Software Bloat Is Killing The Bottom Line: Here Is What Companies Need To Know

Software-as-a-Service has exploded over the last two decades. Its connected, cloud-based capabilities have become indispensable for businesses of all sizes and steamrolled the perpetual license model for software downloaded from floppy disks and CD-ROMs.

In the enterprise, it's difficult to bring full visibility to the tech stack across the organization. There is a SaaS tool for everything that promises to bring efficiency to your workflow. But without a proper structure and management strategy, overlap, repetition, improper onboarding and offboarding, and unstructured approval processes can cause software overhead to skyrocket.

Eliminating underused applications can help cut costs. As inflation rises and a recession looms, 23.3% of adults are canceling entertainment subscriptions and over 17.7% are canceling product subscriptions as a result of price increases according to a recent survey from Prosper Insights & Analytics. CIOs and CTOs would be wise to follow suit on the B2B side and figure out just which SaaS applications are underutilized at the enterprise level.

As the belt tightens and spending is heavily scrutinized, eliminating redundancies can bring huge financial relief. I caught up with Ritish Reddy, co-founder of SaaS management platform, Zluri to talk about the hidden places you may be spending money on software and how to save in 2023.

Gary Drenik: Let’s start broadly. How did businesses end up with so many SaaS subscriptions?

Ritish Reddy: It’s a good question, Gary. One year we’re talking about making the transition from Microsoft Excel to a single SaaS platform and the next there is a different SaaS tool that addresses every business problem you can think of from payroll to procurement. We see this mirrored in the consumer world, too. A recent Prosper Insights & Analytics survey reported that nearly 90% of Millennials (87.4%) subscribe to one or more paid video services and have on average between 3-4 subscriptions. It has become the way of the world.

In the enterprise, the ease at which employees can sign up for and implement new SaaS tools—many of which are through lead-generating free trials—means that you often have far more SaaS than you need. At Zluri, we call this excess software “SaaS Sprawl”. At the enterprise level, SaaS Sprawl can happen for a number of reasons:

• No standardization in the apps category, meaning every team is free to use whichever software they like even if there is overlap in functionality.
• Lack of centralized app procurement. No sole person is responsible for approving app transactions.
• The abundance of options in the market
• Lack of adequate training for your employees

We see those four things most often and recommend that one or many are affecting your bottom line, it can be an indicator that you may need to reevaluate your SaaS management plan.

Drenik: Interesting. Once IT teams realize they need to rein in their SaaS spend, what challenges do they face implementing changes?

Reddy: A lot of this work is process work, so it starts by understanding exactly what SaaS platforms are in play. IT teams largely struggle to have total visibility of all of the technologies in use. In fact, as much as 70% of apps within an organization are unknown to IT, making it very difficult to manage. This “shadow IT” happens when an application owner leaves a role without transitioning their access to someone else on the team or teams forget about the software they purchased for a very specific process among other reasons.

Often when employees forget to cancel their subscriptions, auto-renewals tend to go unnoticed. We call this dark billing. And finally, a major problem for IT managers is siloed data, which happens when financial and application data are scattered and disconnected. IT managers can begin to shed light on this problem by asking two simple questions: “What elements of SaaS do I control?” and “Where is the data being generated from these elements going?” Understanding how your organization processes this information will not solve the problem, but it gives you a good place to start.

Drenik: Is all of this software necessary? When everyone is making their case for the software they use, how do IT teams determine what’s essential?

Reddy: The answer is no, not every piece of software is necessary, and likely very few of them truly are. There are a lot of redundancies in the enterprise software stack. It’s about finding and eliminating those redundancies and creating a more tailored plan.

We created a playbook for CIOs that outlines critical decisions they need to make before the likely recession hits in 2023. Obviously, the most straightforward way to make it through a recession is to cut costs, but as you said, every team is advocating for the tools they are using, so how do you know where to trim the fat?

First, teams should examine which SaaS tools can provide ROI before they buy. This can mean asking critical questions; including whether your organization has adequate resources for purchasing, implementing, and maintaining new tools. You can often negotiate with vendors for a lower rate when purchasing on an annual basis. Additionally, you can increase the ROI of your software investments when you properly train employees. If you can’t commit to any of these, it’s likely not the right time to commit or recommit to that investment.

Drenik: I want to go back to employee onboarding and offboarding. Why is it important for teams to have a structured offboarding process?

Reddy: Offboarding employees, particularly those who have been with the company for a considerable amount of time, is tedious and time-consuming. It involves transferring responsibilities, ensuring the return of company-owned devices, and, most importantly, revoking access from the existing tools, which when done incorrectly can be a major headache at best and a security threat at worst.

Lack of IT visibility makes this process challenging. Many companies do not have a record of the tools their employees are using at any given time. According to a report from OneLogin, 32% of companies took more than a week to remove their former employees from SaaS apps, leaving the organization vulnerable to data breaches and potentially permanent data loss.

In some cases, ex-employees still had access to critical tools long after leaving the company. Automated offboarding reduces the simple mistakes we frequently see when employees are moving through repeatable tasks quickly. It’s human nature, but it’s avoidable.

Drenik: Clearly unmanaged SaaS has a huge impact on the bottom line. What can we do to prevent software bloat in the future?

Reddy: Great question. SaaS management is only one piece of the puzzle. Equally important is SaaS governance, meaning building a cycle of continuous improvement across your SaaS ecosystem with the ultimate goal of having it run on autopilot.

Achieving true governance is a multi-stage process that involves observability and data collection, continuous optimization, and automation of workflows across the stack based on the org-specific use cases. Without a strong governance framework, any efforts toward a sustainable bottom line will be futile.

A SaaS management platform plays the role of an operating system by creating a framework to enable this governance. While useful, it ultimately won’t provide you the significant ROI that total SaaS governance will.

Drenik: Thanks, Ritish. These are some great insights.