How to Manage SaaS Vendors in the Subscription Economy

The importance of SaaS vendor management is growing. In fact, today, enterprise SaaS spend represent more than $4,600 per employee per year. To gain some insights surrounding this growing category, I sat down with Mike D. Kail, CTO of Everest, and discussed common challenges and opportunities.

Consumerization of Enterprise SaaS Benefits the End User

SaaS use is expanding. Gartner projects a nearly 18% growth in the category this year alone. And the consumerization of enterprise SaaS applications spurs that growth.

Many SaaS products design software focusing on the end user first. With an emphasis on end-user experience, software applications have become easier to implement and use. Consequently, business units are adopting and utilizing SaaS at higher rates.

Additionally, enterprise cloud-based subscription software boasts the rapid deployment of updates and new product features. Compared to traditional on-premises software update deployments, IT teams no longer manage burdensome semi-annual updates that disrupt the business.

Frequent application updates, informed by user sentiment and behavior, provide increasing value from the enterprise software purchase. As a result, more IT and business leaders are moving to cloud-based software.

Involve the User and Seek Feedback

Today, SaaS vendors and enterprise technology managers prioritize the end users. IT teams can no longer afford to select applications and force adoption. IT leaders must factor user experience and satisfaction into decision-making for the acquisition and long-term management of SaaS tools.

Understanding how the user experience affects adoption and utilization can prevent the growth of shadow IT by providing users the tools they’re more likely to continue to utilize. With the plethora of easily accessible SaaS choices, users dissatisfied with a software experience often acquire tools on their own. This rogue SaaS acquisition inevitably leads to the growth of shadow IT.

Ensure Forecastable SaaS Vendor Pricing

Enterprise SaaS pricing should be forecastable and well defined. Many SaaS tools for the enterprise begin with a basic price, such as a basic subscription or license fee. But many also include variable costs based on consumption metrics. Examples include maximum storage thresholds for data or content storage services like Box and Dropbox or contact list count maximums for customer relationship management tools such as Salesforce.

Having a forecastable price includes defining and documenting the consumption metric, but also monitoring usage to ensure there are no surprises if and when a threshold is crossed and additional costs are incurred. Without direct and continuous measurement, either through the SaaS application directly or via tools like Zylo’s SaaS management platform, CIOs and technology managers risk costly surprises when the true-up occurs.

Answer SaaS Vendor Integration Questions Early

When purchasing a new SaaS tool, it’s important to be aware of how exactly it will integrate into your current technology environment. Enterprise SaaS especially advertises the cost advantage of economies of scale as the tool deploys to a greater number of users or transactions.

Will the application require a third-party manager or implementation specialist to integrate the new SaaS tool into your existing software stack? If so, the savings produced by scaling can sometimes be negligible when weighed against the cost of hiring to implement.

Getting answers from SaaS vendors to key questions about the process and costs associated with integrating, adopting, or on-boarding the new tools is an essential step.

Beware SaaS Vendors Selling to Siloed Business Users

When enterprise SaaS vendors circumvent procurement processes and sell directly to teams or users, shadow IT proliferates. However, decentralized software acquisition can cause wasted spend and administrative burden.

In an enterprise environment, the symptoms of leads to:

• Redundant functionality. Teams or individuals may purchase different applications to perform the same function. Redundant functionality can create disparity among teams and lack of available support.
• Duplicative app purchases. Teams or individuals may purchase the same application in discrete instances. Disparate purchasing of duplicative SaaS applications creates an operational burden. Leaders recommend the consolidation of all users into a larger, more cost-effective enterprise-grade deployment of a single application instance.
• Security risks. When individuals or teams deploy software without approval from a central IT team, vetting processes are frequently skipped. To mitigate security risks and privacy threats, include IT in all SaaS purchases.

By approaching SaaS acquisition in partnership with IT and procurement and choosing tools that can bring value to the entire organization, teams avoid creating silos and the “pirate ship” mentality.

Prioritize the User To Improve SaaS Vendor Relationship Management

Enterprise software decisions about what software to buy can no longer occur in complete isolation. The modern enterprise technology leader holds responsibility for filling the gap between what the user wants and needs, what the vendor offers, and how to square the difference when implementing the technology into the existing organization.

This requires creating continuous feedback loops where user experience and inputs influence the decision-making. Many modern tech leaders accomplish this task via the creation of user feedback groups, surveys, and other feedback tools, or by applying the principles of “management by walking around,” a.k.a speaking and listening to user concerns directly in a transparent way.

These learnings can then be applied to SaaS vendor relationships to influence acquisition decisions and renewal road amps.

What’s Next for SaaS Vendor Management

Enterprise SaaS vendor management is a practical art still not yet fully matured. However, many principles of enterprise leadership apply to this relatively new practice. Technology leaders who focus on the needs of the user, who keep maintaining value for the organization as a top priority, and who lead through partnership are the most likely to be successful in the effort.

To learn about how Zylo helps technology leaders discover, manage, measure and govern SaaS applications in enterprise organizations, schedule a demo today.