What Business Value Do I Really Get from SaaS Management?
Ben Pippenger: Do you ever wonder, " Why is SaaS so hard to manage? What can I do about it? How can I save money on SaaS? Is product bundling a thing?" You likely have a ton of questions about SaaS management. But frankly, there aren't a lot of answers out there. I'm Ben Pippenger, your resident SaaS expert, and this is SaaS Me Anything, the show that brings clarity to the chaos of SaaS. All right.
Ben Pippenger: Hey everybody, and welcome to our third episode of SaaSMe Anything. In today's episode I'm really excited for we're going to be talking about the business value of SaaS management and how to get the most value out of your company's SaaS management program. When we talk to customers and talk to prospects, their first thought is often ROI, and it's definitely more than that. At Zylo, we look at value with our customers aligned to the four pillars we've talked about. Number one, visibility. Number two, license optimization. Three, cost savings. And number four, risk avoidance. So let's jump in here.
Ben Pippenger: The value of SaaS management depends on your strategic business goals. That could be, like we mentioned in the last episode, that you want to operate more efficiently, that you're wanting to remove risk from your organization, or probably save money as well. All right, so let's dig in then to see what this looks like within each pillar of SaaS management.
Ben Pippenger: We're going to start with visibility. Simply put, you can't manage what you can't see. We find that 9 times out of 10 that organizations are underestimating the number of apps they have and the spend by two to three x. Sometimes even more. That's a big deal because visibility is key to really truly understanding and knowing what applications you have, to knowing what you're spending on those applications, to understand where your organization may be exposed to compliance or security risks. Then also, and probably most importantly, to understanding where you have opportunities to optimize and to really achieve those business outcomes that you're setting out to achieve. A good example of this is a large financial services firm that we work with. They came to Zylo, they told us that they thought they were spending about $100 million on SaaS annually. We plugged in our discovery system, did our work, and we found that they were actually spending $300 million a year annually on SaaS, a gap in$ 200 million in spend. So a pretty big deal when you think about what they thought they knew versus what the truth actually was. So that's a really important one when you think about laying out the value, and the value of a SaaS management program, you got to get the visibility underway.
Ben Pippenger: Next pillar then is around license optimization. This is always pretty eye-opening when people start to realize how much waste there is in SaaS licensing. We've uncovered through our SaaS Management Index that companies are only using about 55% of the licenses they're buying. So either those other 45% are sitting on the shelf never getting provisioned, or they've been provisioned to somebody, but those users aren't actively using those licenses. It's really important that organizations have this level of knowledge and that they're driving better utilization to make sure they're getting the most value out of these SaaS applications that they're spending a lot of money on. We typically recommend that organizations keep about a 90 to 95% utilization rate in order to just make sure you accommodate your needs and you have somewhat of a buffer if you need it. So a good example of this from a customer is that we have a large automotive company, and they were about to invest and purchase about $100,000 in additional Smartsheet licenses. In Zylo, they saw that almost three-fourths of their current licenses weren't actually even being used. So instead of going out and buying more, they pulled those licenses back and reallocated those to the appropriate departments, and they avoided that additional $100,000 in spend.
Ben Pippenger: Third value pillar here is all around cost savings and avoidance. Our SaaS Management Index finds that the average organization wastes about $17 million a year on SaaS. Sort of the scary thing about that is that's current state. Gartner has projected that over the course of the next few years, actually through 2026, that SaaS spend is going to continue to grow 15 to 20% every single year. It's grown so much that we've found that it's often your largest operating expense next to people, next to headcount, and it's ripe for optimization. It's the ideal place to start saving. A good example of this is, a customer of ours, Momentive, they shared with us that over the last three years by acting on optimization opportunities that were surfaced by Zylo and by operationalizing their renewal process, they have allocated about $7 million in cost savings to their SaaS management program. So significant, and legit, and real business value from a great customer, Momentive.
Ben Pippenger: All right. The fourth pillar around generating business value from a SaaS management program is governance and risk mitigation. Through our SaaS Management Index, we found that one in six employees are expensing SaaS applications. That equates to about 37% of your applications. So it's a lot of apps that are going through employee expense and oftentimes just aren't accounted for within organizations. Gartner actually came out with a stat, they call it a strategic assumption, and they're saying that organizations that don't centrally manage their SaaS applications by 2027 are going to be five times more susceptible to a cyber incident. So it's really important when you think about those elements of just understanding what you have and then the potential risks that your business is being exposed to. So you have to put effective governance in place in order to reduce that risk, in order to create the operational efficiencies that you want your business to be running on, and really just to make it overall easier for your employees to engage, and find the applications, and stop them from going out and buying them on their own. A couple good examples here of what we've seen from within our customer base. We have a mid-size and fast-growing software startup. They came to Zylo and they told us they thought they had 70 applications. We did our job, and we found two to three x as we talked earlier. We found 223 applications inside their environment, and that equated to about $12 million in spend. Now, why that is in this pillar is that of those 223 applications, 118 of those apps were software titles expensed by employees. That accounted for about $1.5 million in spend. An employee was purchasing those applications on their credit card, pushing it through the expense system. The IT, and finance, and procurement teams had no visibility to any of those applications, and they were not accounting for them at all. So obviously big risk being exposed to their organization and something they jumped on really quickly to resolve. Second example is with Adobe. Adobe, with the help of Zylo and doing what we do, we came in, helped them uncover all the applications. They found they had about 2, 500 applications in their environment, just a huge amount of apps that were being used. They were able to consolidate those applications into 400 preferred standard SaaS titles, overall reducing redundancy, removing unnecessary costs, and at the end of the day, really delivering a better experience for their employees to find and use the software that's most important to them to get their jobs done.
Ben Pippenger: So what's the bottom line here? The bottom line is, you always need to be focused on the business value, and you do that through always having a source of truth, by optimizing your application adoption and your licenses, by always making sure that you're saving money, and reducing risk from your organization. I'll leave you with this quote from our customer and previous podcast guest, Jason Owens, at Salesforce.
Jason Owens: If we could get this story out to more people about how transformative software asset management, particularly in the SaaS space, that more people would say, " Oh, we really need to invest in this for our business because we can leverage that money and then unlock value and put it into things that are transformative for the business rather than just spend.
Ben Pippenger: Do you have questions about SaaS and how to manage it? Submit your questions at the link in the show notes. And tune in next time for more answers from your trusted source of SaaS management insights and trends. Go ahead, SaaS Me Anything.
We get it. You’re doubting the impact SaaS management can have on your business. It’s not just about the tactical things, like optimizing licenses, managing contracts, or putting governance in place. It has the power to drive significant financial and operational value when tied directly to your company-wide business objectives. In this episode, we explore the business value you can expect from implementing SaaS management at your organization.
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- [00:44 - 01:13] Overview of the Four Pillars
- [01:15 - 02:14] Visibility
- [02:50 - 04:02] License optimization
- [04:02 - 05:03] Cost savings and avoidance
- [05:03 - 06:58] Risk mitigation
- [07:01 - 07:53] Adobe and the bottom line
SaaSMe Anything is the bi-weekly podcast that brings clarity to the chaos of SaaS, hosted by your resident SaaS expert and Zylo co-founder Ben Pippenger. Connect with Ben on LinkedIn here.