The Rise of SaaS Waste (and How To Stop It)

SaaS waste is becoming one of the most pervasive issues modern businesses face.

According to the 2020 SaaS trends report, the average company wastes around $135,000 annually on SaaS tools they don’t really need or use.

Some SaaS waste stems from companies paying for multiple tools that solve the same problem. Similarly, forgetting to terminate SaaS subscriptions for former employees forces companies to pay for unused licenses, causing even more waste.

As companies grow, employees come and go, and new SaaS tools are introduced to the market. These types of systemic mistakes compound, causing extensive SaaS waste.

To prevent SaaS waste in your own organization, it’s critical to understand how it develops over time.

How SaaS Waste Grows

SaaS waste usually develops due to problems with these four processes:

1. App Purchasing
2. App Ownership
3. Employee Offboarding
4. SaaS Inventory Management

By developing structured, transparent processes with data integrity, you can significantly reduce SaaS spend, thereby avoiding SaaS waste. Here’s how:

#1. App Purchasing

Many companies have incredibly informal SaaS purchasing processes.

Typically, an employee discovers a new tool that seems useful for their department and, before purchasing, seeks approval from their direct team lead. The team lead assesses the potential value of the new SaaS tool and either approves or disapproves the purchase.

Sound familiar? Here are the risks:

1. The new SaaS app might be a duplicate of a tool another department has already purchased.
2. The new SaaS app might not be secure or compliant with relevant regulations.
3. The new SaaS app might be overpriced compared to other alternatives on the market.

How to Avoid SaaS Waste Before Purchasing an App

Implement a formal, structured SaaS purchasing process to create SaaS efficiency. We recommend using the following workflow:

1. Employees submit a SaaS purchasing request on your SaaS vendor management solution.
2. The employees’ direct supervisor approves/disapproves of the purchase.
3. The IT team approves/disapproves of the purchase.
4. Finance approves/disapproves of the purchase.

#2 App Ownership

Another common pitfall is when companies don’t have a clear system for application ownership.

Once a new app tool is purchased, if it’s not as useful as anticipated, or doesn’t get enough buy-in to be widely adopted, it’s abandoned (and in many cases, never cancelled).

How to Avoid SaaS Waste with Abandoned Apps

Every time a new app is purchased, assign an App Owner. This person will:

• Conduct in-depth research to find the best SaaS tool to solve the business problem.
• Get buy-in for the app and teach the team how to use it.
• Ensure that the app, when purchased, is actively being used by the team on an ongoing basis (not just during the first week of purchase).
• Ensure the number of app licenses match the actual need.

#3. Employee Offboarding

When employees quit, their accounts need to be deactivated and their SaaS licenses revoked. Without a structured offboarding plan, this workflow is prone to error.

SaaS waste occurs when employees fall through the cracks — if their SaaS licenses are never revoked, the company is needlessly spending money on them.

How to Avoid SaaS Waste with Employee Offboarding

Create a structured employee offboarding workflow using SaaS management software, and implement it whenever an employee quits.

The software will assign offboarding tasks to relevant employees, set deadlines, and ensure that every component of the offboarding process is executed properly.

#4. SaaS Inventory Management

Medium to large-sized companies often purchase dozens of new SaaS tools every month.

Inventory tracking and management is critical to see which tools are actually being used and providing value to the business. Without visibility, SaaS waste develops.

How to Avoid SaaS Waste with a SaaS Inventory Management System

There are two different ways to track and manage your SaaS inventory:

Option #1 – Create an Excel spreadsheet that lists all the SaaS tools in use, including, at a minimum:

• The App Owner for each app.
• Which pricing plan you’re on.
• Which department uses the app.

Once this sheet is finalized, you should review it every other week and look for opportunities to optimize inventory. This might mean cutting out duplicate apps, downgrading the pricing plan for a SaaS tool you’re underusing, etc.

The problem with this path is it requires constant manual updating, which is extremely time-consuming.

A simpler, more automated path is:

Option #2 – Use a dedicated SaaS management solution.

SaaS management tools do all the tracking for you. Once you sign up for the software, it automatically discovers every SaaS app your company is using, extracts the relevant data (pricing plan, users, etc.), and keeps it continually updated.

Zero man-power required.

SaaS management software offers several other useful features, such as:

• Vendor Management Workflows: Simplifies and centralizes your SaaS purchasing workflows — an employee submits a purchase request, and the software makes sure all the right people see and approve/disapprove it.
• Onboarding & Offboarding Workflows: Ensures that every single onboarding or offboarding workflow gets executed properly.
• Compliance Tracking: Shows which apps you’re using are compliant with given regulations (e.g. SOC 2, HIPAA, GDPR, etc).

Conclusion

SaaS waste is becoming one of the most pervasive issues modern businesses face.

It’s possible, by developing structured, transparent processes with data integrity, you can significantly reduce SaaS spend, thereby avoiding SaaS waste.

Support SaaS efficiency with our top recommendations:

• Create structured SaaS purchasing workflows, ensuring that all purchases are approved by relevant employees.
• Designate an App Owner for every new SaaS purchase.
• Create a structured employee offboarding workflow, and use a SaaS management solution to automatically enforce it.
• Use a SaaS management solution to automatically track and optimize your SaaS inventory.