Mastering SaaS Lifecycle Management to Reduce Risk and Optimize Spend

SaaS lifecycle management has become a required discipline for enterprises in 2025. Rising software costs, the rapid adoption of AI-powered apps, and decentralized purchasing have prompted organizations to adopt structured oversight. The average organization adds 7.6 new unique applications to its environment every month, resulting in 91 new applications annually. That’s a staggering 33.2% year-over-year portfolio growth.

Unchecked growth of applications can lead to overspending and increased exposure to risk. Gartner forecasts global SaaS spending will climb to $299 billion in 2025, reinforcing the urgency of disciplined lifecycle practices.

By approaching SaaS as a continuous cycle—from procurement to renewal—leaders can lower costs, reduce risk, and ensure employees have the right tools at the right time.

Unmanaged SaaS Creates Uncontrolled Costs and Increased Risk

When portfolios grow without oversight, organizations face immediate financial and security challenges, including:

• License waste
• Overspending
• Security risks, especially with AI
• Shadow IT

License Waste

The 2025 SaaS Management Index shows unused licenses contribute to an average of $21M in annual waste. Short one-year contracts gained favor in 2024, but the convenience often comes with higher pricing that compounds each year.

Overspending

Decentralized purchasing continues to push costs upward. These factors drove SaaS spending to $4,830 per employee in 2024, representing a 21.8% year-over-year increase.

Security Risks with AI

The risks extend beyond budgets. Nearly 90% of IT leaders expressed concerns about the security of AI tools, while 66.5% experienced surprise costs from usage-based or AI pricing models.

Shadow IT

Shadow IT now accounts for a third of the average company’s applications, creating blind spots that weaken compliance and data protection. Without lifecycle management, contracts, owners, and renewals become difficult to track, leaving organizations exposed.

What Is SaaS Lifecycle Management?

SaaS lifecycle management is the practice of overseeing each stage of a software application’s journey inside an organization. It includes:

• Procurement
• Implementation
• Onboarding into a system of record
• Optimization
• Renewal or termination

The objective is to:

• Create visibility across the portfolio
• Align licenses with real usage
• Manage costs effectively
• Reduce risk across the environment

In 2025, the need for this discipline has accelerated. Organizations now manage an average of 275 applications and incur annual expenses of $49M. Portfolios are expanding, AI-native tools are reshaping contracts, and decentralized purchasing continues to grow. Lifecycle management provides a structured response through discovery, governance, and optimization.

Key Stages in SaaS Lifecycle Management

The lifecycle of SaaS applications follows a series of predictable stages. Each stage presents opportunities to enhance efficiency and mitigate risk when managed deliberately. The process includes:

• Buying SaaS
• Implementing SaaS
• Onboarding SaaS into a system of record (SMP)
• SaaS optimization
• Renewal or termination

Buying SaaS

The SaaS lifecycle begins with purchasing new software. To reduce risk, unnecessary spending, and over-buying organizations should have a clear purchasing policy in place. Collaboration between procurement, legal, security, and the business stakeholder provide checks that ensure new applications:

• Meet compliance standards
• Align with corporate policies
• Integrate effectively into existing systems

Consolidating procurement enhances visibility and facilitates more effective vendor negotiations. Beginning with SaaS discovery ensures that all applications—whether officially procured or not—are identified before new purchases are made.

Implementing SaaS

Once purchased, applications move into implementation. This step determines how securely and effectively the tool integrates with existing systems. Establishing consistent standards for configuration, security, and data handling ensures compliance and avoids gaps created by fragmented rollouts.

Onboarding SaaS into a System of Record (SMP)

Alongside implementation, a new application should be added to your system of record, like a SaaS Management Platform. Paired with app ownership, spend, and user activity, it becomes a reliable source of truth for stakeholders and enables optimization and renewal planning. Without a central record, contract details and usage data quickly become scattered and difficult to manage.

SaaS Optimization

Licenses and features are often underused, costing organizations millions of dollars annually. Over its lifecycle, an application must be regularly audited and optimized. Optimization involves adjusting license tiers, reclaiming unused seats, and eliminating redundant apps to reduce waste and align spend with business needs.

Renewal or Termination

The end of a SaaS application’s lifecycle is either renewal or termination. Evaluate renewal dates, analyze utilization data, and understand business value to determine whether to renew, renegotiate, or terminate. This stage is where disciplined lifecycle management delivers the largest financial impact—as cost savings can only happen at time of renewal.

SaaS Lifecycle Management Challenges

Building a SaaS Management program introduces its own set of challenges. Common pain points include:

• Partial visibility into software inventory
• Reactive renewal management
• Operational burden from manual processes
• Onboarding employees
• Offboarding employees

Partial Visibility into Software Inventory

Many organizations don’t have a complete picture of their software environment. Shadow IT, decentralized purchasing, and inconsistent reporting make it difficult to track what applications are actually in use. Without full visibility, leaders risk overspending and may miss compliance requirements.

