Globally, the spending on end-user software is projected to exceed $315 billion; however, on average, an enterprise cannot see one-third of its active applications. Therefore, the big strategic challenge for executives to overcome is not about how to purchase software anymore — the challenge has become how to govern a highly decentralized tech stack while keeping business operations from slowing down.
This guide describes what an organization needs to have the proper operational model for SaaS management, including what data flows, structures, and metrics will help turn blind spending into a controlled asset.
What SaaS Management Really Is
Most definitions define SaaS management as a tool for locating software, however SaaS management is actually a cross-organizational business model for managing spend, access, and governance of security.
SaaS management creates the essential connection points between the identity provider, financial records, and contract data, resulting in a single source of truth for the organization.
Without a single source of truth for SaaS, the risk of immediate operational issues is substantial. Data indicates that organizations without a centralized software management system are five times more likely to experience a data breach.
Additionally, organizations without a centralized system waste up to 30% of their software budgets on tools that are either underutilized or redundant.
The Difference Between SaaS Management and Old Tracking Tools
Traditional software asset management (SAM) and IT asset management (ITAM) are both built around the deployment of on-premise hardware and the sale of perpetual licenses for software. Traditional SAM and ITAM track devices and stationary deployments.
However, web-based applications are proliferating through employees' personal credit cards, thus creating a shadow IT ecosystem that traditional SAM solutions simply cannot see.
Therefore, modern SaaS management solutions connect directly to single sign-on (SSO) tools, such as Okta and Microsoft Entra ID.
Finding Hidden Software Subscriptions
Expenses aren't just the cash you spend. They're all the digital tools you purchase, subscribe to, and use. Companies of an average size (800 employees) have 141 web applications running at any given time.
Each employee typically uses 44 separate tools to do their job. No single person can manage all that without SaaS management.
More than 60% of all IT teams still do all of this manually, tracking who has access to which app using just a basic spreadsheet. Companies like LeanIX, BetterCloud, Zylo, and ManageEngine are changing this game by using automated data feeds to manage people instead of spreadsheets.
Getting Total Software Visibility
To see how well you're managing your applications, you need to look at multiple sources of data. Companies are creating total software visibility by looking at employee identity information, browser extensions, and financial data to provide a complete picture of every application being used across the company.
Being able to see everything will expose any tools that were purchased outside of your standard procurement process.
By identifying those applications early, you'll be able to mitigate security risk and eliminate unnecessary duplicate financial costs.
Automating the Software Lifecycle
When an employee leaves the business, IT must remove their access from everything immediately. By having one central place to automate this process, IT can deprovision across multiple systems at once.
This reduces security risk because it eliminates orphaned accounts, and it frees up user licenses for use by new employees without the need for additional purchases.
A 90-Day Plan to Start SaaS Management
When implementing a software management platform, it's advisable to implement a phased operational process. Although some vendors can conduct an initial discovery in 24 to 48 hours, enterprise implementations usually require four to six weeks.
In order for the implementation to be successful, it is recommended that you implement on a 90-day timeline.
Month 1: Full Visibility and Accountability
The first 30 days will be dedicated to data gathering. Use a connection from your management platform to the identity provider, ERP, and HR systems.
You will need to identify each application that is discovered in the list of applications with a specific business owner who will act as the primary lead for budgeting and security-compliance purposes for that application.
Month 2: Creating Workflows and Processes
In this month, you will develop the process for how IT, finance, and security will work together to define new requests for software and how those requests will be approved.
When a department head submits a new project management tool request, that workflow will first check the inventory of all applications to determine whether or not there is any licensing available.
Month 3: Fixing Renewals and Costs
On day 90 of this process, focus on recovering the capital costs of software. Create a central calendar that lists all upcoming software contract renewals.
All software renewals must have some type of actual usage data associated with them; therefore, finance and procurement will need to verify actual usage data before approving any renewal. If a department has only used 40% of their purchased seats, their contract will need to be reduced in size.
How to Measure Success
Without measuring any element of a business operation, you cannot manage it—most successful operating models utilize metrics to measure performance, not vague plans.
Avoid terms such as "cost savings." Focus on specific operational changes that will improve your business.
App Coverage and Visibility Rate
Track the % of applications fully integrated into your SaaS management system compared to the remaining % of applications that have yet to be integrated.
High coverage means that every user that interacts with the organization on a transactional level can be seen by the security team, and the finance team can see what is being spent on a transactional basis.
Unused License Rate
This metric measures the difference (or gap) between the number of purchased seat licenses (the number of employees that an organization is entitled to license) and the number of active employees using the software (the number of employees that an organization has actually licensed).
To better manage software waste, organizations should attempt to mitigate this issue directly by lowering the unused license rate and conducting a thorough analysis of their purchase behavior.
As part of their purchasing process, procurement teams will perform an analysis of this metric 60 days prior to their major contract negotiation/renewal.
Offboarding Completion Time
Organizations need to track how long it takes to completely remove system access for all users once an employee has exited the organization and/or to disable all accounts of an employee who has been terminated from the organization.
A mature automated workflow will complete this process within a few minutes, as opposed to days. Therefore, this metric demonstrates the enhanced security value of using a centralized management workflow.
Organizing Your Software Spending
Cloud-first strategies are projected to be used by 85% of enterprises. Software will continue to grow in volume through decentralized means. This approach requires organizations to view application sprawl as a strategic failure and adopt centralized SaaS management platforms to assist in creating a single source operational view of identity, finance, and usage data.
Organizations that create and implement these automated workflows will create a higher security level and maximize their capital efficiency, while organizations that continue to track application usage manually will experience higher costs as well as increased security issues.
Common Questions About Software Operations
What steps can we take to avoid overlapping capabilities when departments choose to purchase their software?
Before approval for any new software purchase, organizations should have a policy that requires all department managers to check the centralized software catalog prior to making their decision.
For example, if a marketing department manager wants to purchase a new design tool, the management system will simultaneously flag if the design department already has any unused licenses for that type of software (if applicable), preventing duplicate spending at the time of purchase.
What is the primary reason for delayed completion of the software offboarding process?
The primary reason for delays in the offboarding process is that most organizations have fragmented ownership and rigid dependence on manual ticketing to revoke user access upon termination from the organization.
When an employee exits the organization, IT is required to log into potentially hundreds of different systems manually to revoke access to all the employee's accounts. When a centralized SaaS management platform is used in conjunction with an identity provider, all accounts for an employee can be closed simultaneously and automatically.
Why are finance teams often unable to accurately forecast the renewal costs of their software contracts?
Most finance teams do not have direct visibility into the actual usage of the software. They only see the financial expenditure of the software but do not know if employees are actually using the software.
By linking actual usage metrics of software directly to the renewal calendar, finance teams can better determine if it is advisable to downsize or remove a software line item based on factual information rather than just inputting the same amount of funding for the current year as has been input in the previous year.
