Unmanaged SaaS applications: the risks, costs + solutions
Anna Markowska | JAN 12, 2023
As a global recession looms and the pandemic’s legacy lives on, businesses are fighting tooth and nail to minimize their operational costs. But one obstacle that both CIOs and CFOs need to be aware of is wasted SaaS spending, which threatens to push up organizational outgoings.
It goes without saying that, for many businesses, SaaS is a lifeline. Cloud-powered software tools are capable of boosting productivity and streamlining vital business functions, revolutionizing every process from project collaboration to customer relationship management.
However, for all of their benefits, taking on too many of these useful tools could have ramifications for your business expenditure when SaaS prices are on the rise. In fact, our data tells us that 90% of businesses are overpaying on SaaS by as much as 20-30%.
But how is this the case? One important part of the answer lies in unmanaged SaaS applications.
If you’re unfamiliar with the concept, read on as we explain what unmanaged software entails, its consequences, and some of our top recommendations for managing your SaaS stack.
What is meant by unmanaged SaaS applications?
Software licenses and subscriptions that go ungoverned in your organization’s tech stack are considered “unmanaged” applications. This could refer to applications that haven’t been purchased by the organization, those that haven’t had their terms correctly documented, or even applications in use without the company’s knowledge.
So, how do SaaS stacks become unmanageable?
Unmanaged software typically arises due to tool use outside of the company’s knowledge or control. There are several common ways that this might occur:
Decentralized SaaS procurement
Individual teams or employees making their own software purchases can cause a company’s SaaS portfolio to quickly proliferate out of control. This typically occurs when there is no central team or structure in place to facilitate new IT procurement, leading to individuals taking it upon themselves to make new SaaS investments.
As decentralized procurement takes place, there is a distinct lack of coordination in the company’s purchasing behavior. This can lead to an unmanaged software portfolio that fails to function as effectively as it could. Inadequate procurement systems may also lead to individuals making SaaS purchases without the informed consent of the IT and finance teams within the organization, which is known as shadow IT.
Decentralized purchasing and shadow IT are especially prevalent following the rise of the distributed workforce. With many companies now employing hybrid or fully remote working policies, more employees are taking it into their own hands to find and use the software that works for them. So much so, that one Gartner report estimates actual company cloud usage at 10 times its known usage — with each member of staff using or subscribing to their own set of tools.
As a result, distributed workforces have helped to facilitate a rise in cumbersome shadow IT, with consequences for business productivity and expenditure.
Poor stack visibility
Alternatively, even when software is approved for purchase by the relevant teams, it can quickly become unmanaged SaaS if it is not appropriately documented. This is especially pertinent for large organizations that operate across a number of different teams, structures, or premises.
Without a central knowledge base that keeps track and regularly updates records of SaaS in use at the company, it’s easy for an organization to lose visibility of which tools are being used, who’s using them, and on what terms they are being renewed. As a result, software may go unused or forgotten about, even if it’s still being paid for.
The consequences of unmanaged SaaS applications
So, there are a number of ways by which that software can inadvertently become unmanaged over time. But what knock-on effects could this have for your business? If you’re looking to reduce costs, you’ll want to consider how an unmanaged software portfolio can result in increased and wasted spending.
These are the main consequences to watch out for:
When companies take on multiple applications that fulfill the same purpose, it’s known as SaaS duplication. This is not only fuelled by the increased autonomy of individual departments within an organization to purchase their own software, but the market trend of certain types of software growing increasingly saturated.
SaaS duplication is especially prevalent within project collaboration software. As employees move between jobs, roles, and different suites of applications at different companies, many will develop their own preferences to manage their workflow. Some may favor Asana, whereas others prefer Monday.com — and as a result, teams could find their files, tools, and important data scattered across several different applications procured for the same purpose. In fact, one study estimates that up to 95% of project managers are still using two or more tools to manage projects.
So, organizations may be unwittingly wasting more budget, time and resources procuring multiple different licenses when they could be using and paying for just one piece of software.
An unmanaged SaaS stack can also result in the lesser-used applications, and by extension, their contracts, falling by the wayside. This is hardly surprising, considering that the average organization now deploys an average of 177 SaaS applications — but our data suggests that companies are overspending on and under-utilizing their SaaS tools.
