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The Impact of SaaS on Software Audits, and Why SaaS Audits are Now a Must

software audit


When on-premise software was king, software audits were a common occurrence — and a dreaded one at that.

On-premise software vendors routinely conducted these audits to ensure an organization was using software in compliance with their contract. This included measuring actual usage of the software and comparing that to what the company was paying for.

Software audits could spring up at any time, seemingly out of nowhere. And preparing for them took time and effort — often pulling team members away from other important tasks.

When things went south, there were costly consequences. If a vendor found that a company wasn’t using their software as outlined in their contract, the company could run into legal issues and penalties to the tune of millions of dollars.

But the rise of SaaS has had a big impact on the software audit.

SaaS Ousts Software Audits, But Presents New Challenges

At many organizations, SaaS is rapidly growing — and replacing on-premise software. And it seems this growth won’t slow down anytime soon. In their State of the Cloud 2021, Bessemer Venture Partners predicted that within the next three years, the cloud will be the dominant delivery model for all software.

That prediction actually came to fruition according to analyst IDC. In 2022, for the first time ever, more money was spent on SaaS than on-premise software.

The great news is, the dreaded software audit isn’t a concern with SaaS. That’s because SaaS vendors have ongoing visibility into how you’re using their software, and there’s typically no way of getting around the license terms. If you want extended access — for example, additional licenses or units — you’ve got to pay for it.

But that doesn’t mean audits should be a thing of the past. In fact, if your organization is investing heavily in SaaS, it’s essential to regularly conduct internal SaaS audits. If you don’t, you’re creating unnecessary costs and risk for your organization.

Why Your Organization Needs an Audit

Chances are, your organization has more SaaS applications than you think – and you aren’t alone. Our 2023 SaaS Management Index found that on average, most organizations consistently underestimate how many SaaS applications they have by two to three times!

Chart: SaaS Ownership by Send vs Number of Apps 20233Why does perception differ so much from reality? Largely, because SaaS is easy to acquire. While on-premise software typically goes through a formal vetting process that involves the IT and procurement teams, SaaS is often purchased by individuals and business units throughout the organization — often via credit card. In fact, business units and employees combined make up 69% of SaaS spend — and a whopping 82% of application quantity.

The fact that SaaS is easy to acquire can be a good thing; it means employees can quickly get access to the tools they need to be successful. But this ease of acquisition can also cause a lot of problems for organizations.

For starters, SaaS applications purchased via credit card don’t go through a formal vetting process to ensure they’re compliant and secure. That’s bad news as these rogue, unknown applications create risk for your organization. And that risk can lead to costly consequences. According to IBM Security’s annual Cost of a Data Breach Report, the average data breach in the United States costs $9.44 million.

SaaS growth, when left unmanaged, also creates unnecessary costs. One example is when the exact same application is purchased by multiple people or teams throughout the organization. And duplicate SaaS subscriptions are more common than you might think. At the average organization, 90 SaaS applications are purchased by more than one employee.

When SaaS is purchased throughout the organization, it can also lead to redundant applications. That means your organization is paying for multiple tools that essentially do the exact same thing.

A SaaS audit can help you regain control of SaaS growth at your organization and be a great first step toward more effective SaaS management. And when you proactively manage Saas, you’re in a better position to control the costs and risks associated with it.

What is a SaaS Software Audit?

We’ve established that a SaaS audit is a great way to start better managing SaaS. But what exactly is a SaaS audit?

As the name suggests, a SaaS software audit is an internal review of all SaaS applications in your organization. It sets the foundation for a more effective SaaS management strategy that’ll empower you to cut risk and costs.

When done right, a SaaS audit will allow you to:

  • Discover all SaaS applications at your organization: This includes everything from enterprise software acquired by your procurement team to rogue applications obtained via free trial, with a credit card charged when the trial is up.
  • Understand utilization of key applications: This is important, 40% of SaaS applications go unused in a given 30-day period. That’s a lot of money down the drain!
  • Get recommendations on areas of overlapping functionality: You likely have multiple applications with largely identical functionality. Here’s a snapshot of some of the most redundant SaaS applications.
  • Get clear visibility into SaaS spend: You’ll be able to see which individuals or business units are purchasing which applications.
  • Highlight shadow IT risks: Shadow IT can lead to wasted spend and security and compliance issues, among other things. A SaaS audit can shed light on these risks so you can work to mitigate them.

How does a SaaS Software Audit Work?

One option is to conduct a manual, internal SaaS audit. Such an audit might involve surveying each department to discover all SaaS applications in use, and then logging the key details for each application into a spreadsheet.

But the average organization has 291 SaaS applications, which means this process could easily take months. What’s more, that spreadsheet is sure to get outdated quickly as the typical company sees six new applications enter its environment and three applications exit active use.

A better option is to work with a SaaS Management vendor to conduct a SaaS audit. These vendors leverage SaaS software audit tools to help organizations discover all SaaS — and leverage insights to optimize their SaaS portfolios.

Typically, the SaaS audit process takes just two to three weeks. And there’s no heavy lifting on your part; you’ve just got to provide your Accounts Payable and Expense data. Once your SaaS audit is complete, you can choose to roll the process into a full implementation with the SaaS management vendor.

Get Started Today

As SaaS overtakes on-premise software, software audits are getting a lot less common. But that doesn’t mean audits are a thing of the past. Today, SaaS audits are a must for organizations looking to cut the risk and costs associated with unmanaged SaaS growth.

Start taking control of SaaS growth at your organization. Contact Zylo today to request your free SaaS audit.