A generation of IT has been trained on the practice of Software Asset Management, which has been built on the focus of audit-based license agreement compliance. As the enterprise software market has moved to SaaS, the need for regular audits has decreased because of a fundamental shift from vendor-driven contract enforcement to client-friendly policies for adding new licenses and services.
As software shifts from being a license-based capital expenditure asset to a usage-defined operational expenditure service, the foundational nature of software management must change as well. Rather than managing software as a sunk cost with the goal of squeezing the maximum utilization out of an initial license before the software becomes obsolete, companies must now treat Software as a Service as a constantly renewing and updated functionality aligned to specific business roles.
The trade-off for the ease-of-use and support for SaaS is that enterprise software contracts are harder to negotiate because a number of buyers may end up purchasing SaaS and the purchase cycle is built to support consumerized purchases through P-cards, expense accounts, and line-of-business operational budgets rather than through a formal IT process.
As a result, the traditional world of SAM compliance and top-down procurement is being replaced with the need for cost management solutions that focus on:
- Discovery of new accounts through identity and access management
- Aggregation of multiple user accounts associated with a single vendor
- Identifying duplicate solutions providing similar functionality
- Finding zero-usage and underutilized accounts
- Identifying requests for account upgrades (based on the increasingly standardized three-tier SaaS view of Starter, Enterprise, and Advanced levels of functionality.)
- Revenue-driven and purpose-driven demand forecasting
In discussions with IT, operations, and procurement managers that have pursued the cleansing and optimization of SaaS environments with over $1 million in annual spend, Amalgam has found that unmanaged SaaS typically has 30%-40% in wasted expenses due to a lack of proactive account rationalization. Enterprises taking a traditional SAM-based compliance view of software will fail to identify these accounts because of a focus of assigning existing accounts to users or projects rather than taking a business-based view of whether the account should be upgraded, downgraded, or disconnected.
In the new world of SaaS, procurement and IT managers must look for zero usage accounts and understand line-of-business needs for third-party access, data integration, and new functionalities. To take control, Amalgam suggests that SAM and SaaS managers take a look at how telecom, network, and mobility managers are handling their bills. Consider the similarities.
For decades, telecom and mobility managers have been working with multiple vendors and handling service orders such as moves, adds, changes, and disconnection (MAC-D) requests on a daily basis based on business and employee demand. Although these managers also conduct audits, the telecom audit is best conducted as a three-way view of contracts, invoices, and inventory that can be conducted on a one-time basis or validated continuously through a software-based solution. Because significant portions of telecom and mobility service order activity can be outside the purview of centralized IT, these spend categories rely on constant vigiliance driven by automation.
This is the future of software management as well due to the nature of SaaS purchases and support. Amalgam notes that the SaaS expense management market currently is fragmented across a variety of Software Asset Management vendors, startups focused on SaaS, and technology expense vendors that have typically started with a telecom or mobility background and have inherited SaaS as a new spend category.
A partial list of vendors in each of these categories supporting the discovery, cost management, and usage analysis associated with enterprise SaaS-specific cost management includes:
Software Asset Management: Aspera, BDNA, Flexera, Ivanti, License Dashboard, Snow Software, Vector Networks
SaaS Expense Management: Binadox, Cleanshelf, MetaSaaS, Zylo
Technology Expense Management: Asignet, Calero, Cimpl, GSG Telco, MDSL, Tangoe, vCom
If you are managing million dollar SaaS environments and would like to discuss strategies and vendors for proactively managing this spend, please feel free to contact me directly at Hyoun@amalgaminsights.com or sign up for my November webinar on SaaS Management