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The Ongoing Challenge and Opportunity of SaaS License Spend Management

Richard Moy

December 11, 2020

5 minute read

RepurposedSaaSLicencses_featureImage

Last year, we shared the story of one customer that saved $156,000 after it identified 1,300 suspended SaaS licenses. You don’t need to be a mathematician to see that it’s a big deal to find that type of cost saving opportunity. And if you’re like many IT professionals, ensuring that your organization is properly resourced (without wasting money) is always a top priority. But take heart, SaaS license spend management is an ongoing challenge for enterprises everywhere.

In its recent report on the growing need for SaaS operations, Forrester’s analysts agree. They continue by saying, “Identifying unused licenses for repurposing is a big opportunity in this environment.” But it also begs one question: Just how big of a cost-savings opportunity is there?

Let’s explore this question below.

Low barriers to entry reduce IT’s visibility into the SaaS environment

To unpack just how quickly an end-user can sign up for an app, we’ll use me as an example. (Note: This is the part where I state for the record that I’d never actually do this without telling anyone.)

I evaluate a lot of SEO apps for my job, so let’s say that I’ve identified one that will make my wildest dreams come true. This probably won’t come as a huge surprise, but like many SaaS apps, signing up for many SEO products only takes a few clicks.

For this exercise, let’s assume that I’m purchasing this app for five of my colleagues. We’ll also say that each license costs $40 per month and that I’ve agreed to a three-year contract. The math from this point isn’t very difficult. Here’s a quick breakdown:

  • Monthly cost: $200
  • Yearly cost: $2,400
  • Contract value: $7,200

That $7,200 over three years probably won’t bankrupt most enterprises. But if IT doesn’t have visibility into what’s happening here, there’s nothing stopping them from fulfilling a similar request for the same tool and from purchasing it for the same employees that already have it.

It’s also important to remind you that we’ve walked through just one example where one user introduces a SaaS application into your environment without much of a barrier to entry.

Now imagine just five more employees making similar SaaS purchases without IT’s knowledge. If we assume that each of those five employees purchases $7,200 of SaaS apps without IT’s knowledge, suddenly you’ve got a significant budgetary issue on your hands.

It’s easy to see how tricky SaaS license management gets when IT doesn’t have full visibility into the SaaS environment. We haven’t even touched on the endless security risks the low barrier of entry introduces. And while it would be easy to assume that you have a strong grasp of what’s happening in your SaaS environment, even the most experienced IT pros face an uphill battle as the number of users and apps increase.

Untapped opportunities to cut costs and properly allocate licenses

The key to refining your SaaS license spend management is understanding the types of cost-saving opportunities that exist. Typically, redundant apps and licenses come in two flavors:

  • The same SaaS app used in different accounts by different users and teams. When multiple teams sign up for the same app on their own, you miss out on enterprise volume pricing, which is a really easy way to cut costs. Additionally, you’re probably missing out on preferred features, functionality, and support that comes with higher volume SaaS tiers.
  • Different applications that solve the same use case. In addition to all the aforementioned benefits that you miss out on, you also lose out on efficiencies related to SaaS app standardization, like user and IT productivity.

Let’s unpack this by doing some more math. Say your enterprise needs to purchase licenses for 100 users. The marketing team subscribes to 18 seats, the product development team has their 40 seats in a different account, and then the finance and accounting subscribes to 32 seats in a third account. We’ll break down pricing below:

  • Each user is $25/month. The total cost for the whole organization is $2500 per month and $30,000 per year.
  • For this project management app, an Enterprise account threshold is 50 seats, and the per user fee is $18 per user. Separately, in this example, no account qualifies.

When we combine this example into a single Enterprise account that is sanctioned and managed by IT, the monthly cost drops for all users from $2500 to $1800 per month. Annually, costs go from $30,000 to $21,600. So throughout the year, you’d save $8,400 for a 28% reduction.

Not only might this be less expensive for the entire enterprise, but chances are good that you miss out on special features SaaS app vendors offer exclusively for Enterprise accounts. So SaaS license spend management pays dividends in more than just the bottom line.

Understanding the opportunity of SaaS license spend management isn’t rocket science. But how can you uncover these opportunities within your SaaS environment to cut costs while also ensuring that your employees have the tools they need?

Discovering new opportunities to cut costs

When we announced BetterCloud Discover at Altitude 2020, our director of product strategy Peter Bilali said that organizations have an average of 25 redundant categories with two or more apps. This is one of many reasons why Discover is the one of the most important product releases in BetterCloud’s history.

Take a glance at the screenshot below. See the Applications overview?

Notice there are multiple SaaS app accounts for project management and two instances for one of the same project management tools. Clearly, only one of these project management instances has users and this account doesn’t need to be remediated. But that second account with no users? It needs to get eliminated because all it does is clutter up your SaaS environment.

But what if there were multiple users across multiple accounts? Discover would point you to the need to eliminate it.

All you do is sort by Category to explore all of your apps. Not only does Discover give you full visibility into your SaaS environment, but it gives you details about each app. This way, you can work with business functions to determine which apps to make standard throughout the function or enterprise. Of course, the decision to standardize is more than just SaaS license spend management. It’s about choosing the best tool that meets your needs.

BetterCloud’s Discover is an incredibly powerful tool for any IT administrator looking to refine a SaaS license spend management strategy. But it only scratches the surface of what Discover can do for your entire cloud-based organization.

Want to learn more about how BetterCloud can help you discover, manage, and secure your SaaS environment? Schedule a demo.

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