Reactive Renewal Management

Renewals often catch teams off guard. Without proactive monitoring, contracts can auto-renew at higher prices or for applications that are no longer needed. This reactive approach leads to wasted spend and missed opportunities for negotiation with vendors.

Operational Burden from Manual Processes

Even with a SaaS Management Platform, teams face heavy workloads if processes aren’t automated. Managing renewals, provisioning, and deprovisioning across dozens of apps can overwhelm IT and finance resources. Automating these workflows eases the burden, improves efficiency, and reduces the risk of human error.

Onboarding Employees

Onboarding employees into SaaS applications creates additional complexity. Licenses must be provisioned correctly, and access should align with role-based policies. Inconsistent onboarding often results in unused seats, wasted spend, and security gaps.

Offboarding Employees

Offboarding is a common failure point in SaaS lifecycle management. When access is not revoked at offboarding, former employees may still retain access to sensitive systems. This creates both compliance risk and excess cost. Automating offboarding through integrations with HR systems reduces these exposures, but many organizations struggle to maintain consistent processes.

Why SaaS Management Matters Now

The urgency surrounding SaaS Management is expected to continue growing in 2025. Rising costs, decentralized decision making, and rapid adoption of AI-powered apps have changed the dynamics of software ownership and spending. The most pressing challenges include:

• Shifts in technology spending to business units and employees
• Product-led growth
• Shadow IT

Shifts in Technology Spending to Business Units and Employees

SaaS purchasing has steadily moved away from central IT. In fact, more than 70% of SaaS spending is now managed by business units. Individual employees also introduce applications through expense reimbursements or corporate cards. This decentralization enables flexibility but reduces visibility, making it difficult to manage contracts, usage, and security.

Product-Led Growth

Product-led growth strategies enable employees to easily start using new apps without requiring formal procurement. Many SaaS vendors rely on free trials or self-service signups to gain traction within companies.

These models often expand to enterprise contracts, sometimes before IT or finance has visibility into usage. The result is rapid adoption that bypasses traditional controls and accelerates sprawl.

Shadow IT

Decentralized purchasing and product-led growth combine to fuel the growth of shadow IT. About one-third of the average company’s applications fall into this category. Shadow IT creates financial inefficiency by duplicating functionality across multiple tools. It also increases compliance and security risk, as unmanaged apps may not follow corporate policies or integrate with existing identity and access systems.

How to Get Started Managing SaaS

Beginning SaaS lifecycle management requires clear goals, dedicated ownership, and the right tools. Companies that align these elements early are more likely to drive business outcoms. Common steps include:

• Align on business goals
• Choose a SaaS Management Platform
• Establish a SaaS center of excellence
• Prioritize applications by outcomes

Align on Business Goals

Define what SaaS Management should achieve for your organization. Decide whether your top priority is:

• Cost reduction
• Compliance
• Security
• Enabling innovation

Bring IT, finance, and business leaders together to agree on shared outcomes. This alignment ensures the program measures success against the goals that matter most.

Choose a SaaS Management Platform

Stop relying on spreadsheets or legacy software management tools to track applications. Select a SaaS Management Platform that serves as the system of record for contracts, usage, and ownership. Connect it to your procurement and HR systems to build a complete inventory. Use the platform’s insights to negotiate renewals confidently and enforce governance with data.

Establish a SaaS Center of Excellence

Create a cross-functional team that owns SaaS lifecycle practices. Bring in stakeholders from IT, finance, procurement, and security to develop policies, oversee compliance, and drive optimization. Give the group a clear mandate so they can standardize best practices and extend them across departments.

Prioritize Applications by Outcomes

Rank applications based on their cost, risk, and impact. Start with core productivity and collaboration tools, since they often account for the largest spend and present the highest risk. Focus your early efforts on high-value apps to deliver savings and security improvements quickly before turning to lower-priority tools.

The Zylo SaaS Management Lifecycle

Zylo’s Enterprise SaaS Management Framework guides organizations through a phased evolution—from basic discovery to fully operational programs. This structured approach helps teams build confidence, measure progress, and drive business impact through disciplined SaaS management.

The Framework’s Pillars

1. Disciplines define the core areas of activity:
   • Inventory Management
   • License Management
   • Renewal Management
     
2. Capabilities represent functional activities within those disciplines—such as application rationalization and shadow IT tracking (under Inventory Management) or license optimization and cost forecasting (within License Management).
   
3. Tactics and Actions outline the specific tasks—such as setting up governance or automating discovery—that bring each capability to life.
   
4. KPIs track progress with metrics such as spend reduction, increased utilization, and compliance status.

The Crawl-Walk-Run Approach

This framework unfolds in phases that match organizational maturity and capacity:

• Crawl: Begin with visibility. Deploy a SaaS Management Platform to compile contracts, spend, and usage into a central system of record. Prioritize your most critical applications first—typically those with the highest spend or risk.
  
