A Practical Guide to Conquering SaaS Waste

Did you know that the average company throws away millions of dollars each year on unused or underutilized software licenses? That’s money down the drain—money that could be invested in growth, innovation, or simply improving your bottom line. In today's digital age, businesses of all sizes rely heavily on Software as a Service (SaaS) applications to streamline operations, improve collaboration, and boost productivity. While SaaS offers numerous benefits, its rapid adoption, particularly during the pandemic-induced shift to remote work, has led to a growing problem: SaaS waste.

This post will delve into the hidden costs of SaaS waste, uncover its common causes, and provide you with actionable strategies to regain control of your SaaS spending and optimize your software portfolio.

The Hidden Costs of SaaS Waste

The financial impact of SaaS waste is staggering. Companies wasted an average of $18 million on unused SaaS licenses in 2023, a 7% increase from the prior year. Organizations with 1,000 to 2,000 employees wasted an average of $3.3 million on underutilized licenses, while those with over 2,000 employees wasted $4.3 million. These numbers highlight a significant financial drain that can impact a company's profitability and growth prospects.

Beyond the direct financial losses, SaaS waste carries additional hidden costs:

• Security Risks: Unsanctioned SaaS applications, often referred to as "shadow IT," can introduce security vulnerabilities, making your organization susceptible to data breaches and cyberattacks. When employees use unapproved applications, IT departments lack visibility and control, increasing the risk of compromised data and regulatory violations.

• Compliance Challenges: Using SaaS tools that don't meet industry-specific compliance standards can lead to legal and financial repercussions. For instance, if your company handles sensitive healthcare information and uses a non-compliant SaaS application, you could face hefty fines for violating regulations like HIPAA.

• Hidden Productivity Drain: Juggling multiple SaaS applications with overlapping functionalities can lead to workflow inefficiencies. Employees may waste time switching between different tools, searching for information, or duplicating efforts. This complexity can hinder productivity and create frustration.

Unmasking the Culprits: Why SaaS Waste Happens

Understanding the root causes of SaaS waste is crucial to developing effective mitigation strategies. Here are some common culprits:

• Hasty Purchasing Decisions: The pressure to quickly adopt new technologies, especially during times of rapid change or crisis, can lead to rushed purchasing decisions. Companies may purchase SaaS applications without adequately assessing their needs, researching alternatives, or considering long-term implications.

• Lack of Visibility and Control: Without a centralized system to track SaaS usage and spending, organizations often struggle to gain a clear picture of their software landscape. This lack of visibility makes it difficult to identify unused licenses, redundant applications, or opportunities for cost optimization.

• Shadow IT and Maverick Buying: When employees purchase software without IT department involvement or approval, it creates "shadow IT." This practice poses significant security and compliance risks and can lead to uncontrolled spending on applications that may not align with business needs or existing IT infrastructure.

• Failure to Revoke Licenses: A common oversight is the failure to deactivate licenses when employees leave the company or change roles. These inactive licenses continue to incur costs, contributing to unnecessary SaaS spending.

Turning the Tide: Strategies to Combat SaaS Waste

Fortunately, organizations can take proactive steps to minimize SaaS waste and optimize their software investments. Here's how:

1. Implement a Formal SaaS Purchasing Process

A well-defined SaaS purchasing process ensures that all software acquisitions align with business needs, meet security and compliance standards, and are cost-effective. Here’s a framework for a structured process:

• Identify the Business Need: Clearly define the problem you're trying to solve or the opportunity you're trying to capitalize on.
• Research and Evaluate Solutions: Explore available SaaS options, compare features, pricing, and vendor reputation.
• Conduct Security and Compliance Reviews: Ensure the chosen application meets your organization's security policies and industry-specific compliance requirements.
• Negotiate Pricing and Contracts: Work with the vendor to secure the best possible pricing and contract terms. Consider factors like the number of users, desired features, and length of the contract.
• Obtain Final Approvals: Establish a clear approval process that involves IT, finance, legal, and other relevant stakeholders to ensure alignment and accountability.

