Top Five ‘must-dos’ to contain SaaS costs

The cloud is the future. Or so many IT pundits will have you believe. And they may be right; but for the wrong reasons. 

The ability to stand up resources and services on-demand with little or no consideration to the need to provision on-premises hardware is undeniably attractive. It’s fast and efficient.

It can also be very, very costly.

Since the early 1990s, organizations have been managing their software consumption and guarding against overspend through the use of Software Asset Management (SAM) solutions. In very simple terms, if you discover what software is in use, identify and track it, and then reconcile it against the organization’s actual entitlements then you can simultaneously ensure license compliance while eliminating unnecessary spend.

As we move into an era where cloud spend will begin to dwarf on-premises, this has led some to declare the death of Software Asset Management.  After all, one of the benefits of SaaS is that it should be near-impossible to fall out of compliance.

Well, yes and no. And to think that “SAM = compliance” is about as outdated as that i486 desktop in your attic.

To paraphrase Mark Twain, the reports of SAM’s demise are greatly exaggerated. It’s a view that Snow shares with industry analysts such as Gartner in their paper SAM Reaches a Tipping Point: SaaS Cost Management Eclipses License Compliance:

“IT sourcing and vendor management leaders need to recognize that SaaS subscriptions are not a turnkey fix to licensing complexity, but will increase cost risks and add to the demands on SAM.”[1]

Not only does SaaS not remove compliance issues, the nature of SaaS deployment also makes it a potential budget landmine. The license management and optimization provided by an effective SAM program are critical to address these compliance and financial risks.

Here are Snow’s Top Five must-dos for organizations increasing their investment in SaaS applications:

#1 Understand ‘compliance’ in a SaaS world

SaaS applications are typically licensed on a subscription or usage basis as opposed to the perpetual-license model more common with on-premises software. This element has led to the false belief that SAM is no longer needed. The thought is, if you need a login to access the software, how can you be out of compliance? Let’s borrow from Gartner again:

“The myth that it is impossible to be out of compliance with SaaS also needs to be addressed, as there are clear terms and conditions associated with the use of such solutions.”[2]

It is true the ability to track user logins helps mitigate a good bit of compliance risk. But it doesn’t address several compliance challenges including:

  • SaaS solutions that deliver components such as databases. With these SaaS offerings, it is possible to spin up components without having to immediately pay. These SaaS agreements often state the SaaS vendor can audit and invoice at a later (often unexpected) date.
  • Authorized user violations stemming from client side software components such as plug-ins, applets and agents
  • Unauthorized use stemming from license constraints on geography, shared logins and use of Admin credentials.

#2 Apply IT governance to SaaS

Most organizations have a reasonably good handle on procurement and provisioning governance for on-premises applications. After all, if a server install is required to get an application up and running, it is a stretch to think a business unit is going to tackle that by themselves. But SaaS deployment upended this dependence. Vendors make it easy to launch new platforms and consume services. More individuals and groups than ever are self-selecting technologies and bypassing IT when signing-up for new services and subscriptions. This is creating what we call the Disruption Gap, or a delta between what IT thinks they know about enterprise software usage and what is actually true.

Because of the ease with which users can sign up for SaaS, organizations find they have a disjointed and decentralized procurement mechanism with users purchasing their own subscriptions, rather than following approved software request processes. This increases costs as the organization loses the visibility necessary to negotiate volume discounts and makes it difficult to reallocate subscriptions across business units

Governance issues do not end with procurement and provisioning. While users get better at spinning-up needed resources, they are extremely poor at tidying up after themselves and decommissioning resources they no longer need. This creates a potential cost explosion as zombie users and virtual machines roam the cloud, creating monthly billing for the organization.

The answer to these governance challenges isn’t a return to centralized IT control. Frankly, that horse has left the barn and locking the gate isn’t going to do a lot of good at this point. Instead, IT leaders need to support and enable business units to efficiently procure software and to do so in a way that maintains centralized visibility. This can be accomplished with automated, workflow driven processes for access request, provisioning, and deprovisioning.

