Understanding the Hidden Costs of SaaS
Many companies are suffering from cost creep around the SaaS apps their staff install. In this post, we outline how you can identify the hidden cost of SaaS within your organization and how tools like Torii can help. Be sure to read our eBook on SaaS spend management for more information on how you can optimize your SaaS expenditure.
We are increasingly reliant on SaaS apps to help us operate effectively. Businesses struggled to manage SaaS spend even before the Covid-19 pandemic accelerated digital transformation and the use of cloud-based services. Why? Because it's hard to track SaaS adoption across the organization without the right SaaS management tools in place. One Torii customer discovered 700 different apps listed across its organization and saved more than $1 million in SaaS costs after streamlining.
Without proper monitoring, it’s very easy for employees to sign-up for SaaS apps without IT approval. This is called ‘shadow IT’. Given that it only takes a few clicks to install an app or set up an account, the problem of unapproved SaaS apps will keep on growing. A study from Core found a 59% rise in shadow IT during the pandemic, with teams working remotely. As well as hidden license spend, this rise in unsanctioned SaaS downloads also presents a risk to security and compliance, and the associated costs of those.
The challenge is identifying those unused ‘rogue’ licenses so you can transition employees to better options and reduce unnecessary SaaS. Even better, if you categorize the apps, you can understand where you can save even more money and think more strategically about how your company’s IT stack will look in the future.
Where the hidden costs of SaaS comes from
Let’s look at two common sources of hidden SaaS costs:
Without guidance or monitoring, staff can download and install SaaS apps as they please. This could mean that your teams across the organization could be paying for tools that do the same job, effectively paying twice for the same thing. For example, if your company is based on Microsoft Office 365, then there are plenty of tools that you are already paying for.
One Torii customer I spoke to explained how he had to get his organization to migrate away from third-party workflow and collaboration tools, because they already had Microsoft Teams. Not only did the company save money, it also ensured consistency across the organization with everyone active on the same system. This consistency will be essential given the expected rise in hybrid office/remote working practices going forward.
Do you know:
- How many app licenses you have across your organization?
- Whether all of those apps are currently being used?
- When each license is set to renew?
- How much unnecessary SaaS is costing the company?
Many apps come with an auto-renew function, so you could be charged for something you don’t use and not even know that cost is in the pipeline.
That's why it’s absolutely key to have 100% visibility over what SaaS accounts have been set up by your staff, how much use – if any – they get out of those tools, what they cost to maintain, if they deliver value for money and offer a high level of security. It’s time to cut out any SaaS tools you don’t use or need, or – if you do need them – that you’re on the most cost-efficient license for your organization’s needs. This diligence will help prevent SaaS adoption from spiraling with all the associated license and time management costs that come with it.
With tight license management, you can review your licenses regularly to gauge what SaaS apps the organization still requires. This visibility will also enable you to negotiate better rates for those apps from which you get value. One customer told us that his IT team takes a case-by-case approach to app selection and that using Torii helped the company take a data-led approach to SaaS management over the long term.
How to tackle the hidden costs of SaaS
Using Torii’s SaaS management solution makes monitoring and streamlining your SaaS usage – and therefore your SaaS spend – really easy. You can be up and running within minutes.
Our research finds that less than 28% of IT teams use SaaS management tools to understand their SaaS usage and costs. These companies enjoy visibility over the SaaS tools in their tech stack and the associated spend. As well as saving on license costs, with a SaaS management tool, you see financial benefits elsewhere, such as in operational efficiency and more substantial negotiating power for future license adoption.