How to Identify & Reduce SaaS Waste (2024)

SaaS waste

According to Deloitte, companies are increasing technology budgets on SaaS subscriptions across industries, with 49% of tech leaders saying that the tech investments that have the most significant digital transformation impact on their businesses are shifts to cloud-based applications. 

As organizations continue to accumulate SaaS applications, they run the risk of mismanaging subscriptions without sufficient oversight. This mismanagement often costs thousands of unnecessary dollars and causes compliance issues. As time goes on, these costs add up and become detrimental to a business’s bottom line.

What Is SaaS Waste?

SaaS waste is the unnecessary or inefficient purchasing of cloud-based software. This often happens when companies purchase SaaS tools they don’t need or use. SaaS waste can also result from employee underusing applications, failure to terminate subscriptions when teams change, and general mismanagement of SaaS inventories. This issue is especially pervasive with sales, marketing, customer success, and analytics software. 

Fortunately, IT teams can eliminate SaaS by developing robust software management strategies and conducting regular audits to improve usage. Several software asset management tools on the market aim to resolve these issues and maximize software return on investment.

Common Types of SaaS Waste

SaaS waste can stem from a variety of sources, but here are some of the most common ones:

1. Duplicate subscriptions for similar tools

It seems like for every workplace problem, there are a range of software solutions. This sounds like good news, but when different teams independently subscribe to SaaS applications with overlapping functions and features, organizations often end up spending more money. Sometimes, team members in different departments unknowingly purchase the same tool under different licenses, resulting in even more unnecessary costs, onboarding, and overage fees.

2. Unused or underutilized licenses

It’s common for teams to need to properly train employees on how to make the best use of the SaaS applications at their disposal. A clear software asset management strategy can make managing software licenses, evolving teams, and training needs easier. 

3. Over-licensing or excess capacity

Sometimes, IT teams accumulate more SaaS licenses or computing power than is necessary. This can result in overspending, overprovisioning, and underutilization. Without complete visibility into the organization’s software and licensing data, IT teams miss opportunities to recognize excess capacity and fail to adjust resources to match the true needs of their teams.

4. Inefficient processes due to lack of integration

When an organization’s SaaS applications and systems don’t integrate, organizations get settled with data silos that result in redundant efforts and other efficiencies. It also leads to poor visibility and reporting, which can hinder software asset management efforts.

5. Continuing legacy systems alongside SaaS

When IT teams retain outdated systems, they can prevent their organization from leveraging the full benefits of their SaaS applications. Because legacy systems often have limited scalability and integration capabilities, their continued use can lead to underutilization of SaaS. This can also pose issues for security and compliance because they need more potent features found in most modern SaaS applications.

5 Risks of SaaS Waste

The risks of SaaS waste can be dire for businesses; here are some of the most prevalent ones:

1. Unnecessary expenditure on unused subscriptions

Investing in a software subscription that will reap benefits and a high ROI is one thing; throwing money away on unused software subscriptions is another. When IT teams lack the proper visibility into the status of their software assets, they risk paying for more licenses than necessary or continuing to pay for subscriptions that employees don’t find helpful for their job functions.

2. Reduced ROI from technology investments

A lack of streamlining, oversight, and governance structure can cause overpurchasing of applications, which can bog down productivity with redundant features, inefficient integration, and security concerns. These problems, paired with a lack of end-user training, can cause confusion and software avoidance, leaving applications underused and reducing the overall return on SaaS investments.

3. Misallocation of IT resources and budget

When SaaS waste is not monitored, it can result in various issues, like misallocation of IT resources and budgets. On top of overlicensing and redundant tools, SaaS waste prevents IT teams from adequately monitoring and reporting on SaaS usage and performance, preventing the optimization of SaaS-related costs.

4. Decreased productivity due to tool overload

When organizations need standardized protocols and have redundant tools at their disposal, employees end up reinventing the wheel regularly rather than following clear procedures to get their work done. On top of that, they may be downloading unapproved SaaS applications or shadowing IT to get their work done. Together, these effects cause decreased productivity and leave employees feeling under-supported.

5. Potential compliance and security risks

Additionally, unauthorized SaaS downloads and Shadow IT can result in security breaches and noncompliance issues, which put the organization at risk of fines and other penalties. Poor integration of SaaS systems and inadequate security monitoring can compound these problems.

Best Practices for Managing SaaS Subscriptions

Despite the risks, we know that SaaS is essential to thriving modern IT environments. So what do you need to ensure your organization benefits from SaaS investments? Effective management of SaaS subscriptions.

Here are some widely-acknowledge best practices for cloud-based software asset management:

1. Regularly monitor and evaluate usage

One of the critical foundations of proper SaaS management is visibility. IT teams should continually monitor SaaS usage to optimize software licensing and determine which applications are worth the investment. Usage monitoring is also essential for determining whether employees are adequately trained on the software and feel the resources meet their needs.

2. Centralize subscription management

Rather than allowing each department to handle its own software licensing, centralize subscription management within IT to optimize spending and create a more secure software environment. By consolidating subscription management, IT teams gain control over user access and data security and are better positioned to consolidate licenses, cut unnecessary costs, and guard against shadow IT.

