Tag: SaaS Management

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The Evolution and Expansion of IT FinOps

At Amalgam Insights, we’ve long championed the Technology Lifecycle Management approach to describe the many areas existing across IT FinOps to reduce costs across hyperscalers, data clouds, Software-as-a-Service, networking, enterprise mobility, and telecom costs. Usage optimization is not enough. Product rationalization is not enough. Contract negotiations are not enough. And when these opportunities are not bridged, additional opportunities fall by the wayside across the IT environment.

Technology Lifecycle Management

One of the most interesting trends of 2024 has been the FinOps Foundation’s initial steps into software management. As cloud FinOps starts entering the already-established worlds of SaaS management and network management, it will be interesting to see both where cloud FinOps’ comfort zone of massive usage and product tradeoffs help the more static worlds of software and telecom as well as where FinOps’ traditional struggles with business taxonomy, detailed sub-user chargebacks, and lack of contract detail start to push against the issues that you, I, and the rest of the IT world have been dealing with for the past 15+ years. Unlike Cloud FinOps, Software FinOps and Telecom FinOps have a long history of multi-user monitoring, usage, and cost management and to avoid cooperating with end-user requests for any type of market-wide billing or usage standardization.

For the past several months, I’ve been working on my SmartList of IT FinOps vendors (thank you to all the vendors and customers for your participation!) with a eye towards looking at vendors focused on bridging gaps between cloud FinOps and the rest of the IT world. Out of the 300+ vendors I look at from an IT expense lifecycle perspective, I’ve narrowed the list down to 15 vendors that I think are really doing something different, which will be our Distinguished Vendors. But I am also starting to find some interesting trends that make these distinguished vendors different from the extremely crowded portfolio of options that IT departments face.

Before getting to those, let’s just define what is not considered differentiated in 2024. Simply ingesting bills is not good enough. Being customer-centric and having attention to detail are considered table stakes if you cannot provide customers that vouch for your approach being quantitatively better than other competitors. Everybody I cover can support tagging. Cross-charging is a standard enterprise ask in RfX activity. Basic dashboards and analytics are standard (and if you haven’t chosen a high-performance analytics solution like Sisense or Sigma or Qrvey, you’re probably behind for supporting real-time changes). And everyone is competing against 2020s-era design standards for SaaS as a standard, especially with the flood of money that has gone into the data and code-centric Third Wave of FinOps.

First, as expected, top vendors are often finding now that they are the second or third solution chosen at the enterprise level. IT buyers have often focused on the “up and to the right” vendor landscape too much in their purchase of FinOps and IT expense management solutions with the assumption that these are commoditized solutions rather than the financial window to the pulse of the digital business. Although every business today likes to talk about how they have “digitally transformed” and are “data-driven,” the truth is that companies have not fully embraced data and digital business until the actual cost of data infrastructure, delivery, and data-related customer activities can be finally categorized and calculated. And without FinOps and IT expense solutions, the comparative data simply isn’t there at the bill of material (BOM) or component level that we take for granted in manufacturing or service level. A digital business lacking formal IT FinOps is like managing a hospital without knowing how many procedures are being done or a discrete manufacturing company not knowing how many parts it uses.

Second, there is a massive effort to utilize and translate tagging efforts into standard business categories. The FinOps insistence on tagging service elements across infrastructure and platform without alignment to larger corporate or IT frameworks is starting to collapse into its own form of technical debt. The combination of poor data quality, inconsistent or idiosyncratic tagging, poor mapping to existing categories, and lack of integration with existing birthright and foundational enterprise applications has led to the need for better metadata definition and mapping. Of course, the goal here is not simply to create a pristine metadata environment (although I do love well defined taxonomies and ontologies!), but to deeply align IT to business so that product, service, and revenue managers know which technologies are vital to their work.

Third, data integrations and a unified data layer are increasingly important across vendors. One of the most salient and welcome aspects of the latest wave of FinOps solutions is the data layer that provides visibility across hyperscalers, data clouds such as Databricks, Snowflake, and Cloudera, as well as observability solutions such as Datadog. From a tactical perspective, this data ingestion helps cloud architects and digital business leaders to track costs. But it also helps set up the FinOps practitioner as a central player in managing the business aspects of digital behavior. The cost of accessing, processing, and utilizing data will only increase with the emergence of AI as a new massive spend area within IT. And although this cost is under the direct supervision of the CTO and CFO right now in many cases, it will all eventually filter down to some level of IT FinOps as the complexity of these ecosystems becomes too immense. Many of today’s top solutions are proactively setting themselves to be this data layer for supporting the future of IT activity.

