In the last 20 years, we’ve seen a dramatic change in the way software is acquired and consumed in enterprise businesses. In previous software eras, the acquisition model for most large organizations was top-down. During the 1980s and 1990s, software makers sold directly to IT leaders, who then would distribute software throughout the organization.
From 2000 to about 2015, department-specific selling arose as the predominant force in the market. Title makers such as Salesforce focused not on IT buyers, but leaders of sales or marketing departments. Similar strategies unfolded with HR departments and finance leaders.
Today, we’re about five years into what some have called the end-user era of product-led growth. Defining this era are products like Slack or Zoom, where the decision to acquire a tool happens at the user’s desk, and then the tool spreads throughout the organization.
The trend is likely to progress as consumers continue to be more digitally savvy and software as a service (SaaS) vendors focus on building inroads to increase with product-led growth. By 2023, Gartner predicts 40% of workers will choose business applications and tools like they do their music streaming experience.
This acquisition model solves one problem — the end user acquiring the best tool or service for the task quickly — but creates new ones for business and IT leaders. Among these are:
• A lack of organizationwide visibility into purchases, acquisition and usage.
• An increase in unmanaged costs because multiple users may acquire the same product at single-subscriber rates rather than enterprise agreements.
• A decrease in compliance with regulations such as GDPR, HIPAA or security best practices that could reduce the risk of a breach.
Ideally, your organization will embrace the flexibility, innovation and agility that SaaS tools can deliver — without subscribing to their detrimental characteristics.
Gaining Visibility Into Tech Stacks
The odds are that your business already has user-acquired SaaS lurking somewhere (or everywhere) in its digital tool portfolio. Software publishers make it incredibly easy to purchase their products or offer products at no initial cost based on the likelihood that free users will later convert to paid users. That ease of acquisition makes it imperative to get a bird’s-eye view of your entire software landscape, including identifying all SaaS applications and their respective vendors.
SaaS discovery tools and management platforms like Zylo can make the application inventory more visible. You can also perform a manual audit and inventory by surveying your users.
Once you’ve established visibility into which tools and vendors your end users have acquired and use, subsequent processes such as optimization, cost containment and right-sizing become more feasible.
Building An Approval Pipeline For New Soft
Prohibit new software acquisition from running amok by creating a documented software review and approval process. This may also include the prohibition of employees using expense reimbursement to purchase new software, which is typically more widespread than many IT leaders realize. In a recent study of customer data, my firm found that as much as 32% of employees use expense reimbursement to acquire new software tools.
A software review pipeline makes any new software purchase subject to review and approval by a board of cross-functional stakeholders. These typically include IT and IT security to evaluate the need for the proposed tool and its compliance with any security protocols, finance to review spending, legal to approve agreement terms, and procurement to ensure that an existing designated tool or application doesn’t already serve the same function.
This process does increase the time and effort required to acquire new SaaS tools. Still, organizations that deploy this process could improve their chances of reducing duplicated application purchases and redundant function applications.
Reducing Duplicate Applications
Duplicated application purchases and functional overlap are some of the most common issues created by end-user acquisition. Without continuous visibility and monitoring of the entire SaaS inventory and a software review process, preventing copies and overlaps is nearly impossible.
Duplicate instances of a SaaS application can cause cost overruns and missed savings opportunities. They undermine the purchasing power of the organization, thereby increasing costs. An enterprise that buys multiple seats or licenses can negotiate a reduced per-seat or per-license price versus an individual user purchasing a single instance. That buying power also includes the ability to negotiate additional discounts for instances such as multiyear terms.
An enterprise license agreement creates the opportunity to leverage additional contract details including enhanced data protection, extended notification periods, and discounts on other features and services.
Planning For Subscription Renewals
What’s the most universal characteristic of SaaS applications? Automatic renewal is probably a front-runner. While it helps guarantee continuity of service from SaaS applications, too often, unplanned and unmanaged renewals end up costing businesses big bucks.
After establishing visibility into all your SaaS tools and culling duplicates or redundant function, it’s essential to map out a renewal timeline. This may require deep dives into the original agreements or contracts to determine renewal dates and notification timing, which typically runs 30, 60 or 90 days.
The benefit of this work is the development of a proactive renewal strategy that prevents unplanned automatic subscription renewals. Managing renewals also encourages collaboration. If you own your organization’s SaaS application management strategy and renewals, it’s incumbent to reach out and engage individual application owners about upcoming renewals.
It’s hard to argue against the benefits of SaaS in the end-user era. Today, subscription-based software and services are more accessible and affordable than ever, and truly deliver value and utility. But the compromise of product-led growth is reducing visibility and lack of management frameworks. By recognizing these deficits and tailoring SaaS management to meet your organization’s needs, you can leverage the end user era for good.