3. Negotiate flexible contract terms

When working with SaaS vendors, negotiate contract terms that allow for flexibility and favorable pricing by consolidating licenses and contracts across the organization. Maintain positive relationships with vendors and keep current with changes to features and terms. 

Negotiate favorable flexibility/pricing by consolidating contracts across the organization.

4. Ensure compliance with company policies

Establish robust application governance procedures to ensure employees comply with company policies. Perform regular security assessments and compliance checks to ensure operations align with company policies and regulatory requirements.

5. Train employees on efficient SaaS use

Employees should know not only which SaaS applications to use for different tasks, but also how to use them efficiently. Digital adoption platforms (DAP) like Whatfix enable employees with in-app guidance and contextual support that helps them comply with organizational policies, learn in the flow of work, and provide moment-of-need support.

whatfix flow

With Whatfix, provide contextual onboarding to end-users with Tours, Task Lists, and Flows – all providing role-based assistance to employees using applications for the first time. Use Self Help, Smart Tips, and Field Validation to provide on-demand, real-time end-user support inside your SaaS applications.

whatfix-digital-adoption-platform-example

Above: In-app employee guidance created with the Whatfix Digital Adoption Platform

Whatfix’s DAP empowers organizations with a no-code editor to create in-app guided flows, onboarding tasklists, pop-ups, tooltips, alerts, reminders, self-help wikis, and more to enable employees to use software better. Enable your employees to become proficient in new applications faster, create interactive process documentation, guide users through process changes, assist employees through infrequent tasks, and provide self-help performance support on your CRM, ERP, HCM, or any desktop, web, or mobile application.

6. Remove redundant or underused applications

Once redundant or underused applications have been identified, IT teams should phase them out and provide employees with a superior alternative they can use. By optimizing software subscriptions and consolidating applications with overlapping functionalities, IT teams can improve employee experience and eliminate excessive tech spending.

7. Align SaaS purchases with business goals

Aligning SaaS investments with organizational goals helps keep IT strategies focused on long-term business outcomes. By purchasing software that directly supports business objectives, teams can build a more purposeful and cohesive IT strategy that benefits the organization as a whole.

19 Tips for Minimizing SaaS Waste

Eliminating SaaS waste allows IT to maximize resources and foster a secure working environment. Here are 19 tips your team can use to keep SaaS waste from piling up:

1. Conduct regular SaaS inventory audits

Conduct regular audits to identify which applications or licenses may need to be eliminated or modified to achieve IT and organizational goals. Use software discovery tools to identify unauthorized subscriptions and ensure that licensing quantities and terms align with the teams’ needs.

2. Implement a centralized SaaS management system

Centralization and consolidation go a long way toward effectively managing SaaS tools. Implement a SaaS management system that can be utilized from a centralized platform to give IT the visibility and control necessary to manage software properly.

3. Establish clear policies for SaaS procurement and use

Standardization of policies is critical for promoting appropriate software use and procurement practices. These policies should be well-documented and communicated to team members to encourage cooperation and ensure compliance at all times.

4. Encourage employee feedback to identify unnecessary tools

Ask employees about their experience using SaaS for their job functions. This information should be compiled with usage analytics to determine which tools are most useful from the employee’s standpoint.

5. Negotiate scalable and flexible contracts with vendors

When drawing up contracts, prioritize scalability to ensure that subscription costs remain manageable and worthwhile as your organization grows. Build in favorable exit and change strategies to ensure that agreements allow for modification, consolidation, or reallocation as necessary.

6. Utilize analytics tools for monitoring usage and performance

Monitor SaaS usage and performance to evaluate their value and inform decisions for the future. These insights make it easy for IT teams to decide whether applications should be modified or replaced in the future.

7. Prioritize SaaS solutions that offer integration capabilities

To ensure that employees get the most use out of applications, stick to software that integrates seamlessly with existing infrastructure. This will streamline processes and make using SaaS easier for both IT teams and general employees.

8. Train employees on the effective use of SaaS tools

Employees should be well-versed in SaaS policies and practices, especially when complying with organizational and regulatory requirements. Proper employee training ensures efficient and effective use of software and prevents the adoption and use of unauthorized software.

9. Discontinue or reallocate underused or redundant subscriptions

When it comes to redundant or underutilized applications, cut subscriptions to avoid further lost funds and wasted time. If applications are better suited for one department, reallocate subscriptions to maximize efficiency. When possible, consolidate contracts into organization-wide subscriptions to further minimize unnecessary spending.

10. Regularly review and optimize SaaS spending and budget allocations

Cutting SaaS waste requires coming at the problem from many angles. In addition to monitoring application usage, pay regular attention to big-picture financial perspectives to keep spending in check and avoid year-end headaches.

11. Explore multi-function SaaS platforms to reduce tool sprawl

Consolidating SaaS platforms can be tricky, but opting for multi-functional solutions is a surefire way to reduce redundancy and misuse. It is worth it to do the research and choose SaaS platforms that can perform a variety of functions within and between teams to minimize tool sprawl.

