Recent studies have shed light on a growing trend that a significant portion of Software-as-a-Service (SaaS) licences often go unused. Mi3 mentions in their article that data from Zylo suggests that up to 44% of SaaS licences may not be actively utilised within organisations.

This rampant waste isn’t just a minor budgetary concern; it can be a silent killer of your operational efficiency. This problem is a massive drain on resources that you could be allocating elsewhere.

With SaaS spending becoming the second-largest operating expense after staffing for many organisations, the financial implications of this waste on your bottom line are staggering.

So today we will explore some of the burning questions you might have: “How much wasted on SaaS spend?”

We’ll dive into the current trends in SaaS spending, examine the factors contributing to waste, and explore strategies that some organisations have successfully implemented to maximise their software investments.

We hope by the end of this article, you’ll have a clearer picture of the SaaS spending landscape and be better equipped to evaluate your own situation.

So without further ado, let’s get to it!

The Effect of SaaS on Your IT Budget

Software-as-a-Service (SaaS) has significantly changed how many businesses operate, offering new options for flexibility, scalability, and accessibility.

This shift towards cloud-based solutions has impacted IT budgets in various ways, often becoming a substantial line item for organisations of all sizes.

According to recent data, the average organisation spends approximately $50 million on SaaS, which translates to about $4,600 per employee.

This figure is astounding, especially when you consider that it’s often the second-largest operating expense after your staffing costs.

However, it became clear why this happened and why SaaS is the new trend: it eliminates your need for costly on-premises infrastructure and allows for rapid deployment of new tools and technologies.

But this ease of adoption has likely led to a proliferation of SaaS applications within your organisation, often without proper oversight or management.

Companies are probably adding an average of four to six new SaaS applications every 30 days. This rapid expansion, while potentially beneficial for your productivity and innovation, also creates significant challenges in terms of cost management and efficiency.

More in Nexalab’s blog: How SaaS Spend Management System Can Help You Cut Costs and Boost Efficiency

Waste on SaaS Spend

The most alarming statistic in the world of SaaS spend is the sheer amount of waste. Studies have shown that a staggering 44% of SaaS licences go unused. This means that nearly half of the money you’re spending on SaaS is essentially being thrown away.

By Company Size

The impact of SaaS spend waste varies depending on the size of the company.

• Small Businesses (1-100 employees): If you’re running a small business, you may have fewer SaaS applications overall, but you might be struggling with overpaying for features you don’t need or having overlapping functionalities across different tools.
• Mid-sized Companies (101-1000 employees): If your organisation falls in this category, you’re likely facing challenges with departmental silos leading to duplicate subscriptions and underutilised licences.
• Large Enterprises (1000+ employees): If you’re managing an enterprise-level company, you’re probably grappling with a complex SaaS ecosystem, making it difficult to track usage and manage costs effectively. You’re more likely to have significant waste due to sheer volume and complexity.

By Industry

Different industries face unique challenges when it comes to SaaS spend waste:

• Technology: If you’re in tech, you’re often an early adopter, which means you might overinvest in cutting-edge tools that end up underutilised.
• Healthcare: If you’re in healthcare, strict regulations can lead you to oversubscribe to compliance-focused SaaS tools.
• Finance: In finance, you might be dealing with high-cost, specialised software that often leads to significant waste if not properly managed.
• Education: If you’re in education, your limited budgets make waste particularly painful, yet decentralised decision-making often leads to inefficiencies.

Visibility and Shadow IT in Your Organisation

One of the primary drivers of your SaaS spend waste is likely the lack of visibility into what software is being used across your organisation.

Unapproved software purchases by employees make this problem worse.

This is called “shadow IT”—when staff buy and use software without the company’s knowledge or approval.

With the ease of credit card purchases and departmental budgets, your individual employees or teams can easily subscribe to new SaaS tools without oversight from your IT or procurement departments. This leads to several issues:

1. Duplicate subscriptions: Your different departments may unknowingly subscribe to the same or similar tools.
2. Unused licences: Your bulk purchases may include more licences than necessary, leading to waste.
3. Security risks: Unauthorised SaaS tools may not meet your company security standards.
4. Inefficient processes: Without proper integration, data silos can form in your organisation, reducing overall productivity.

To tackle these problems, you should put in place solid SaaS management practices. Do regular checks on how you’re using SaaS, set up a central system for buying software, and use SaaS management tools to get a clear view of all your software. This’ll help you keep things under control.

Forecasting Future SaaS Spending

As companies continue to digitalize and adapt to remote work models, the SaaS spending is expected to grow. Gartner predicts that global spending on public cloud services, including SaaS, will grow 20.7% to total $591.8 billion in 2023, up from $490.3 billion in 2022.

This growth presents both opportunities and challenges for your business.

On one hand, SaaS tools can drive your innovation, improve your productivity, and enable you to stay competitive. On the other hand, without proper management, this growth could lead to even more waste and inefficiency in your organisation.

To prepare for this future, you should:

• Put in place a solid SaaS management strategy and methods.
• Check and improve your SaaS lineup often.
• Train your team well so they can make the most of the tools you already have.
• Think about using fewer SaaS providers to get better deals and make things easier to manage.

You can also consider using a SaaS management platform to help implement your SaaS spend management strategy efficiently. These tools can give you a clear view of all your software, track usage, and help you make smart decisions about your SaaS investments.

More in Nexalab’s blog: How Much Do Companies Spend on SaaS?

Conclusion

Seeing clearly what SaaS you’re using, managing it well, and planning smart for future costs can cut waste and help you get more from your software investments.

Looking ahead, managing SaaS well will only become more important. If you get a handle on your SaaS spending now, you’ll be in a better spot to use cloud software’s power while avoiding waste and inefficiency.

Octobits from Nexalab offers a full solution for these SaaS management issues. Our SaaS Management Platform (SMP) gives you the insight and control to make the most of your software investments. Octobits has central dashboards, automatic reports, and custom alerts to help you cut waste, lower costs, and get the most value from your SaaS tools.

Don’t let SaaS waste drain your resources anymore.

Contact Nexalab today to see how Octobits can improve your SaaS spend management strategy.