Fourth, the tradeoffs between defined hyperscalers, defined on-premises services, virtualized services, and containerized services continue to be a challenge and the current answer is often to split each of these categories into a separate management solution. This is not a sustainable approach and Amalgam Insights both expects and encourages market consolidation so that FinOps professionals can see more of their infrastructure and platform investments under the same umbrella.

Fifth, everybody likes to talk about “cloud economics” while ignoring the “economics” part of the puzzle. There is a lot of focus on the mathematical aspects of large scale optimization of usage. And I get it. Techies love working with big problems and algorithmic fixes and finding clever ways to discover null values and aggregating pennies into dollars. This skill set is often what makes technology contributors invaluable both in developing architecture and in root-cause analysis for large enterprise challenges. But it is only a piece of the puzzle when it comes to aligning the financial health of the enterprise with digital and cloud activity. At some point, this optimization needs to be tied to the less exciting tasks of invoice processing, cross-checking billing rates with existing rates and discounts, direct product tradeoffs both within and across hyperscaler providers, comparing contract terms, enforcing contracted KPIs and timeframes, and aligning cloud activity to new accounting rules and tax credits. All of this is part of the microeconomics of cloud. Simply looking at usage optimization makes you a unit-specific beancounter. A true cloud economist needs to understand how the cost of cloud shapes the rest of the business and how it needs to be structured, reinforced, and defined based on all business forces.

Sixth, the cost of IT FinOps is changing rapidly. The first generation of cloud FinOps solutions charged similarly to software management and telecom management vendors where enterprise spend was based on a percentage of spend. But the problem is that these approaches started to outgrow their value for clients that grew their cloud spend to $50 million or $100 million and literally realized they could build their own solution and support it in perpetuity. We have seen solutions like Capital One Slingshot or Netflix’s development of NetflixOSS Ice, now supported by Teevity based on corporate efforts that became commercial products. So, there is a lot of pressure to drive down the cost of IT FinOps back to a flat license rate or user-based pricing once spend gets to an enterprise-tier. This pressure is exacerbated by the vendor sprawl across FinOps. For vendors that are product-based, this will continue to be a trend while companies shifting to a managed services approach will be able to maintain pricing based on the overall maintenance of the FinOps environment across billing, accounting, optimization, procurement, vendor relationships, governance, and IT-business alignment.

Those are some of the big trends I’ve been seeing so far over the last several months. There is a lot of nuance here, which I’m looking forward to digging into as I finalize the FinOps SmartList and get to highlight the Distinguished Vendors: the top 5% of companies that stand out both in their results and their differentiation. Is there anything you think I missed? Or do you want to talk more about either your FinOps product or your current FinOps RfP work? If so, get in touch with me at briefings@amalgaminsights.com.

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Zoom Faces Challenges in Navigating the Age of Generative AI

Note: This piece was accurate as of the time it was written, but on August 11th, Zoom edited its Service Agreement to remove the most egregious claims around content ownership. Its current language is more focused on the limited license needed to deliver content and establishes that user content is owned by the user. Amalgam Insights considers the changes made as of August 11th to be more in-line both with industry standards and with enterprise compliance concerns.

On August 7, 2023, Zoom announced a change to its terms and conditions in response to language discovered in Zoom’s service agreement that gave Zoom nearly unlimited capability to collect data and an unlimited license to use this information going forward for any commercial use. In doing so, Zoom has brought up a variety of intellectual property and AI issues that are important for every software vendor, IT department, and software sourcing group to consider over the next 12-18 months.

Analyzing Zoom’s Service Agreement Language

This discovery seems to have been a few months in the making as these changes seem to have initially been made back in March 2023 as it was launching some AI capabilities. Looking at each section, we can see that 10.2 and 10.3 focus on the usage of data.

Although this data usage may seem aggressive at first, one has to understand that Zoom‘s primary function is video conferencing, which requires moving both video and audio data across multiple servers to get from one point to another. This requires Zoom to have broad permission to transfer all data involved in a standard video, conference, or webinar, which includes all the data being used and all of the service data created. So, in this case, Amalgam Insights believes this access to data is not such a big deal as Zoom probably needed to update this language simply to support even basic augments, such as cleaning up audio or improving visual quality with any sort of artificial or machine learning capabilities.

