There’s no doubt that the employees within your company are diligent, hard workers. But when it comes to them taking it upon themselves to procure new SaaS applications — which many do — it can cause more problems than it solves.
This is because unauthorized software procurement, also known as maverick or rogue spending, often leads to a lack of visibility into spending and contracts. Without this oversight, your business is ultimately at risk of both financial and compliance issues.
So, what’s the solution? In other words, how can you prevent it?
To answer that, we first need to understand what exactly maverick spending looks like and how it’s costing your business.
What is maverick spending?
Maverick spending, also known as rogue spending, can be defined as any purchasing that takes place within an organization, outside of an established procurement process.
In the context of SaaS, maverick spending refers to the acquisition of cloud-based software solutions that are purchased unbeknownst to the finance, IT or procurement teams, and in a way that does not comply with the organization’s formal IT procurement process — and so may not be approved, vetted, or appropriately documented.
What’s the difference between maverick spend and tail spend?
Maverick and tail spending each refer to purchases that fail to pass through official procurement channels at a company.
However, while tail spend refers more generally to purchases that are deemed too frequent or low-value to warrant monitoring by the company, maverick spending is usually described as one specific type of tail spend — the kind that is committed by individual employees and is largely unknown by the organization.
Causes of maverick spending in SaaS
So, what’s causing individual employees to go out of their way to purchase their own software applications?
Unmet software needs
The average organization deploys 110 different tools — but with SaaS offering solutions for every business function from sales outreach to financial auditing, chances are that there’s a gap somewhere in your portfolio that could be filled by a piece of software.
And if employees are feeling the effects of a missing tool, they’re more likely to go and purchase it for themselves — particularly if it’s one they’re already familiar with.
The problem with this is that the required functionality may already exist within your SaaS stack. But without solid documentation in the form of a SaaS system of record, you could end up with costly redundant apps causing feature overlap, or even duplicate tools.
No clear process for procurement
Maverick spending can also happen for the simple reason that there is no one delegated authority for procuring new SaaS systems. While some companies have dedicated procurement teams, others leave it to the IT department, CFO, or even department heads to purchase new software for the organization.
Without a clear process — or when employees aren’t aware of what the procurement process is but have access to a company card — they’re likely to take it upon themselves to make the purchase, often even with their manager’s permission. In fact, this is particularly common when teams or individual employees need fast access to a tool.
The bottom line is, even if there are procedures in place for for procuring software, it’s important that everyone across the business is aware of it and that it’s a truly robust and streamlined process.
If it’s not, you could be inadvertently enabling maverick buying.
Examples of maverick spending in SaaS
If you’re looking to prevent maverick buying, you’ll need to know where it could be taking place within your organization.
Here are some examples:
Cloud storage solutions
Research from Gartner shows that the actual cloud usage across the average organization is approximately ten times the known use, with staff utilizing personal systems in addition to approved software to handle company data.
So, even if your organization uses Microsoft OneDrive for cloud file storage, individual employees may be storing sensitive information on Dropbox.
Communication platforms
Beyond sanctioned video conferencing and messaging suites, employees may use external communication platforms to liaise with colleagues or external stakeholders.
For example, if your company’s standard communication tool is BlueJeans but a client uses Zoom, teams might purchase a subscription to the latter.
Project collaboration tools
Apps for workflow management and collaboration are notorious for becoming redundant SaaS within an organization’s tech stack, as departments typically use different tools to collaborate.
Case in point, even if your development team already has a subscription to Asana, staff from marketing might independently purchase a Monday.com license for the same purpose, not realizing that the company is already subscribed to a viable tool.
The cost of maverick spend
At this point, you might be realizing that maverick spend can crop up just about anywhere across your SaaS stack. But the question is, what consequences could it have for your organization?
Wasted SaaS spend
If employees are procuring their own software for work purposes, there’s a good chance that they’re not using the products that your company is already paying for. This can contribute significantly to wasted spend.
In fact, our data shows that as many as a third of all software licenses are either underutilized, or barely used by the intended employees.
Plus, it’s usually cheaper for organizations to purchase extra licenses for products that they already subscribe to than procure additional tools. This means that any maverick spend expensed to the company will drive wasted costs up further still.
Security risks
Maverick spending is associated with shadow IT — the use of SaaS products within the company that are not sanctioned, or sometimes even known about, by the organization’s IT department. Unfortunately, there are security risks associated with rogue applications, as these tools can render company data significantly more vulnerable to breach.
This is because personal tools are generally not vetted to ensure that they meet security and compliance standards.
And with many of the applications that employees use on a daily basis holding sensitive customer information, business logic, and proprietary data, shadow IT systems can be costly for both security and finances should a data leak take place.
Loss of buying power
Software purchasing at the employee level dilutes company buying power. Higher volume usage can often be used as leverage when negotiating your software contracts, to secure extra bandwidth or other contract terms for a lower price. But when employees purchase and use their own systems, these advantages disappear.
This is because your company is likely to be subscribing to a lower tier of subscription for a given app on account of its reduced usage, and individuals may also be purchasing from non-preferred vendors.
Maverick buying may also result in undocumented contracts that the organization doesn’t know about. This means that you could be missing out on opportunities to negotiate contract terms, or be caught out by pending auto-renewals draining your budget.
How to prevent maverick spending
The most effective way to prevent maverick spending is by having a centralized procurement process, something that ultimately relies on effective SaaS management.
At Vertice, we not only provide you with total visibility of your software portfolio, but we also take the burden of buying, renewing and managing SaaS off your hands, while streamlining the process and requiring minimal input from your end.
But that’s not all we do.
With access to pricing and discounting data for more than 13,000 global software providers, we can secure you the best possible deal on any SaaS contract. In fact, we guarantee you savings on your annual software spend.
See for yourself how much you could be saving with a free cost-savings analysis, or alternatively browse through our extensive vendor database for pricing insights for thousands of SaaS providers.
