Restricted Resources and Budgets: Five Steps to Implement SaaS Cost Management To Save Your Bottom Line

So what’s driving IT costs up? The world is catching up on cloud adoption–and especially SaaS apps. Employees use an average of 110 apps for work, up from eight just five years ago. And for good reason. Apps are useful, they reduce total cost of ownership because they require no internal infrastructure and bill on monthly subscription models. By lowering upfront costs and amortization spend across the subscription term, apps can be far cheaper than traditional software options. Until they aren’t. Now more than ever, SaaS spend management tracking is essential. This requires SaaS app investment tracking, and tracking starts by implementing SaaS management to save the bottom line.

Who’s spending the money?

Apps are everywhere because they’re convenient to deploy, easy to use, and accessible. And that’s exactly the problem. Apps are so accessible that the end users–or average employees–are now software decision-makers. One person discovers a cool app and adoption spreads organically throughout the organization. This decentralized decision-making means that the sales process is circumventing the IT department. Instead, employees within the business unit are spending their budgets. IDC estimates that 70% of US tech spending now occurs from business unit budgets, overpowering IT budgets.

Here’s where the disconnect starts: IT teams don’t track SaaS spend outside of their own budget. So when it’s coming out of the business unit IT teams can’t get a handle on a company’s actual SaaS app license spending. With hundreds of apps possibly flying under the radar, it’s easy for spending to spiral out of control and take a chunk out of the bottom line. 

Unknown costs are lurking in the shadows

Decentralized app decision-making makes it difficult to detect and attribute app ownership and associated costs, which means costs rise without a traceable source. Or, if app sources are tracked, they’re often miscategorized. These apps lurking in the background, also known as shadow IT, have the potential to cost companies thousands of dollars every year. The worst part? As adoption grows, so do expenses. 

Employees often sign up for a free trial of an app, but will plunk down the company credit card to pay once their free trial is over. These one-off licenses not only go undetected, they add up. Think about it this way, if 25 employees sign up for an app that’s $5.99 per month, it costs the company $1,797 per year. Multiply that by five, 10, or even 20 apps and costs could reach $35,940 or more. Not only that, individual purchases mean companies don’t get the benefit of negotiating or buying bulk licenses for a cheaper rate. 

But SaaS costs more than just licenses. IT teams spend valuable time finding shadow IT apps, mitigating security issues, answering support tickets, and just generally dealing with SaaS application operation and maintenance. This can hinder both productivity and morale by bogging IT down with support ticket requests or sending them scrambling in the event of a data breach. With SaaS spend tracking, IT departments can help companies cut costs, save themselves time, and only spend what is necessary, all while still relying on the tech tools they know and love. However, tracking spend requires visibility, which means companies must have a SaaS cost management process in place. 

With SaaS spend tracking, IT departments can help companies cut costs, save themselves time, and only spend what is necessary, all while still relying on the tech tools they know and love.

Why SaaS cost management is essential–and how to do it

The new year–and new budgets–are just around the corner. In the face of economic uncertainty it’s more important than ever to put the right process in place to manage your SaaS costs next year and beyond. Otherwise, the SaaS spend management problem will continue to grow and even overshadow some of your productivity and cost gains. 

Here’s a step-by-step guide to managing costs and reducing spend both now and in the future. 

Step one: Uncover shadow IT

The only way for companies to truly know how much is spent on SaaS is to uncover shadow IT. From emails to credit card statements, every bit of correspondence is a piece of the full SaaS puzzle. Companies can use tools, such as Lumos, to scour emails and discover which apps employees are using, including rogue purchases. This type of SaaS operations automation can help teams see all your organization’s apps in one place. From there, you can see who is using which apps, identify group or department needs, and determine exactly how much your apps cost.

Step two: Find the overlap

Odds are, if there’s shadow IT there’s overlap in your app capabilities. When employees purchase their own apps, they’re only thinking about what they need at that particular moment, not what the company already has. Once you can see all the sanctioned and unsanctioned apps, you can look at SaaS app usage analytics to get to know your stakeholders and determine which apps they actually need. Then you can start the consolidation process by migrating your users to a streamlined number of apps and canceling the rest.  

Step three: See who’s really using what

Even after you’ve whittled down the number of apps your organization uses you’re still not done. Now it’s time to start SaaS app utilization tracking to check which users are currently active, which ones aren’t, and the ones in between. This visibility will allow you to remove licenses when it’s time to renew, reallocate users to the right package or service level, upgrade, and negotiate with your SaaS providers for a better rate. And no, it’s not possible to keep track of numerous users across hundreds of apps. You need automated SaaS Operations so you can see your apps, licenses, costs, and renewal dates. 

‍

Step four: Centralize the buying process (but decentralize access requests)

Once you know what you have and who is using it, you’re good to go…right? Not quite. If you want to manage SaaS costs now and in the future, you need to design a process that will work for the long haul. To prevent shadow IT, you need to centralize the procurement process. A company SaaS app catalog, much like the AppStore, is a great way to show employees a list of sanctioned apps so they aren’t tempted to go rogue. No more on-off app purchases or unsanctioned tools that turn into security and compliance nightmares because everything employees need is in one central location. 

The best part about a company AppStore? It decentralizes access requests by enabling self-service. Employees can browse the catalog of apps that are approved for their particular role, submit their access request, and that request gets routed to the right person. No IT ticket needed. How’s that for streamlined SaaS operations maintenance?

A company SaaS app catalog, much like the AppStore, is a great way to show employees a list of sanctioned apps so they aren’t tempted to go rogue.

Step five: Revisit and review the process regularly 

Organizations change and so do their needs. For the past two years, many employees worked from home. This changed how they worked and the tools they needed to do their jobs. While remote working arrangements may stick for some companies, others may have employees return to a physical location. The point? Needs change. Continual SaaS app monitoring can help you determine if a particular app still fits your needs, adjust licenses, and ensure you aren’t spending more than is absolutely necessary. 

It’s time to streamline your SaaS–and we can help. Let Lumos help you discover shadow IT, gain visibility into your apps, and make the right decisions to benefit the bottom line. Let’s chat.While IT spending typically increases every year, (Gartner predicts IT spending will grow by 3% in 2022) the real question is: Does it have to? The answer is a resounding no.