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If you’re one of the more than 70% of organizations that rely almost exclusively on software-as-a-service (SaaS) to run your business, your SaaS spend is surely growing exponentially year over year. In fact, Gartner projects SaaS will exceed $171 billion in global end-user spending in 2022.
At Zylo, we saw this growth happen throughout our customer base. According to our 2023 SaaS Management Index report, SaaS spending across all categories averaged $50 million annually, with organizations spending an average of $4,600 per employee on SaaS. Today, the average enterprise employs an average of 664 SaaS tools in their software arsenal.
While Gartner initially predicted moderate SaaS growth in 2020, the unexpected global pandemic triggered a massive uptick in SaaS spending as organizations quickly pivoted to remote work, which required adopting new applications, such as video conferencing tools. From February to April 2020, SaaS spending rose 26% compared to the same time period in 2019.
Bottom line: SaaS is an unstoppable force, and without a company-wide SaaS spend management plan, costs can quickly get out of hand. To keep spending in check, many organizations rely on SaaS spend management software.
Why You Need to Manage Software Spend
SaaS spend management is similar to SaaS subscription management, but with a heightened focus on identifying costs, increasing savings when possible, and maximizing value for your SaaS applications.
As SaaS becomes a growing part of most organization’s IT portfolios, it’s essential for organizations to understand company-wide spending on SaaS. The true challenge becomes discovering and documenting employee-led SaaS purchases. Without a dedicated SaaS management software, these applications often fly under the radar.
According to Zylo research, more than 51% of all SaaS application transactions are not accurately tagged as “software” in most expense tracking systems. SaaS-specific spend management efforts must accompany existing spend management software and initiatives to accurately monitor and connect SaaS spend, end-user utilization, and total contract value.
How Software Can Assist in SaaS Spend Management
When it comes to SaaS spend management, some organizations rely on manual processes and methods (think Excel spreadsheets or Google docs) to track and manage their SaaS spend. While this solution may work for smaller organizations with few SaaS applications, it becomes nearly impossible to maintain an accurate and scalable system of record as the number of SaaS applications grows each day.
Remember, the average enterprise possesses more than 664 SaaS tools. And according to our research we’ve found that without a central system of record, many leaders underestimate this number by two to three times.
The key to understanding your full SaaS spend involves discovering all existing SaaS tools across your organization. While it may seem straightforward, you need to account for the potentially hundreds of employee-led purchases, many of which likely exist outside the confines of IT. This requires a company-wide effort to track down and document each department and business unit’s SaaS inventory. To automate these processes, organizations increasingly leverage SaaS spend management software, such as Zylo.
The Zylo Discovery Engine uses machine-learning analysis to accurately identify SaaS applications from large volumes of financial transaction data, including direct purchases and employee expense transactions. By discovering previously obscured or miscategorized SaaS subscriptions, it provides real-time transparency and insights into SaaS application inventory, usage, and spending.
SaaS spend management software typically performs automatic, ongoing discovery, which helps organizations stay on top of SaaS management as they add new applications and tools. It also serves as a single, central system of record, so you can ditch the clunky spreadsheets.
Because they act as a single system of record for all SaaS applications, SaaS management platforms automatically surface actionable insights to optimize your SaaS spend, such as:
- Reduce redundant applications with overlapping functionality: With full SaaS discovery, you may be surprised to find your organization retains multiple tools that perform the same, or a similar function. For example, one Zylo customer found 48 different project management applications. Some of the most common redundant SaaS applications include learning software, digital asset management, team collaboration, file storage, and video conferencing.
- Consolidate duplicate subscriptions: Without centralized software procurement, organizations often wind up with duplicate subscriptions to the same application. In many instances, employees purchase applications that the organization already pays for and manages. Duplicate subscriptions can increase software costs due to per-use costs typically being much higher than purchasing bulk licenses.
In addition to discovering redundant SaaS applications and duplicative subscriptions, SaaS spend management software enables you to measure applications and usage, so you can:
- Rightsize SaaS licenses based on license and feature usage: According to Zylo research, 40% of SaaS applications remain unused over a typical 30-day period. Further, SaaS management software can identify premium licenses that you can downgrade to free licenses, if your team isn’t using the premium features. Zoom offers a prime example, as the video conferencing platform’s Pro license enables users to meet for more than 40 minutes at a cost of $15 a month per employee. However, if your Pro users consistently meet for under 40 minutes, consider deprovisioning them to a Basic free plan to lower your software investment.
- Proactively manage renewals: With clear insights into renewal dates, negotiation periods, and other contractual terms, use your organization’s data to leverage more favorable pricing, features, or terms. In 2021, the average company experienced one SaaS renewal each business day. Without a dedicated SaaS management system and renewal calendar, you’ll quickly lose track of renewal dates, and face the dreaded automatic renewal.
Ready to discover how Zylo’s SaaS spend management software optimizes your organization’s SaaS spend? Get started by requesting a demo of Zylo today.