Upon inspection, you may discover that some of the applications in your software portfolio are receiving just a fraction of the utilization that you are paying for. When this happens to more visible assets, businesses will often cut out those that aren’t providing a sufficient return on investment — for example, many chose to terminate their physical office contracts during the Covid-19 pandemic. However, when organizations have reduced visibility on a particular asset, such as unmanaged SaaS applications, it can be easy to forget that they are there — still ticking over, and still being paid for.
This is especially prevalent for auto-renewing contracts. Without due notification that a subscription will roll over year after year, many organizations find that they are inadvertently continuing to pay for a plan even once they’ve migrated to a new tool for a given business function.
An unmanaged software portfolio paves the way for tool use that infringes on security or compliance standards. Many processes require the sensitive handling of unique business logic and company information — and if staff are using their own unvetted software to manipulate or store this data, there is an increased risk of leaks or other breaches. This is because they may be utilizing means to transfer or store data which company IT teams are unable to supervise and regularly update to keep in line with compliance requirements.
As well as being reputationally damaging and potentially unsafe, tech misuse can be expensive. In recent years, large companies have started to invest a lot of capital into data protection and compliance mandates to protect sensitive information, with cybersecurity spending estimated to reach a cumulative $1.75 trillion from 2021 to 2025. This works to ensure data security and protect against phishing, leaks and other incidental privacy breaches that could incur legal fees.
Therefore, in failing to follow company policies for data handling and storage, staff may unknowingly be wasting the large security spend made by companies each year, as well as risking significant damage costs should a security incident occur.
What can you do to manage your SaaS portfolio?
Effective SaaS management can help your business to minimize its wasted spending. As IT and finance departments grapple with rapidly proliferated SaaS stacks, below are our top recommendations for regaining control.
1. Gain visibility on your SaaS stack
The crucial first step to reducing your SaaS spending is to gain visibility into your existing stack. This will help you understand which tools are being used, gain insights into any shadow IT use, and make informed decisions about future centralized procurement.
When bringing your portfolio’s documentation up to speed, consider making records of the following key details:
- Applications functions
- Contract length
- Renewal clauses
- Billing period
Once you have access to this regularly updated knowledge base, you can establish a centralized procurement system to ensure that all future purchases are coordinated across departments. These records will help the organization to keep track of outgoings, usage, and timelines, therefore minimizing wasted procurement costs.
2. Cut out any redundant tools
As soon as you have a better grasp on company utilization, you can begin to eliminate the tools that are not strictly necessary to your business operations. With SaaS prices continuing to rise exponentially, you’ll ideally want to achieve the leanest stack that you can without impeding your staff’s ability to work effectively.
To that end, you should look to terminate unused licenses, eliminate duplicate SaaS and comprehensively assess the return on investment that each tool in your stack provides. Attempt to justify each application by relating it to a specific business outcome not achieved by another piece of software that you use. For example, a customer relationship management platform such as Salesforce might make up an integral part of your sales pipeline because it decreases the cost of lead generation.
For a full guide on consolidating your existing portfolio, take a look at our application rationalization walkthrough.
Let Vertice manage your SaaS portfolio
Needless to say, getting your SaaS stack under control can be a challenging and labor-intensive process — especially for a larger enterprise with lots of software needs to consider. But if you’re under pressure to reduce your company’s IT outgoings, gaining control over your unmanaged SaaS applications is a no-brainer. Prices will only continue to climb, and Vertice can help you get ahead of the curve.
We do this by giving you total visibility of your software portfolio, while also working on your behalf to secure the best possible terms on all your SaaS deals. Our platform not only combines all the information integral to your stack into one convenient dashboard, streamlining your SaaS management, but with access to the pricing benchmarks of more than 13,000 SaaS vendors worldwide, we can ensure you’re getting the best possible value on any SaaS purchase.
To find out more about how we can help your organization cut its SaaS costs, get in touch with us today. Alternatively, see for yourself how much you could be saving on your SaaS spend with our free cost savings analysis tool.