 50% of all software acquisition and management now occurs outside of IT.
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
Along with the unique advantages of the subscription basis for SaaS tools comes one notable SaaS-specific drawback: Renewals.
Many SaaS applications feature automatic renewals including notification periods of 30, 60 or 90 days (or more). If the SaaS user does not explicitly notify the company that they will not be renewing for another term, the contract automatically renews, locking in the users into another payment cycle.
This problem becomes magnified without a centralized management approach that focuses on ensuring all renewal dates for SaaS applications in use 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 nearly $4 million in mitigation costs, lost business, and subsequent process improvement. The average cost of a data breach climbs to roughly $8 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 SaaS application adoption and utilization.
Measuring utilization provides a more complete picture of how users interact with applications through deployment, adoption, and long term usage, which 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 hybridized, best-of-both-worlds approach possible. IT or sourcing teams can oversee and monitor the SaaS application inventory as a whole, enabling 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 Do Enterprises 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 towards managing SaaS is to gain an understanding and awareness of the current state of SaaS applications in use within the business. Frequently, completing this process in-house frequently means technology resource managers such as IT or Procurement teams 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, such as 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 because it’s difficult to continue to 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 machine-learning based patent-pending matching model based on a comprehensive library of known SaaS application profiles. The result of this process is a set of data that includes but is not limited to:
- 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.
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 the benefit of all SaaS 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
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.
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.