#3 Identify who’s using what

Just as many governance processes haven’t kept up with the implications of SaaS, organizations also find their visibility of which applications are installed and who is using them is weak or non-existent for SaaS applications. Even those with robust Software Asset Management practices can find their chosen vendor doesn’t support discovery, inventory, and normalization of SaaS applications.

What organizations need is a single, integrated view showing users, usage and cost across all their SaaS applications. But what about the administration portals SaaS vendors provide? Don’t they show you what is in use? Unfortunately, these portals leave users wanting in several ways:

  • These portals can tell you what subscriptions you have bought, but almost none actively helps you discover how – or even if –services and subscriptions are being used.
  • No usage information means they provide little to no insight into how SaaS spend can be optimized. This isn’t surprising, after all, what incentive to vendors have to help you cut down on billing?
  • Critically, for applications such as Office 365 which simultaneously maintain on-premises and cloud-delivered deployment models, this view must integrate all usage, not just SaaS information.
  • As organizations increase the number of SaaS vendors they utilize, trying to track usage across a dozen or more SaaS portals becomes impossible.

#4 Shift your primary focus from compliance to cost optimization

We know that although compliance concerns don’t go away in a cloud world, they are partially lessened. Therefore, as cloud adoption increases, the focus on compliance can lessen relative to cost containment, IT leaders, especially Software Asset Managers, can increase their attention on license spend optimization.  It is helpful to think of this shift in focus in the context of who is responsible for identifying who is responsible for calculating software spend. In an on-premises world, the burden was on the software vendor to identify customers who were not paying as per their license agreement. In the SaaS world, vendors can easily determine how much is owed. The burden has shifted to the customer and it is on IT leaders to manage and control spend. By creating a foundation of user and usage visibility, software asset management solutions can enable this control.

(Don’t forget to  download our guide‘The Indispensable CIO: A guide to putting yourself at the center of Digital Transformation projects’ which explores the opportunity for you to get visibility into software usage and spend, and transform your role to one of an indispensable adviser to your business).

#5 Watch out for when ‘free’ really isn’t

Another challenge is SaaS offerings which appear “free” but in practice result in the need for expensive corporate subscriptions. One example is the popular cloud-based storage vendor Box. Some of our customers have received communications from Box stating they have a certain number of employees who created user accounts using their corporate email addresses.

Since Box’s business plans cost between $5 and $15 per month – as opposed to the free individual license – these organizations must now fork out for an enterprise subscription for each user! Box isn’t the only one, there are numerous other examples of this “Freemium” model laying traps for enterprises.

The solution to SaaS sprawl

Whether you chose to label the answer to the above five must-do as ‘Software Asset Management’ or something else entirely, the requirements are clear:

  1. Discover what services are being used in your environment, including cloud-based apps as well as on-premises components.
  2. Understand how those services are being used and by whom by using your SAM platform’s inventory source to track user activity on SaaS websites.
  3. Gain visibility into discrepancies between what you have purchased and what is being used by connecting to SaaS vendor portals and comparing that to inventory data from your own systems.
  4. Optimize the discrepancy that exists to identify opportunities to reclaim under-utilized subscriptions and re-allocate those to new users, rather than buying more subscriptions.
  5. Enable governance-based procurement and user lifecycle management by leveraging your SAM solution to allow users to provision and manage subscriptions.

 

Platforms like Snow empower organizations to manage their SaaS investments and ensure they deliver on the ROI promises made by software vendors and service providers.

Armed with the insight provided by Snow, IT leaders and procurement professionals can automatically harvest unused subscriptions and put in place automatic processes to make sure less time is spent chasing IT to make changes to the SaaS service administration.

Today we launch Snow for Office 365 which extends the ability to manage software licensing and availability to Microsoft Office users across all platforms – desktop, cloud and mobile. Click on the image below to find out more and sign up for a demo. 


[1] Gartner, Software Asset Management Reaches a Tipping Point: SaaS Cost Management Eclipses License Compliance, Stephen White, Victoria Barber, 06 January 2017

[2] Gartner, Software Asset Management Is Now a C-Level Imperative, Victoria Barber, Dawn Hubbard, Hank Marquis, Stephen White, 03 March 2016