Excess SaaS Application Buys Risk Budgets, Security

Organizations consumed so many SaaS applications this year that the growth rate almost doubled to 9%, compared to 5.3% in 2019.

That’s according to new statistics from enterprise SaaS management platform vendor Zylo and its third annual SaaS Management Benchmarks report.

In particular, SaaS spending increased 26% between February and April 2020, over the same period a year earlier. The adoption, of course, came as COVID-19 spread and companies sent employees to work from home.

These shifts in SaaS reliance complicate business operations. One in four employees now expenses SaaS, Zylo said, leading to duplicate purchases and redundant functionality. This hurts organizations’ budgeting efforts, makes tracking shadow IT more difficult and can cause friction among staff using different applications.

Nonetheless, at least 10 new applications will enter the typical organization every 30 days, Zylo found, while four applications go dormant.

Overall, the circumstances spell opportunity for managed service providers, VARs, agents, consultants and other partners. Now is the time to help clients control spending and plug SaaS-related security leaks.

Zylo’s Eric Christoper

In this Q&A, lightly edited for length, Eric Christopher, co-founder and CEO of Zylo, talks with Channel Futures about what the discoveries in the report mean for partners.

Channel Futures: What two or three findings most surprised you?

Eric Christopher: 2020 was an undeniably challenging year for enterprises across the world. While IT leaders are cutting their IT spend because of the pandemic, we’ve seen SaaS grow substantially. One of the most surprising findings was that business units and individuals – not IT – are now the primary owners of SaaS. These business units and individuals own 58% of all SaaS spend (value) and 75% of all SaaS applications (volume).

Additionally, organizations had an average of 651 SaaS applications, up from 597 last year. Our customer success managers tell us that customers underestimate the number by 2-3 times, proving the discrepancy between perception and reality. Perhaps because they lack visibility of the true size of their portfolios, many companies are not yet proactively managing SaaS. Until organizations begin to proactively manage their SaaS portfolio, they will face the negative consequences of increasing cost and risk.

These key findings highlight the importance of gathering insights based on hard data and not just survey findings. Zylo’s Discovery Engine has examined more than $300 billion in supplier spend to identify more than $23 billion in cloud-based investments and, specifically, more than $5 billion in SaaS spending. This data serves as the backbone of Zylo’s SaaS management platform – the fuel for our AI-powered Discovery Engine – and the foundation for the annual benchmarks report.

CF: How do you recommend VARs, MSPs, agents and other partners act on these findings?

EC: SaaS purchases are being led by employees and business units, not IT. SaaS not managed by IT is often called shadow IT and has had a negative connotation. Today’s reality is that employee-led purchases – especially with freemium offerings – is the new business model. It’s how new solutions are discovered and shared; it’s how they become the new standard.

Use SaaS management solutions to provide your clients a comprehensive view of which SaaS applications are being used – especially the applications outside of IT’s control. Help your clients identify redundant applications (one of our clients had 48 project management applications!) and choose the right applications for the right users. By giving their employees easy access to the best SaaS solutions, you will empower them to rationalize their SaaS portfolios, reduce costs and improve employee effectiveness.

CF: What SaaS trends do you see partners capitalizing on the most in 2021?

EC: Companies went on a spending spree in 2020 as they rushed to empower remote workers. While 2021 will continue to be a growth year for SaaS as it outpaces the rest of cloud, it will also be a year of discovery, consolidation and ongoing management of SaaS portfolios.

Our report found that in addition to averaging more than 600 SaaS applications, a typical company will see at least 10 new applications enter its environment and four applications exit active use every 30 days. Without an effective way to monitor these dynamic SaaS portfolios, companies will continue to increase costs and risks.

As they work to better manage their SaaS portfolios, companies will invest in technology like Zylo and in people skilled in SaaS management. 2021 will be the year that SaaS management becomes a dedicated role in many more organizations. We also expect the demand for professional SaaS management…

…will grow more rapidly than the ability to hire, so partners offering SaaS management technology and expertise will be highly sought after.

CF: Other thoughts to add?

EC: It’s no question that 2020 threw us a lot of curveballs. The shift to remote work led to a dramatic increase in SaaS spending as employers looked for digital tools that enabled remote work. In fact, compared to the same period (February-April) last year, SaaS spending rose 26%. Some of the most notable investments included web conferencing, IT security and virtual private networks. One of the biggest upsides to come out of this tumultuous year was that for many companies, digital transformation finally arrived. Next year, as workers equipped with advanced digital capabilities are no longer constrained and stressed by a pandemic, innovation, productivity and satisfaction will skyrocket. 2021 is going to be exciting!