12. Ensure IT and business alignment in SaaS decision-making

A central goal of IT governance is structuring IT infrastructure to facilitate the achievement of organizational goals and values. Involve stakeholders from IT and upper management in decision-making to keep IT activities aligned with business objectives.

13. Leverage AI and automation for efficient SaaS management

Choose tools that harness the power of AI and automation to streamline software management processes and eliminate SaaS waste before it happens.

14. Actively manage renewals and avoid automatic renewals without review

Avoid surprise costs and getting saddled with unnecessary subscriptions by taking a proactive approach to software license management. Software asset management tools simplify this with automatic renewal alerts and IT approval workflows for subscriptions.

15. Engage in periodic market research to stay updated on SaaS trends and alternatives

The tech landscape is constantly evolving, so doing regular market research to learn about SaaS trends and new tools that can benefit your company is useful. Staying abreast of trends empowers IT leaders to manage software stacks more effectively and create more value for their organizations.

16. Foster vendor relationships for better support and potential savings

IT teams need to develop relationships with their vendors for each SaaS subscription. Positive vendor relationships can lead to improved communication and support, and make additional room for negotiating mutually-beneficial agreements.

17. Promote cross-departmental communication to avoid siloed SaaS purchases

To avoid redundant software purchases across departments, promote communication and collaboration to seek out effective solutions that work across departments. When tools can be consolidated like this, IT teams reduce spending and promote shared understanding across the organization.

18. Evaluate the total cost of ownership (TCO) for each SaaS tool

Sticker price isn’t everything. Licenses, maintenance fees, training, downtime, and external support needs all add up to the true cost of each SaaS tool your organization uses. Use analytics tools to calculate the total cost of ownership for each SaaS tool to make software inventory decisions based on an accurate picture of costs and benefits.

19. Implement a robust offboarding process for SaaS tools when necessary.

Work favorable offboarding terms into SaaS contracts during the negotiation and implement change-management processes to maintain productivity and security standards through transitions. This will reduce disruption and keep employees feeling supported as tech environments evolve.

Tools for SaaS Optimization

Many different tools on the market empower IT teams to manage SaaS spending and ensure efficient resource utilization. Here are some of the most common tools IT teams use to reduce SaaS waste and optimize software usage:

1. SaaS management platforms for managing software stack

SaaS management platforms allow IT teams to optimize SaaS subscriptions with use monitoring, license management, and automated compliance checks. These platforms give IT teams optimal visibility into company-wide SaaS use to make better software purchasing decisions and eliminate waste as it is discovered.

2. End-user behavioral analytics for tracking usage

Software with robust end-user behavioral analysis tools empowers IT teams not only to determine which software is being used by employees, but also how it is being used. 

With Whatfix, IT teams can gather end-user behavior data that reveal which employees use different applications, the level of product usage by different employees, and the level of adoption by different types of users. Understanding user behavior at this level can help teams determine which applications can be used more efficiently and which areas require more employee training.

3. Digital adoption platforms for enabling end-users with in-app guidance and support

Digital adoption platforms like Whatfix provide in-app guidance and support within applications to ensure that SaaS platforms and their contextual processes are used effectively and consistently across the board. By providing contextual assistance, task lists, and information about relevant policies and compliance requirements. 

4. Automated subscription renewal alerts

Implement software that can alert IT to upcoming subscription renewals to avoid service interruptions and maintain compliance. This allows responsible parties to verify that all compliance requirements are met before renewal or to cancel unnecessary subscriptions in time to comply with contract terms.

5. Cloud access security brokers (CASBs)

Cloud access security brokers serve as a security gate between SaaS users and the cloud service providers, allowing IT teams to incorporate an organization’s security policy before use. CASBs add a valuable layer of security for organizations with extensive security and compliance needs.

6. Integration tools for cross-application efficiency

Software integration tools reduce SaaS waste by consolidating, transforming, and transferring data between different applications and allowing access from a centralized platform. Integration tools can help IT teams optimize software use and improve the efficiency of existing applications if they are not compatible right out of the box. This also makes them helpful in cases where it is not currently possible to move away from legacy solutions.

7. Benchmarking against industry standards

Some software management applications include benchmarking tools, which can be used to evaluate software use compared to similarly sized companies in similar industries. Using this data can better inform software purchasing decisions and reveal instances where other organizational inefficiencies are the source of software misuse or underuse.

Whatfix: The Ultimate Tool to Combat SaaS Waste

SaaS waste is an issue that arises not only from ineffective software asset management but also from inadequate employee adoption. Incorporate Whatfix’s digital adoption platform into software asset management plans to optimize software use and eliminate SaaS waste for your organization. 

With Whatfix Analytics, IT teams can use behavior insights to craft optimal support tools that can be integrated right into the applications employees use. From in-app guidance to step-by-step workflows, Whatfix empowers IT teams to drive adoption and provide employees with all the tools and assistance they need in real time.

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What Is Whatfix?
Whatfix is a digital adoption platform that provides organizations with a no-code editor to create in-app guidance on any application that looks 100% native. With Whatfix, create interactive walkthroughs, product tours, task lists, smart tips, field validation, self-help wikis, hotspots, and more. Understand how users are engaging with your applications with advanced product analytics.
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