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What is SaaS Management & Why It's Vital to Today's Business
Today, managing every phase of the SaaS lifecycle is challenging. From procurement and onboarding to integration and training to security and compliance, to usage and cost optimization, and to licensing and subscription management, it’s easy to make missteps or see costs spiral out of control.
As more companies phase out perpetual licenses in favor of SaaS products, software subscriptions and monthly fees are continuing to rise. Gartner suggests licenses will increase by more than a third by the end of 2025. Managing subscriptions and costs will become crucial to prevent toxic SaaS costs.
Table of Contents
- What is SaaS Management?
- What are SaaS Management Platforms?
- Challenges SaaS Management Helps Solve
- Signs You Need a Clear SaaS Management Strategy
- How the Surge in SaaS Subscriptions Shaped Our Present State
- Why Businesses Need SaaS Management
- Key Components of SaaS Management
- SaaS Asset Management
- SaaS Inventory Management
- SaaS License Management
- SaaS Subscription Management
- SaaS Renewal Management
- Benefits of SaaS Management
- Cost Savings Made Tangible
- Boosting Productivity: Streamlining Your Workflow
- Security and Compliance: Protecting Your Assets
- Enhanced Transparency of SaaS Estate
- The Role of SaaS Management in Cost Optimization
- Tips on How to Prioritize Your SaaS Spend
- Classifying SaaS Assets
- Defining Usage Levels
- Reclaiming Inactive Licenses
- Right-sizing Underused Licenses
- Know What You Can Negotiate
- Best Practices for Implementing SaaS Management
- How to Get Started Reducing SaaS Costs
What is SaaS Management?
So, what is SaaS management? SaaS management is also known as SaaS application management or SaaS governance. Whatever you call it, it involves overseeing all aspects of Software as a Service (SaaS) applications within your company’s technology portfolio. This includes everything from purchasing and onboarding these applications to integrating them into your systems, ensuring they are used effectively, maintaining compliance, and optimizing costs.
In short, it’s about managing the entire lifecycle of SaaS applications to ensure they are used efficiently and cost-effectively.
What are SaaS Management Platforms?
SaaS management platforms (SMPs) help companies catalog their SaaS applications in a centralized way. SaaS management platforms help identify SaaS sprawl and duplication, which is the first step toward rationalization and optimization and managing asset allocation more efficiently.
However, SaaS Management Platforms are not always a comprehensive solution for SaaS cost management. While companies that deploy SaaS management platform solutions get greater visibility into what they’re paying for, these solutions often fail to identify licenses that aren’t being used or under-used. It takes a SaaS license and cost optimization solution that combines deep vendor-specific licensing and IT price benchmarking expertise to understand usage patterns, align licenses with best-fit options, and make sure you’re paying a fair price for the licenses you purchase.
Challenges SaaS Management Helps Solve
SaaS management is essential to right-size your licenses and your costs. More than 85% of companies will overpay for the IT purchases over the next 12 months. A proactive approach to SaaS management can address several key challenges that businesses encounter, such as:
- Shadow IT: Unauthorized software usage that bypasses IT department oversight, potentially compromising security and compliance.
- Cost Overruns: Uncontrolled SaaS adoption leads to redundant applications and unnecessary expenses.
- Integration Complexity: Difficulties in connecting multiple SaaS applications with existing systems and each other.
- Data Silos: Information scattered across various SaaS platforms, hindering collaboration and decision-making.
- Vendor Lock-in: Over-reliance on specific SaaS providers, making it challenging to switch or negotiate better terms.
- Compliance Risks: Ensuring all SaaS applications meet industry regulations and internal policies.
- Performance Monitoring: Tracking the effectiveness and ROI of numerous SaaS applications across the organization.
Signs You Need a Clear SaaS Management Strategy
Managing all of your SaaS assets gets complex quickly, especially for companies in growth stages. If you are seeing any of these warning signs, you need to revisit your SaaS management strategy.
Unexpected SaaS Bills or Budget Overruns
If you find yourself surprised by SaaS-related expenses, it's a clear indicator that you need a more structured approach to managing your software subscriptions.
Employees Using Unauthorized Applications
Employees often turn to SaaS solutions to solve problems, enhance operations, or streamline their workflows. While their intentions may be good, this often leads to unauthorized applications within your organization. This shadow IT can pose significant security risks and create data silos. If you discover that teams are regularly adopting new tools without IT approval, it's time for a formal SaaS management strategy.
Difficulty Tracking Which Departments Are Using Specific SaaS Tools
As your SaaS ecosystem grows, keeping track of who's using what can become increasingly challenging. If you find yourself struggling to answer questions like “Why are we paying for three different project management platforms?” you need a better strategy to track resource allocation efficiently.
Overlapping Functions Between Different SaaS Applications
It’s common for different departments to adopt tools with similar functionalities. For example, you might discover your marketing team is using one email automation platform while your sales team is using another. This creates software bloat and adds unnecessary costs. It also creates data silos and hurts cross-departmental collaboration. If you're noticing significant overlap in your SaaS toolset, it's time to implement a strategy that promotes consolidation and maximizes the value of your SaaS investments.
