Organizations can expect to spend almost $10,000 per employee on software as a service in 2023, according to a new study by SaaS management company Productiv. The year-over-year review from 2021 to 2023 surveyed 100 million SaaS licenses using Productiv’s own services, primarily within the United States.
- Which SaaS apps do organizations use the most?
- SaaS spending rises even as governance improves
- Some SaaS hides in the shadows
- Organizations slowly cut down on unused apps
- ChatGPT makes waves among shadow SaaS
- Changes in SaaS spending: Contract lengths shorten
Which SaaS apps do organizations use the most?
The average department now uses an average of 87 SaaS apps, a growth of 27% between 2022 and 2023. The five most popular SaaS apps overall are:
- Atlassian Cloud
This list has remained mostly the same since 2021, with the five apps listed above swapping places but remaining in the top five. Zendesk is another popular app among customer success teams, while Figma appears in the top five for engineering teams.
Engineering teams tend to use the most SaaS apps, with an average of 108 apps. The IT and security teams saw the most growth in SaaS app usage between 2022 and 2023, with an increase of 33% mostly in point solution and ROI tools.
SEE: Discover how software as a service impacts your business.
SaaS spending rises even as governance improves
SaaS adoption continues to rise gradually. The average SaaS portfolio grew by 32% over the past two years.
When broken down by the size of the organization, the data shows that:
- Small and medium-sized business SaaS portfolios grew by 5%.
- Mid-market portfolios increased by 41%.
- Enterprise portfolios increased by 49%.
“Our data demonstrate the path to immediate action for CFOs is to better identify and consolidate SaaS apps, given the cost reduction pressures currently facing every company,” said Jody Shapiro, chief executive officer and co-founder of Productiv, in a press release. “Buying and renewing software never stops, but the best procurement practices require collaborative decisions using data across IT, procurement, finance and functional leadership on what software to purchase, renew, downsize and consolidate.”
SEE: Download this customizable software procurement policy from TechRepublic Premium
Some SaaS hides in the shadows
Shadow SaaS are apps purchased and used by employees outside of the approval and knowledge of the IT team. IT may not know how much these apps cost, how they are used or to what extent they are used.
The most common shadow SaaS apps are Evernote, Coursera and Canva.
The amount of shadow SaaS in organizations decreased between 2022 and 2023, showing that organizations have become more aware of the bloat and more effectively took governance actions to reduce sprawl. However, shadow SaaS may still account for more than half (51%) of the applications in the average SaaS portfolio.
Productiv detected shadow SaaS apps using Google Social Login and employee expense reports.
Organizations slowly cut down on unused apps
Another area in which organizations can improve efficiency in terms of what SaaS they use is reducing unused apps. Of the surveyed organizations, 53% of SaaS licenses went unused. License usage increased slightly (2%) from 2022 to 2023. Companies using more apps per category and increasing license usage at the same time suggest organizations are improving their rationalization and consolidation efforts, Productiv said.
The apps with the lowest percentage of license usage are Greenhouse, Asana and Jira. Productiv noted that no one type of app dominated the list of unused licenses.
ChatGPT makes waves among shadow SaaS
The trendy AI app ChatGPT could count as shadow SaaS if employees use the free or subscriber tiers without IT being involved.
“Given our report reveals widespread shadow use of ChatGPT, it’s time for companies to figure out how to foster innovation using ChatGPT without security risks,” said Aashish Chandarana, chief information officer of Productiv, in a press release.
In the cases Productiv found, employees most often use ChatGPT for writing emails and marketing content, summarizing meeting notes, researching issues, writing code and finding coding bugs. The marketing, engineering and product departments use ChatGPT the most.
Changes in SaaS spending: Contract lengths shorten
As more companies move to remote work, many find that shorter (one-year) contracts are preferable because they allow for more flexibility. Reducing contract lifetime is also a way for organizations to reduce overhead costs.
One-year contracts accounted for 79% of all contracts in 2020 and 85% of all contracts in 2022. Three-year and longer contracts declined the most year-over-year.
In 2023, SaaS spend per employee averaged $9,643. Large businesses spent an average of $7,492 per employee in 2022, while medium-sized businesses spent $10,045 and small and medium-sized businesses spent $11,196. The large businesses spent less because they received volume discounts and enterprise-wide licensing agreements, as well as better efficiency of scale with consumption-based apps, Productiv said.
“To avoid shadow IT, organizations need to develop appropriate SaaS governance policies that help teams take their free and purchased apps out of the shadows and ensure the right level of corporate policies for procurement, security and compliance,” Chandarana said.
SEE: Download this customizable shadow IT policy from TechRepublic Premium
When it comes to consolidating SaaS, organizations should be sure that the IT, finance and procurement teams are working from the same data to prevent shadow SaaS from creeping in, Chandarana said.
“Having a granular understanding of what software you own, how it is being used down to the team and feature level will enable you to make smart decisions that drive value from your software stack and make a meaningful contribution to productivity, financial efficiency and business growth,” he said.