• Walk: Layer in repeatable processes. Onboard additional (Tier Two) applications, apply governance policies, and automate license workflows. This phase shifts the program from a reactive to a proactive approach.
  
• Run: Expand to strategic operations. Scale to all app tiers, optimize for budget with budgeting and chargeback models, and deepen governance across teams.

The Foundation of SaaS Management: Discovery, Documentation, and Ongoing Monitoring

Effective SaaS Management begins with clarity on what tools are in use and who controls them. Without discovery, teams make decisions based on assumptions rather than facts, leaving budgets, procurement, and security vulnerable. Building this foundation requires organizations to:

• Identify every SaaS application within the organization
• Document ownership and responsibility
• Continuously monitor for change

Identify Every SaaS Application Within the Organization

Organizations frequently underestimate their SaaS footprint by nearly 2X—according to Zylo research. Multiple discovery methods can help identify this footprint, each with its pros and limitations:

Manual spreadsheet inventory

Relies on self-reports from technology-owning teams. It often falls short due to delays, inaccuracies, and a lack of continuous tracking.

Cloud access security broker (CASB)

Captures data flows between corporate networks and SaaS providers. However, it misses usage from unmanaged or personal devices, limiting coverage.

Web browser plugins

Installed on company-managed devices to track SaaS services accessed via browser. Lightweight and simple, but easily bypassed through private browsing or non-browser access.

Single sign-on (SSO)

Logs access to SaaS platforms wired through central identity providers. Offers strong visibility for managed apps, but doesn’t capture services outside the SSO environment.

Financial analysis

Reviews expense reports, procurement records, and invoices to uncover apps outside IT’s radar. This method finds hidden deployments across business units, credit cards, and reimbursements.

Blending these methods provides the most accurate picture of a SaaS inventory, especially in complex or decentralized environments.

Document Ownership and Responsibility

Discovery alone isn’t enough. Organizations also need to know who owns each application. Assigning responsibility ensures there is a clear point of contact for:

• Renewals
• Usage tracking
• Compliance

A system of record should document the business owners, IT sponsors, and finance partners associated with every tool. This structure prevents applications from falling through the cracks and establishes accountability for cost management and security oversight.

Clear ownership also streamlines decision making. When renewal negotiations arise or overlapping functionality is discovered, stakeholders know exactly who to involve. Documenting responsibility is especially important in decentralized environments where purchasing decisions occur outside of IT.

Continuously Monitor for Change

SaaS portfolios are constantly evolving. Continuous real-time monitoring ensures:

• New applications are identified
• Identify shadow IT
• Flag applications with weak compliance practices
• Detect underused or inactive licenses before renewal

A SaaS Management Platform provides ongoing visibility into spend, usage, and compliance, alerting leaders when new tools emerge or when utilization patterns shift. This oversight transforms SaaS Management from a reactive process into a proactive discipline.

Future Trends in SaaS Management

SaaS management continues to evolve as organizations adopt new technologies, pricing models, and operating structures. In 2025, three trends in particular are shaping how companies approach lifecycle practices:

• Decentralized management
• Increased prevalence of AI in SaaS
• Hybrid and usage-based pricing

Decentralized Management

Ownership of SaaS has shifted permanently from central IT to a mix of business units and software asset managers. Now that business functions outside of IT manage most SaaS spending, this decentralization requires collaboration between IT, SAM teams, finance, and business leaders. Effective programs combine centralized visibility with distributed accountability, ensuring that each group has the data needed to govern its share of the portfolio.

Increased Prevalence of AI in SaaS

AI features have become standard in SaaS applications, from productivity suites to collaboration platforms. The 2025 Index reported that 66.5% of IT leaders encountered unexpected costs linked to AI pricing models, while 89.4% raised security concerns.

These figures highlight the importance of managing both financial and compliance implications as AI becomes more embedded. Going forward, discovery and contract reviews will need to account for AI-specific usage, licensing tiers, and data-handling requirements.

Hybrid and Usage-Based Pricing

Subscription models are no longer uniform. Hybrid contracts that blend fixed seats with usage-based charges have become common. The 2025 SaaS Management Index indicates that these models are here to stay. For organizations, this means lifecycle management must include forecasting and monitoring consumption patterns in real time to avoid budget surprises.

Moving Forward with Zylo’s SaaS Management Lifecycle

Managing SaaS in 2025 requires more than ad hoc processes. Portfolios are larger, AI is embedded across various applications, and pricing models are changing rapidly. Without structured lifecycle management, organizations risk uncontrolled spend and increased exposure.

Zylo provides the data and framework to manage SaaS with confidence, cut waste, reduce risk, and operationalize SaaS Management at scale. Learn how license management, spend management, and governance equip leaders with the tools to take action. Request a personalized demo with one of our experts for a deeper dive.