Challenges in Managing Multiple Renewal Dates and Contract Terms
Keeping track of various renewal dates, contract terms, and licensing agreements can become a logistical nightmare. Yet, missing a renewal deadline could result in service interruptions or unfavorable auto-renewals. If you find yourself constantly scrambling to manage these details, it's a clear sign that you need a centralized system for tracking and managing all your SaaS contracts.
Inconsistent Onboarding and Offboarding
When employees join or leave your organization, managing their access to various SaaS applications should be a smooth, standardized process. However, if you're noticing that new hires are struggling to gain access to necessary tools, or worse — former employees still have active accounts — it's time to reassess your SaaS management practices. Unassigned licenses can run up the costs.
Compliance Audit Failures or Near-Misses
Software companies are increasingly aggressive in license audits and noncompliance can be extremely expensive. If you've experienced compliance audit failures or near-misses related to your SaaS usage, it's a glaring sign that your current management approach is inadequate.
A robust SaaS management strategy will include regular compliance checks and risk assessments, helping you avoid costly penalties and reputational damage.
How the Surge in SaaS Subscriptions Shaped Our Present State
The shift away from on-premise software to SaaS has been accelerating for years with remote work intensifying the pace. Today, large enterprises use an average of 664 SaaS applications according to one study - a number that’s shocking to even the organizations that use them. Many businesses find they have 2-3X more SaaS and cloud-based applications than they assumed.
Why Businesses Need SaaS Management
In most enterprises, SaaS sprawl is common. And more than half of the average company’s app ownership and management is dispersed rather than centralized.
In some companies, there’s nobody actively taking a proactive, holistic approach to managing all SaaS assets. Businesses are forecast to spend an estimated $900 billion by 2030 on SaaS. It’s not unusual to find in large enterprises that 30% or more of total SaaS spending is made up of unused licenses and features.
Even when customers buy only what they need, they’re often paying prices that are above best-in-class rates.
Key Components of SaaS Management
For an effective SaaS management strategy, you need a comprehensive approach to each component.
SaaS Asset Management
- Comprehensive inventory of all SaaS applications
- Categorization based on function, criticality, and business impact
- Integration with IT asset management systems for a holistic view
- Regular audits to ensure the accuracy and completeness of the SaaS portfolio
SaaS Inventory Management
- Real-time tracking of SaaS usage across the organization
- Identification of underutilized or abandoned applications
- Monitoring of user access levels and permissions
- Automated discovery tools to detect new SaaS applications
SaaS License Management
- Centralized repository of all SaaS licenses and their details
- Alignment of license types with actual usage patterns
- Proactive alerts for license expirations and renewal deadlines
- Optimization strategies to maximize license utilization
SaaS Subscription Management
- Tracking of subscription models (per-user, tiered, usage-based)
- Analysis of subscription costs against business value
- Consolidation of subscriptions where possible
- Negotiation strategies for better subscription terms
SaaS Renewal Management
- Calendar of upcoming renewals with time for negotiations
- Evaluation process for each renewal decision
- Negotiation playbooks for key SaaS vendors
- Integration with budgeting and procurement processes
Benefits of SaaS Management
One of the biggest benefits of effective SaaS management is transparency. You get a holistic view of all the apps that are being used throughout your organization. This provides a foundation for optimizing your licenses and providing the tools your enterprise needs while avoiding overspending on resources that are not required. This transparency translates into tangible advantages across various aspects of business operations and IT management.
Cost Savings Made Tangible
SaaS management helps minimize spending by right-sizing your tech, eliminating shadow IT, maintaining compliance, and managing your SaaS contracts and providers. By actively monitoring usage and eliminating underutilized or duplicate licenses, companies can significantly reduce their overall SaaS expenditure.
Boosting Productivity: Streamlining Your Workflow
Effective SaaS management ensures that employees have access to the right tools when they need them, which streamlines workflows and boosts overall productivity. By integrating and managing these tools efficiently, organizations can eliminate bottlenecks and enhance collaboration.
Security and Compliance: Protecting Your Assets
SaaS management is crucial for maintaining security and compliance. By ensuring all SaaS applications adhere to corporate security policies and compliance requirements, companies can protect sensitive data and avoid costly regulatory penalties.
Enhanced Transparency of SaaS Estate
Having a clear and comprehensive view of the entire SaaS estate allows for better decision-making and strategic planning. Enhanced transparency ensures that all stakeholders are aware of the SaaS tools being used, their costs, and their benefits, leading to more informed and effective management.
The Role of SaaS Management in Cost Optimization
Consider this:
An NPI analysis revealed that 89% of the contracts we analyzed for license and renewals were overpriced.
Active SaaS Management is key to reducing and optimizing costs. This includes:
- Eliminating Redundancies: Identifying and consolidating overlapping SaaS tools.
- Right-sizing Licenses: Adjusting license types and quantities based on actual usage.