2. Embrace SaaS Management Solutions

SaaS management platforms offer a centralized hub for managing your entire SaaS portfolio. These tools automate license tracking, identify unused licenses, provide spending insights, and streamline vendor management. Key benefits include:

• Automated Discovery and Inventory: Automatically identify and catalog all SaaS applications used within your organization, eliminating the need for manual tracking.
• Usage Monitoring and Optimization: Track application usage to identify underutilized licenses, optimize subscriptions, and ensure you're paying only for what you need.
• Spend Control and Budget Management: Gain visibility into SaaS spending, set budgets, and receive alerts when costs exceed thresholds.
• Streamlined Vendor Management: Centralize communication with SaaS vendors, manage contracts, renewals, and ensure compliance with agreed-upon terms.

3. Assign App Ownership

For every SaaS application, designate an individual as the "App Owner." This person is responsible for the application's lifecycle within the organization, ensuring its proper utilization, license management, and alignment with business needs. Key responsibilities of an App Owner include:

• Usage Monitoring: Regularly track how the application is being used within their team or department.
• License Management: Ensure the right number of licenses are active, deactivate licenses for users who no longer need access, and request license upgrades or downgrades as needed.
• Renewal and Cancellation: Manage renewals or cancellations based on application usage and business needs.
• Adoption and Training: Promote application adoption within their team, provide training, and address user questions or concerns.

4. Create a Structured Offboarding Process

When an employee leaves the company or changes roles, it's crucial to have a system in place to promptly revoke access to SaaS applications and deactivate their licenses. Here's a basic offboarding checklist:

• Identify all SaaS applications the employee has access to.
• Deactivate the employee's account in each application.
• Revoke their license to prevent further charges.
• Transfer data or ownership to another employee if necessary.

Automating this process through your SaaS management platform or HR system can ensure consistency and prevent oversights.

5. Conduct Regular SaaS Inventory Reviews

Schedule regular SaaS inventory reviews, ideally quarterly or biannually, to assess your software portfolio, identify optimization opportunities, and ensure alignment with business needs. Here's a step-by-step approach:

• Gather Data: Use your SaaS management tool or create a spreadsheet to list all active SaaS applications, their associated costs, usage data, and app owners.
• Analyze Usage: Identify applications that are underutilized or unused. Look for patterns of low usage or duplicate functionalities.
• Assess Need: Evaluate the necessity of each application based on current business needs. Consider whether an application can be replaced with a more cost-effective solution or if its functionality is covered by another tool.
• Optimize Licenses: Downgrade licenses to lower tiers for applications with low usage or negotiate with vendors for better pricing based on your actual needs.
• Consider Consolidating or Cancelling: For redundant or unnecessary applications, explore options to consolidate into a single platform or cancel the subscription entirely.

Beyond Cost Savings: The Broader Benefits of SaaS Optimization

Optimizing your SaaS portfolio goes beyond simply reducing costs. It can lead to:

• Enhanced Security Posture: By reducing shadow IT and ensuring all applications meet security standards, you strengthen your organization's defenses against cyber threats.
• Improved Compliance Adherence: Using approved and compliant SaaS applications minimizes the risk of violating industry regulations and incurring costly fines or penalties.
• Increased Employee Productivity: Streamlining your SaaS portfolio reduces complexity, making it easier for employees to find the tools they need, access data efficiently, and collaborate effectively, leading to improved productivity.
• Better Collaboration and Data Integration: A well-managed SaaS ecosystem facilitates better data sharing and integration between different applications, leading to more informed decision-making and improved business insights.

Conclusion

SaaS waste is a pervasive problem that can significantly impact your organization's bottom line and operational efficiency. By implementing the strategies outlined in this post, you can regain control of your SaaS spending, minimize security and compliance risks, and free up resources for strategic initiatives. Start by conducting a thorough SaaS inventory, establishing a formal purchasing process, and exploring the benefits of SaaS management solutions.

AlphaSaaS can help you take proactive steps to address SaaS waste, optimize your software investments, improve productivity, and drive business growth.