If your company is similar to the majority of U.S. companies, you’re likely depending on one or more SaaS cloud applications for critical business operations. Moving some software from on-premise to the cloud simply makes sense for businesses of all sizes. Companies gain flexibility and accessibility while reducing costs and resource requirements.
The PwC Global 100 Software Leaders report found a couple of interesting facts:
- Total SaaS/PaaS revenues of top 50 software companies globally are $22.4 billion
- Subscription-based enterprise software deployments are replacing licensing, significantly impacting the revenue streams of on-premise vendors
SaaS is a big business and only growing. Companies want the ease of offloading maintenance and upgrades to the vendor. They want 24-hour access from around the globe. They want the ability to scale quickly as they grow. SaaS provides all of this and more. That’s the good part.
The bad part is that many companies are struggling to keep up with all of the cloud applications they are using. One of the beautiful things about cloud applications is that they are easy to deploy, often requiring no more than a quick download onto a desktop. On the flip side, when employees find an app they like, within minutes they can be using it for free for a trial period. Their co-workers begin to use it and before IT is made aware, a new application has just been added to the list. Phantom IT pops up everywhere without anyone managing the mushrooming cloud of apps.
Whether one employee or the entire company uses a cloud application, it still has to be tracked and managed. Every SaaS vendor has their own contract and terms, their own fees and renewal dates. Who is keeping track of all of the details and ensuring every app is being fully utilized in order to justify ROI?
SaaS vendors are banking on the fact that you’re not watching.
Therein lies the truth. The SaaS vendors, of course, want to bring to market useful tools to help companies be more productive, efficient and capable. They fill a niche that is rapidly growing to an ocean of possibilities. Yet, despite their noble intentions to better the world, they are a business. They live and die by their bottom line. Margin and revenue still matter.
One of the easiest ways for them to improve their revenue stream is through auto-renewals of subscriptions. While these auto-renewals have the benefits of preventing service disruption and easing administration for the customer, the less time vendors spend on renegotiating contracts, the better for their bottom line. The less meticulous their customers are at tracking their usage of those SaaS applications, the more likely contracts will renew without any modifications.
It’s similar to Amazon Prime or any other similar membership you may have. For Amazon, you pay your $99 per year and it automatically renews in 365 days. You don’t receive an email reminder letting you know your renewal is coming up or encouraging you to think about whether or not you want to renew. Instead, it discreetly charges your credit card another $99. This methodology produces loyalty, with or without consumer consent. Consumer Intelligence Research Partners analyzed membership patterns for Amazon Prime and found member retention rates improved over time.
- 73% of 30-day trial subscribers pay for the first full year of Amazon Prime membership
- 91% of first-year paid subscribers renew for a second year
- 96% of second-year paid subscribers renew for a third year
Let's give due credit, though. Many customers appreciate not having to manually renew their SaaS subscriptions every year. It saves time and more importantly, limits service interruptions, especially for low cost and business-critical applications. Imagine if Google Apps didn't auto renew and your email went out every year until you manually renewed?
So, how do you get the best of both worlds? You must stay vigilant.
Vendor Reports Don’t Cut It
Some companies are attempting to keep track of their SaaS vendors, yet their efforts are rarelyrewarded with accurate or sufficient reporting. While SaaS vendors frequently offer customers a report of usage of their specific software application, companies must still collate all of the separate vendor reports in order to achieve a big picture view. There is no comprehensive reporting offering real-time metrics on how many apps are being utilized, who is using them and how frequently they are being utilized. Unfortunately, organizations make do with what they have - leading to incomplete and inaccurate SaaS management.
Not everyone is blind to this challenge. Third party SaaS management companies are springing up to fill the void. Most of them, however, come with their own issues. They offer reporting but not the in-depth measurements organizations require to manage a quickly evolving and often complex platform of cloud applications.
Their reports may show usage volume but not the more informative utilization metrics, such as frequency and duration of use. What is the difference? Usage volume only reveals who has logged into the cloud application by date or over a specific time period. Logging in is vastly different from actual utilization.
Many employees have single or automatic sign on. Either they sign into one app and are instantly logged into multiple company apps at the same time, or they are automatically signed into the apps whether they intend to use them or not.
Organizations need more information in order to understand whether they have purchased enough or too many licenses, if they are utilizing all of the app features they are paying for, if they are getting any return on their investment or if the contract needs to be renegotiated at contract end. Without this detailed data, without real SaaS contract renewal management, companies can only make assumptions. Contracts auto-renew. Dollars get wasted. SaaS vendors profit.
SaaS Vendors Aren’t Villains
SaaS vendors aren’t bad; they’re just smart. They know most companies don’t have access to this in-depth reporting or the resources to generate them. It’s not their core competency and it seems to be working out quite well for them. IDC predicts global public cloud services spending will reach nearly $123 billion this year.
Ultimately, it’s up to companies to perform their due diligence - both in finding the right type of SaaS management software and for gaining control over their SaaS vendors. When organizations can look at a dashboard and see real-time reports of every SaaS application in use across the enterprise, who is using them, how often and to what capacity, they are in a position to renegotiate where needed.
When companies can monitor a timeline to see which contracts are coming up for renewal, they can plan, negotiate and optimize instead of allowing the contract to auto-renew without consideration. Only those cloud applications that have the greatest utilization and return are renewed. Gartner estimates companies can save up to 30 percent on unnecessary licenses when they implement reporting tools such as these.
If you’re using desktop applications to manage your cloud applications, you will always be at a disadvantage. Take control of SaaS management by using the right technology to keep you informed with real-time, in-depth data you can use with confidence to make smarter decisions.