However, in Amalgam, insights perspective, 10.4 is of much more aggressive set of terms. This change provides Zoom with a broad-ranging commercial license to any data used on Zoom‘s platform. This means that your face, your voice, and any trade, secrets, patents, or trademarks used on Zoom now become commercially usable by Zoom. Whether this was the intention or not, this section both sounds aggressive and crosses the line on the treatment that companies expect for their own data.

This is an extremely aggressive stance by most intellectual property standards. And it stands out as conflicting in comparison, to how data is positioned by Microsoft and Salesforce, enterprise application platform companies that aren’t exactly considered innocent or naïve in terms of running a business.

What went wrong here? Zoom is traditionally known as a company that is for the most part end user-centric. Zoom’s mission includes the goal, to “improve the quality and effectiveness of communications. We deliver happiness.” And Eric Yuan’s early stories about wanting to speak with loved ones remotely and refusing to do on-site meetings in promoting the power of remote meetings are part of the Zoom legend.

However, Zoom is also facing the challenge of meeting institutional shareholder demands to increase stock value. When Zoom’s stock rose in the pandemic, it reached such amazing heights that it led to extreme pressure for Zoom to figure out how to 5X or 10X their company revenue quickly. Knowing that the stock was in a bit of a bubble, Zoom initially tried to purchase Five9, a top-notch cloud contact center solution, but ran into problems during the acquisition process as the stock prices of each company ended up being too volatile to come to an agreement on both the value and price of the stock involved.

And I speculate that at this point Zoom is focused on bringing its stock back up to pandemic heights, a bubble that may honestly never be reached again. For Zoom, 2020 was a dot-com-like event, where its valuation wildly exceeded its revenue. And as other video conferencing, and event software solutions ended up quickly improving their products, Zoom’s core conferencing capabilities started to be seen as a somewhat commoditized capability.

Following the mission of the company would have meant looking more deeply at communications-based processes, collaboration, transcription, and perhaps even emoji and social media enhancement: all of the ways that we communicate with each other. But, the problem is that there is really only one play right now that can quickly leads to a doubling or tripling of stock price and that is AI. There’s no doubt that the amount of video and audio that Zoom processes on a daily basis can train a massive language model, as well as other machine learning models focused on re-creating and enhancing video and audio.

Positioned in a way where it was understood that Zoom would enhance current communicative capabilities, it could’ve been a very positive announcement for Zoom to talk about new AI capabilities. Zoom has taken initial steps to integrate AI into Zoom with Meeting Summary and Team Chat Compose products. But given the limited capabilities of these products, the licensing language used in the service agreement seems excessive.

The language used in section 10 of Zoom’s service agreement is very clear about maintaining the right to license and commercialized all aspects of any data collected by Zoom. And that statement has not been modified. Whether this is because of an overactive lawyer or Zoom’s future ambitions, or promises made to a board or institutional investors is beyond my pay grade and visibility. But I do know that that phrase is obviously not user-friendly, and Zoom is not providing visibility to those changes at the administrative level. The language and buttons used to support zooms, a model and commercialization efforts are very different on the administrative page compared to the language used in the service agreement.

Image from Zoom’s August 7th blog post

Understanding that legal language can take time to change, it makes sense to wait a few days to see if Zoom reverts to prior language or further modifies section 10 to represent a more user-friendly and client-friendly promise. And I think this language reflects a couple of issues that go far beyond Zoom.

First, service agreements for software companies in general, are often treated as an exercise in providing companies with maximum flexibility, while taking away basic rights from end users. This is not just a product management issue; this is an industry issue where this language and behavior is considered status quo both in the technology industry and in the legal profession. When companies like Alphabet and Meta, previously Facebook, were able to get away with the level of data collection associated with supporting each free user without facing governance or compliance consequences in most of the world, that set a standard for tech companies’ corporate counsel. Honestly, the language used in Zoom‘s current service agreement as of August 7, 2023 is not out of scope for many companies in the consumer world that provide social technologies.