- Leveraging Volume Discounts: Consolidating purchases across departments for better pricing.
- Optimizing Renewal Timing: Aligning renewal dates for stronger negotiating positions.
- Implementing Chargeback Models: Encouraging responsible usage by attributing costs to departments.
- Forecasting Future Spend: Using usage trends to predict and plan for future SaaS expenses.
- Benchmarking Costs: Comparing SaaS spend against industry standards to identify savings opportunities.
Tips on How to Prioritize Your SaaS Spend
As enterprise SaaS portfolios grow, Software Asset Managers (SAMs) and vendor management teams need to be proactive about classifying SaaS assets as well as monitoring usage levels.
Classifying SaaS Assets
There’s often duplication in the tech stack, leading to wasted spending. It helps to classify each SaaS provider into one of these four categories to look for overlap and usage levels for efficient subscription and license management:
- Enterprise SaaS: Used across an enterprise
- Functional SaaS: Targets a single function/solution
- Process SaaS: Targets workflow across multiple functions
- Task SaaS: Fulfills specific tasks, such as storage
Defining Usage Levels
You’ll want to prioritize your focus for maximum benefit. While every classification can yield savings and efficiencies, it’s best to start at the enterprise level because the savings potential is greatest. Within the portfolio of enterprise SaaS products, there may be hundreds, thousands, or tens of thousands of users.
Bloat is common and it may be costing you. Internal audits almost always reveal a significant number of abandoned or unused SaaS and software licenses. Perhaps someone left your company and a license was never reassigned or, during the onboarding phase, extra licenses were bought assuming future growth. Either way, these costs impact your bottom line unnecessarily.
Reclaiming Inactive Licenses
Finding users that are no longer active, multiple licenses assigned to single users, or “no pulse” users like printers or smart devices can quickly add up. A
SaaS license optimization assessment can uncover wasted spend so licenses can be dropped at the next renewal cycle or reassigned.
Right-sizing Underused Licenses
An assessment can also help find areas where licenses are underutilized. For example, an enterprise may have Microsoft 365 E5 subscriptions for all its team members, yet many frontline workers do not require the full E5 functionality.
Know What You Can Negotiate
IT pricing and terms are inconsistent from vendor to vendor and make it challenging to know what is a reasonable price and track whether you’re getting what you pay for. You need to know current market-based pricing and terms to make an informed decision about procurement, management, and renewals.
Armed with data, you can negotiate better deals and right-size your subscriptions.
Best Practices for Implementing SaaS Management
Individual departments are typically managing more enterprise applications than IT. So, you need to start with a cross-functional team to account for all of your SaaS spend.
Establish a SaaS Governance Team
Create a team that includes representatives from IT, Finance, Procurement, and key business units. A diverse group creates a holistic approach to SaaS management —balancing technical, financial, and operational considerations.
Implement a SaaS Request and Approval Process
Develop a streamlined process for employees to request new SaaS tools while maintaining oversight. This process should include evaluation criteria such as security requirements, integration capabilities, and cost considerations. By centralizing requests, you can prevent redundant purchases and ensure all new licenses align with organizational goals.
Conduct Regular SaaS Audits
Perform quarterly reviews of your SaaS portfolio to identify optimization opportunities. These audits should assess usage patterns, costs, and the overall value delivered by each application.
Regular audits will help you eliminate redundant or underutilized tools, optimize licensing, and ensure your investments meet evolving business needs.
Leverage Automation
Utilize SaaS management platforms to automate discovery, monitoring and reporting of your SaaS ecosystem. Automation can significantly reduce the manual effort required for tasks like license tracking, usage monitoring, and cost allocation.
Platforms purpose built for IT procurement can also help you with renewal planning and negotiation strategizing - two often overlooked areas of SaaS management that deliver significant savings with minimal disruption.
Establish KPIs for SaaS Performance
Define and monitor key performance indicators to evaluate the value of each SaaS investment. These KPIs might include user adoption rates, productivity improvements, cost savings, or specific business outcomes. By tracking these metrics, you can make better decisions about which tools to retain, upgrade, or phase out to deliver maximum value to your organization.
How to Get Started Reducing SaaS Costs
NPI offers SaaS license and cost optimization services that help companies:
- Reclaim inactive licenses
- Right-size license types based on actual demand/usage requirements
- Create a license purchase and deployment strategy that aligns with your company’s current and future-state requirements.
- Negotiate best pricing and terms
NPI provides vendor- and transaction-specific analysis so you have the right licensing, pricing and negotiation intel to help you negotiate a world-class outcome for your SaaS purchases and renewals. While SaaS management platforms offer spend visibility, material savings can only be achieved by paying for only what you need, when you need it, and at a fair price. This outcome requires NPI’s SaaS License Optimization Assessment services.
At NPI, we help enterprise IT procurement teams identify and eliminate overspending on IT purchases, accelerate purchasing cycles, increase decision-making confidence, and align internal buying teams. This helps you get the best price possible, optimize your deal, and maximize the impact of your IT investment.
Contact NPI to learn more.
