Trends in SaaS Spend and Best Practices for SaaS Management

Cory Wheeler

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Evolution of Software Purchasing

IT used to be involved in every software application evaluation, decision, and purchasing process. With the shift to the Cloud and a plethora of cloud and SaaS vendors, software purchasing has been democratized across the entire organization.

It’s common for business units to have their own technology budgets and manage the entire process of evaluation, selection, implementation, and training teams on new software. The distributed purchasing has resulted in a fragmented solution set with limited visibility, redundant functionality across applications, and increased security risk throughout the enterprise.

SaaS Spending and Utilization Trends

Cloud-based software, including SaaS, dominates the software market and shows steady growth. Industry analyst Gartner projects that the total worldwide SaaS market will grow to more than $98 billion in revenue in 2020.

Worldwide SaaS Market Growth

Worldwide SaaS Market Growth Graph

Our customer data confirms that the explosion of SaaS shows no signs of slowing down. However, it does show the need for more formal SaaS management processes to balance innovation and risk management. Zylo customers have more than $10 billion of annual SaaS investments managed in Zylo today.

From this dataset, we’ve determined that 55% of SaaS spend occurs outside of known software expense types. The average enterprise also discovers two to three times more SaaS and Cloud applications than they think they have.

The explosion of SaaS is not limited to just technology companies. Large, traditional enterprises from financial services firms to pharmaceutical firms–and everything in between–are experiencing the growth in SaaS and cloud spend as well.

We find that medium, non-tech companies have 150-300 applications and medium, tech companies have 300-500 applications. Large, non-tech companies have 400-600 applications, and large tech companies have 500-1,000 applications.

Unfortunately, without the right amount of rigor in place around SaaS governance, many SaaS implementations fail to live up to their potential. Our data shows that just 25% of users are regular or power users, and an average of 40% of users have never actually logged into an application to which they have access.

Determining the value of SaaS applications, creating savings opportunities, and operationalizing a process around SaaS spend and management are the best ways to drive ROI of SaaS and cloud investments.

SaaS Management Best Practices

Communication and transparency throughout the business are paramount to creating an effective SaaS management process in one SaaS system of record. Getting started with a basic SaaS management strategy can be accomplished using spreadsheets. Here’s what we suggest first:

  • Take inventory of your software and start a spreadsheet to capture it.
  • Track down the financial data to map spending to each application.
  • Identify and record the super admins for each application.
  • Locate the contracts for each application to bring into one repository.
  • Create a master renewal calendar with license information and key dates.

After capturing the basic information, two areas to dig into first include applications with overlapping functionality and applications with high volumes of transactions.

Understanding why potential overlapping vendors have occurred and if opportunities exist for consolidation is often a quick win that showcases the value of embarking on the SaaS management process.

For applications with high transaction volume, working toward a master contract with fewer payment cycles can create an immediate impact on the bottom line and efficiency for the organization.

At Zylo, we work with organizations every day to create a SaaS system of record and actively maintain it with real-time data so they can make the best short- and long-term SaaS software decisions.

About the Author

Cory Wheeler

Cory Wheeler is the VP of Services and Customer Success at Zylo, where he helps tech-forward companies understand, manage and optimize their cloud-based infrastructure via the Zylo platform. Prior to Zylo, Cory spent 15 years in Finance and Procurement, managing categories and sourcing teams at Arthur Andersen, BearingPoint and both Takeda and Astellas Pharmaceuticals. Cory then built the Procurement organization at ExactTarget in 2012, and managed the integration of the new Marketing Cloud Procurement organization into Salesforce.com in 2015. He and his family reside in Indianapolis, IN, where they can be found cheering for the Purdue Boilermakers and Chicago Cubs.