Gartner estimates that 30% of spending on subscription services is wasted.
Spending on software-as-a-service is only going up especially after more and more companies turned to these easy-to-deploy solutions when work went 100% remote in March 2020. Now that the dust has settled somewhat, it's time to review all those subscriptions and assess what's being used and what's being wasted.
Gartner estimates $102 billion was spent on SaaS in 2020, according to Roger Williams, a research vice president.
"We assume based on our client discussions that over 30% of that spending goes unused," Williams said. "We see over $30 billion of value that solutions could help business leaders find through reducing SaaS waste, and that will continue to grow as SaaS adoption grows."
Zylo co-founder and CEO Eric Christopher said his company has found that companies have an average of 600 SaaS subscriptions. Zylo provides a SaaS platform to help organizations get control of these subscriptions and find ways to cut costs.
Christopher said he recognized this problem in previous roles when he was selling marketing software.
"I saw firsthand the amount of applications that are being purchased and used by sales and marketing people and I started to realize that it wasn't just the marketing space—it's every category of software," he said.
Forrester Principal Analyst Bill Martorelli said that managing the resulting "SaaS sprawl" has become more important, and that includes managing SaaS expenditures.
Christopher said that many employees start using a SaaS application via a free trial and expense the cost once the trial period ends.
"Our average customer has over 600 subscriptions and it's not organized or tracked," he said.
In a 2020 SaaS Management Benchmarks report, Zylo found that the most common types of redundant purchases are platforms that provide these services:
- Digital asset management
- File storage and sharing
- Project management
- Team collaboration
- Sales intelligence
- Training and e-learning
Christopher said that tracking SaaS usage also helps the finance department manage costs.
"We've found that most IT and finance groups only see 40% of the investment in apps and cloud subscriptions because marketing and sales and HR are moving very fast and buying a lot of tech," he said. "IT by nature doesn't have full visibility."
Christopher estimates that companies are 30% over-deployed or underutilized when it comes to SaaS usage.
"It's really hard to control costs when you don't know what you have and there's also a lot of risk," he said.
Zylo starts with an inventory of a customer's SaaS subscriptions organized by department and function. After 30 days of monitoring activity, the team makes recommendations about consolidating or discontinuing subscriptions.
"Our service Integrates into financial systems and SaaS systems themselves so we know what's being paid for and what's being used," he said.
Zylo's platform includes a dashboard to review overall usage and a software directory so employees can see existing subscriptions. Christopher said that Zylo's platform also can help IT departments identify shadow IT specific to SaaS applications.
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