The second issue is the overwhelming pressure that exists to be first or early to market in AI. The remarkable success of ChatGPT and other open AI-related models has shown that there is demand for AI that is either interesting or useful and can be easily used and accessed by the typical user or customer. This demand is especially high for any company that has a significant amount of text, data, audio, or video. The recent March 2023 announcement of Bloomberg GPT is only the starting point of what will be a wide variety of custom language, models and machine learning models that come to market over the next 12 to 18 months. Zoom obviously wants to be part of that discussion, and there are other companies, such as Microsoft, Adobe and Alphabet as well as noted start-ups like OpenAI that have done amazing AI work with audio and video already. Part of the reason that this stands out is that Zoom is one of the first companies to change its policies and aggressively seek a permanent commercial license associated with all user content and forcing and opt-out process that lacks auditability or documentation regarding how users can trust that their data is no longer being used to train models or support any other commercial activities Zoom may wish to pursue. But Amalgam Insights is absolutely sure that Zoom will not be the last company to do this by any means. This language and the response should also serve as both a warning and a lesson to all other companies, seeking to significantly change their service agreements to support AI projects.

What is next for Zoom?

From Amalgam Insights’ perspective, there are three potential directions that Zoom can pursue going forward.

One, do nothing or make minimal changes to the current policy. Consumer and social media-based technology policies have set a precedent for the level of data and licensing access in Zoom’s service agreement, but this level of customer data usage is considered extreme in most business software agreements. Will Zoom end up being a test case for pushing the boundaries for business data use? This seems unlikely given that Zoom has not traditionally been considered an aggressive company in pushing customer norms. Zoom does try to move fast and scale fast, but Zoom’s mistakes have typically been more due to incomplete processes rather than acts of commission and intentionally trying to push boundaries.

Two, rewrite parts of Section 10 that are intrusive from a licensing and commercial usage perspective. Amalgam Insights hopes that this is an opportunity for Zoom to lead from an end user licensing or service agreement perspective in making agreements more transparent and in using more exact legal language that feels cooperative instead of coercive. The legal approach of including all possible scenarios may be considered professionally competent, but the business optics are antagonistic.

Three, come out with an explicit enterprise version of technology that is not managed under these current rules set in section 10 so that data is not explicitly used for models and cannot easily be turned on through a simple toggle switch in the administration console. As my friend and data management analyst extraordinaire Tony Baer stated on LinkedIn (where you should be following him) “The solution for Zoom is to be more explicit: an enterprise version where data, no matter how anonymized, is not shared for Generative AI or any other Zoom commercial purpose whatsoever, and maybe a more general and/or freemium edition (which is how many consumers have already been roped in) where Zoom can do its Gen AI thing.”

Recommendations

The first recommendation is actually aimed towards the CIO office, procurement office, and other software purchasers. Be aware that your software provider is going to pursue AI and will likely need to change terms and conditions associated with your account to do so. This is a challenge, as multinational enterprises now face the possibility of approaching or exceeding 1,000 apps and data sources under management and even businesses of 250 employees or less average one app per employee. There is a massive race towards aggregating data, building custom AI models, and commercializing the outputs as benchmarks, workflows, automation, and guidance. But Zoom is not a one-off situation and your organization isn’t going to escape the issues brought up in Zoom’s service agreement language just by moving to another provider. This is an endemic and market-wide challenge, far beyond what Zoom is experiencing.

The second recommendation: One solution to this problem may be for vendors to split their product into public consumer-facing products and private products from a EULA and terms and conditions perspective. This wouldn’t be the worst approach, and would maintain the consumer expectation of free services that are subsidized by data and access while giving businesses, the confidence that they are working with a solution that will protect their intellectual property from being accessed or recreated by a machine learning model. This also potentially allows for more transparency in legal language as this product split is considered. Tech lawyer Cathy Gellis, stated “There can be the lawyerly temptation to phrase them (terms of service) as broadly as possible to give you the most flexibility as you continue to develop your service. But the problem with trying to proactively obtain as many permissions as you can is that users may start to think you will actually use them and react to that possibility.” In 2023, software vendors should assume that corporate clients will be wary of any language that puts trade secrets, patents, trademarks, or personally identifiable information at risk. Any changes to terms of service or service agreements should be reviewed both from a buy-side and sell-side perspective. This may include bringing in procurement or specialized software purchasing teams to reflect the customer’s perspective.

The third recommendation goes back to the ethical AI work that Amalgam Insights did several years ago. AI must be conducted in context of the same culture and goals that are considered pervasive within the company. Any AI policy that goes significantly outside the culture, norms, and expectations of the company will stand out. And this can be a challenge, because AI has been treated as an experiment in many cases, rather than as a formalized, technical capability. As AI development and policy is shaped, this is a time when new products, governance, and documentation need to be tightly aligned to core business and mission principles. AI is a test of every company’s culture and purpose and this is a time when the corporate ability to execute on lofty qualitative ideals will be actively challenged.

