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SaaS Spend Management: How much should you be spending on SaaS?

Effective IT Leaders Demonstrate Financial Competency

Do you know how much your organization spends on SaaS and Cloud subscriptions today? If you can confidently say “yes” to this question, you are in a minority of organizations.

Zylo has the privilege of talking to innovative CIOs on a regular basis and repeatedly finds that SaaS spending is out of control in most enterprises and there isn’t one group that knows everything that has been purchased. While the c-level leaders are usually thinking about SaaS, getting a handle on SaaS spend management is not an easy feat in most organizations. Without a centralized process and platform, it is often a collection of outdated and partially complete spreadsheets that are owned by line of business owners or the procurement or IT team.

I recently read Okta CIO, Mark Settle’s new book, Truth from the Trenches, and found many of his insights to be particularly relevant around spend management:

“Although information technology is frequently discussed as a strategic corporate asset or a source of competitive advantage, IT spending occupies one of the least strategic positions on a company’s profit and loss statement.”

Mark goes on to talk about how IT Leaders should take the opportunities to talk to business leaders about IT spending in a non-defensive way and be prepared to showcase their financial competence to build credibility with their colleagues. Ultimately, talking to business leaders in terms of the functional structure of the company and associating IT spend with “key value-generating activities–such as sales and marketing or R&D–the easier it will be to discuss IT expenses with business leaders.”

Connect the Growing SaaS and Cloud Expenses to Business Value and Impact

This logic applies to all of IT spend as well as SaaS-only spend. When an IT Leader is able to share an executive-level dashboard showing all SaaS spend, broken down by line of business and software category and functionality, it suddenly becomes easier to relate the SaaS spend to specific business operations and map the value back to the business.

Being armed with SaaS spend data and being able to present that data to other business leaders in a meaningful way puts IT leaders in a strategic position as they push the organization’s digital strategy forward. The number of SaaS and cloud applications and the amount of spend will vary based on the size of the organization and how many systems are in the cloud. IT may or may not care about every single SaaS application, but understanding the entire software spend is valuable and being able to focus in on the most expensive applications in a granular way with utilization and employee feedback data is where IT can drive the highest value beyond just mastering the financial impact.