Octobits Blog – The SaaS license waste dilemma comes up when companies buy more software licenses than they need, don’t use all the ones they have, or keep paying for apps that are no longer needed or out of date.
The 2024 SaaS Management Index Report from Zylo really drives home the point that, on average, companies leave $18M in wasted spend on the table — a 7% increase from 2022.
It’s not just about the money. It also affects how we operate and how we use our resources.
This waste can be especially problematic for larger organizations, where Zylo reports an average annual waste of $126.9 million.
The reasons for this waste are all over the place, and the solutions need to be pretty comprehensive.
That’s why we’re going to look at a few aspects of the SaaS waste spending.
Common Causes of SaaS License Waste
Overprovisioning of SaaS Licenses
Overprovisioning of SaaS licenses is when companies buy more licenses than they really need.
This can happen when there’s a lack of visibility into actual usage patterns or overly optimistic growth projections.
The ServiceNow white paper “Managing SaaS Licenses” says many IT departments have trouble tracking software usage, which leads to overestimates of needs and overprovisioning of licenses.
Over time, licenses that aren’t being used end up costing the company a pretty penny.
For instance, a company might buy extra licenses in case they need to hire more people or use the software more.
But if those projections are wrong, the licenses just sit there, costing the company money.
Underutilization of SaaS Applications
The 2024 SaaS Management Index by Zylo shows 56% of companies are using only 44% of their SaaS licenses.
This underutilization often comes from poor user adoption, not enough training, or a lack of integration with existing workflows.
For instance, an organization might spend money on a fancy project management tool but not give its employees the training they need to use it.
So, those employees don’t use the tool much, and the company is left with a waste of money.
To beat this, it’s a good idea to keep track of how people are using the tools and make sure that everyone gets the training they need to use them right.
Duplicate or Redundant SaaS Applications
It’s possible organizations may have more than one SaaS application that offers similar features, which can lead to extra costs without any extra benefits.
The Zylo report says a lot of companies have more than one tool for things like project management and team collaboration.
Another insight came for BetterCloud 2021 State of SaaS Ops; as organizations keep going with their digital transformation journeys, SaaS adoption just keeps on going.
In 2021, organizations were using an average of 110 apps, up from 80 in 2020, which is a 38% increase.
That’s a nearly sevenfold increase in SaaS app usage since 2017 and almost a fourteen fold increase since 2015.
Now, the big question is this: with that amount of SaaS ownership, how much is actually used? How much is wasted?
For example, a company might use both Zoom and WebEx for video conferencing. Another example is, your company uses multiple tools for task management like Asana and Trello.
To fix this, companies should regularly check their SaaS apps to see if they can get rid of any that are the same or similar. They should try to combine them if they can to save money.
Ineffective Offboarding Processes
Ineffective offboarding processes contribute to SaaS license waste by failing to remove access for employees who have left the organization in a timely manner.
The ServiceNow white paper says proper deprovisioning is key to avoiding paying for unused licenses.
If an employee leaves but their software access isn’t revoked, the company keeps paying for licenses they’re no longer using.
Automated offboarding protocols can help make sure licenses are reclaimed and reassigned quickly, reducing waste and improving cost efficiency.
For instance, linking HR and IT systems can automatically deactivate licenses as part of the employee exit process.
Identifying SaaS License Waste
One of the most important things you can do is regularly audit your SaaS inventory.
Making a complete list of all your SaaS subscriptions—including license types, renewal dates, and associated costs—gives you a clear picture of your overall SaaS spending.
It’s also a good idea to keep track of what software you’re using. Using software to track how often employees use different SaaS apps can help you spot licenses that aren’t being used much.
SaaS management platforms make this process easier by giving you real-time insights into license utilization.
You can also get employee feedback on software usage and preferences through surveys.
This can help you identify potential redundancies or underutilized applications.
Another good strategy is to review expense reports. If you don’t have an up-to-date inventory of all your SaaS expenses, you might miss out on some unauthorized purchases.
These are software subscriptions that weren’t bought through the usual channels.
These unmonitored expenses just add to the waste of SaaS and show us why we need to keep a close eye on the finances.
So, kindly refer to “The SaaS Inventory Management Playbook: Strategies for Cost-Savings,” for detailed breakdown.
Strategies for Reducing SaaS License Waste
As mentioned before, it’s vital to conduct regular usage audits to identify underused and redundant licenses.
These audits are made easier with detailed usage analytics, which help us understand which apps are being used and how much.
These audits give a clear picture of how SaaS is actually being used, so organizations can spot any inefficiencies.
Consider how optimizing license utilization means reallocating unused licenses to departments or employees who need them.
This can be done by keeping better track of and managing license assignments.
SaaS management platforms give you real-time insights into license usage, so you can easily spot and reallocate underused licenses.
This proactive approach ensures all licenses are used effectively, which means you get the most out of your investment.
Another good strategy is to consolidate redundant applications.
By looking at what applications are already in use and getting rid of those with the same features, companies can cut costs and make their software stack more efficient.
For instance, if you’re using multiple project management tools, standardizing on one can save you money and make management easier.
Plus, always consider how important it is to get offboarding protocols right when it comes to SaaS licenses.
Ensuring proper access revocation for SaaS apps when employees leave the company prevents continued payment for unused licenses and improves security.
Automating the offboarding process makes sure all licenses are reclaimed in a timely manner, which helps avoid waste and keeps control over software access.
This approach not only saves money but also makes things safer by reducing the risk of people getting into things they shouldn’t.
Also, please consider having proper SaaS manager in your company. You can read “The Role of SaaS Manager: Your Tech-Ally for Maximizing Software ROI,” to get perspective about SaaS manager.
Best Practices for Ongoing SaaS License Management
If you centralize the management of SaaS applications, you can better control and oversee them.
With a centralized system, companies can keep track of all their licenses, see how they’re being used, and manage renewals easily.
This approach helps you keep track of all the licenses in your SaaS portfolio and avoid any duplicates or redundancies.
A centralized management system makes processes easier and ensures that all software assets are accounted for, which helps make things more efficient overall.
Another great practice is using automated license management tools. These tools help you keep track of all your SaaS licenses, so you’ll always know what you’ve got and how you’re using it.
Platforms like Octobits make it easy to keep track of licenses and monitor usage, so you don’t have to spend a lot of time manually keeping records up to date.
Octobits gives you real-time visibility into SaaS usage, automates license management, and offers insights for optimizing spend.
Octobits can help your company cut down on unnecessary costs and make things run more smoothly.
For instance, Octobits’ automated tools can help you identify waste and optimize spend, so you can make sure your resources are used effectively.
But, also consider having regular training and adoption programs to help people use SaaS applications more effectively.
It pays to make sure employees know what to do with these apps so they can really get the best out of them.
Training sessions and adoption programs help employees get more out of their tools. They also stop tools from going unused when they’ve been bought but not fully adopted.
Training sessions and adoption programs help employees get more out of their tools. They also prevent tools from going unused when they’ve been purchased but not fully adopted.
Conclusion
SaaS license waste is a big problem ‒ if you don’t manage it properly, it can really drain your resources.
If companies understand the common causes of waste and implement effective strategies to reduce it, they can optimize their software spend and improve overall efficiency.
Using tools like Octobits can help you take control of SaaS license waste, so you can make sure every investment in software is worth its weight in gold.