Zoom’s misstep in aggressively pursuing rights and access to client data should not just be seen as a specific organizational misstep, but as part of a set of trends that are important for enterprise, IT, purchasing, and legal departments as well as all software and data source vendors seeking to pursue AI and further monetize deep digital assets. The next 12 to 18 months are going to be a wild time in the technology market as every software vendor pursues some sort of AI strategy, and there will be mountains of new legal language, technical capabilities, and compliance aspects to review.

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Zluri Raises a $20 Million Series B Round: Is it Enough for the Crowded SaaS Management Market?

Companies Mentioned:

Accel, Apptio, Atlassian Ventures, Bain Capital Ventures, Baird Capital, Bessemer Venture Partners, BetterCloud, Blissfully, Calero, Canaan Partners, Cleanshelf, Cloudability, Coupa Ventures, Craft Ventures, e.ventures, Endiya Partners, Entrée Capital, Flybridge Capital Partners, Founder Collective, F-Prime Capital, Global Founders Capital, Greycroft, High Alpha, Intello, IVP, Kalaari Capital, LeanIX, MassMutual Ventures, Menlo Ventures, New Amsterdam Growth Capital, Norwest Venture Partners, Okta Ventures, Productiv, SailPoint, Scopus Capital, Shine, SoftBank, Sound Ventures, Sozo Ventures, Spring Lake Equity Partners, Tangoe, Tiger Global, Tropic, Uncork Capital, Vendr, Vista Equity Partners, Warburg Pincus, Wing Venture Capital, Y Combinator, Zluri, Zylo

Key Stakeholders:
Chief Information Officers, Chief Technology Officers, Chief Financial Officers, Finance and Accounts Payable Directors and Managers, Procurement Directors, Technology Expense Directors and Managers, FinOps Directors and Managers, IT Architects, Vice President/Director/Manager of IT Operations, Product Managers, IT Sourcing Directors and Managers, IT Procurement Directors and Managers, SaaS Expense Managers, Sales Operations Managers, Marketing Operations Managers.

Why It Matters:
SaaS (Software as a Service) Operations is a hot market where vendors have collectively received over $1 billion in investments. End user organizations are seeking to manage $250 billion in annual spend associated with SaaS subscriptions, which can often be scattered over 1,000 apps in large multi-national enterprises. Even a relatively small 500-person organization can expect to have over 200 apps under management. This combination of vendor sprawl, shadow IT, and governance challenges are quickly forcing businesses to realize that they require SaaS governance across sourcing, spend, access, inventory, and security. With this $20 million Series B round, Zluri enters this fray in earnest in making its automation platform more accessible to the SaaS management market.

Top Takeaway:
Zluri is an Amalgam Insights recommended vendor for automating service orders, managing onboarding and offboarding, monitoring app usage, and managing SaaS spend. It fills multiple core responsibilities within the Amalgam Insights Technology Lifecycle Management relative to SaaS and should be considered by companies seeking to support SaaS environments with over $1 million in total annual spend or with over 100 separate app vendors under management.

Zluri Raises a $20 Million Series B Round

On July 13, 2023, Zluri, a SaaS operations platform, announced a $20 million Series B round headed by Lightspeed with additional participation from existing investors including MassMutual Ventures, Endiya Partners, and Kalaari Capital.

This funding occurs in context of a breadth of investment in managing the operations and procurement of SaaS including the following funding investments and product launches:

  • Feb 2023 – Zylo raises a $5 million round on top of a $31 million Series C round in December 2022.
    Investors include: Baird Capital, Bessemer Venture Partners, Coupa Ventures, High Alpha, Menlo Ventures, Spring Lake Equity Partners,
  • November 2022 – Tangoe announces addition of SaaS management to TangoeOne platform
  • June 2022 – BetterCloud, a SaaS management firm, sells a majority stake to Vista Equity Partners after raising $187 milion over six rounds.
    Previous Investors included: Warburg Pincus, Accel, Bain Capital Ventures, e.ventures, Flybridge Capital Partners, Greycroft, New Amsterdam Growth Capital
  • June 2022 – Vendr raises $150M Series B to support its SaaS buying platform
    Investors include Craft Venturs, SoftBank, Sozo Ventures, F-Prime Capital, Sound Ventures, Tiger Global, Y Combinator
  • April 2022 – Calero (technology expense management vendor managing over $25 billion in tech spend) announces a SaaS expense management solution
  • February 2022 – Vendr acquires Blissfully to add cost management and data offerings.
  • February 2022 – Tropic raises $40M Series B from Insight Partners to improve SaaS procurement, a round that occured four months after a Series A round from Canaan Partners, Founder Collective and Shine
  • February 2022 – Torii raises a $50M Series B round led by Tiger Global
    Investors include Tiger Global, Entree Capital, Global Founders Capital, Scopus Capital, Uncork Capital, and Wing Venture Capital
  • March 2021 – Enterprise Architcture Management company LeanIX acquires Cleanshelf
  • March 2021 – Productiv raises $45M Series C to support SaaS expense management
    Investors include IVP, Accel, Atlassian Ventures, Norwest Venture Partners, Okta Ventures
  • February 2021- SailPoint acquires Intello for $43 million
  • November 2020 – Apptio (IT financial management and Cloud FinOps provider) announced Cloudability SaaS for SaaS discovery and spend management

Suffice it to say that the SaaS management market is both a hot market and one that requires both funding and a high quality offering to be competitive. Top tier venture capital and private equity firms have made one or more investments in this space already. But at the same time, one of the concerns that Zluri does not have to worry about is that this market is an actual market. One of the biggest concerns an analyst typically has about a new market is whether it is real or not and backed by customers, revenue, and market competitors. The SaaS Management market has proven this to be true, both in the quantity and quality of offerings in place.

This said, does Zluri match up with the vendors at large and does it have a competitive niche in this complex market?

About Zluri

Amalgam Insights has spoken with Zluri executives multiple times in the past couple of years as we have explored SaaS management and SaaSOps as a part of our overall Technology Lifecycle Management umbrella. In doing so, we have found so far that key differentiating points include:
• Workflow automation to support app discovery and orders
• Activity-based insight into SaaS usage and spending
• Identity management to audit access and automate onboarding and offboarding

As one of the newer SaaS management solutions that Amalgam Insights covers, founded in 2020 in Bangalore, Zluri has a software solution that currently lacks legacy technical debt issues and is built with a current and modern user interface. Amalgam Insights finds it interesting that Zluri was founded in India, as India has traditionally been an area that has supported much of the help desk, service order, invoice processing, and optimization work associated with telecom expense and cloud FinOps work on behalf of US-owned companies. This company represents a shift in seeing Indian entrepreneurs directly owning the company while also being close to a significant center of the technology lifecycle management value chain. This location also means that Zluri has some cost structure advantages compared to most of its competitors started either in the United States or Israel. And its focus on automating SaaS-related processes and workflows provides a strong foundation towards providing not only the operational support to manage SaaS, but also the lineage and t that are needed to trace how and when specific changes were made to a SaaS account.

Zluri’s offering is compelling enough to win business even as it faces the competition listed above. Amalgam Insights estimates that Zluri currently has around 250 customers and over 200 employees, which is in line with the recent funding round that was announced. However, the capital raised in this Series B round is obviously necessary to gain market share in the 100 – 5,000 employee mid-market where Zluri has succeeded to this point. Even in today’s era of product-led growth, some level of market visibility is needed to support go-to-market solutions, especially in a market where Amalgam Insights has tracked total investment that approaches $1 billion.

Amalgam Insights believes that, though Zluri has a competitive and differentiated product that matches up well with current trends in automation and workflow management that will align well with the current megatrend of Generative AI, its biggest challenge is currently in market visibility where the other companies that Amalgam Insights has mentioned have all made inroads with enterprise buyers, channel partners, consultants, and industry associations relevant to the buying cycle of SaaS.

Recommendations to the IT Expense Community

First, in seeking a SaaS management solution, Amalgam Insights always recommends thinking about the full Technology Lifecycle that goes across sourcing, procurement, expense management, vendor management, resource optimization, compliance, and security. SaaS management and SaaS operations are currently fragmented markets where it is hard to find a single vendor that is strong in all of these areas.

The Amalgam Insights Model for Technology Lifecycle Management

Second, in managing this SaaS lifecycle, look for automation and for skill sets that may fall outside of your organization’s core management or sourcing skills. SaaS can be a complicated and complex spend category, especially as large multi-billion dollar enterprises can expect to manage 1,000 apps at this point across both formal and “Bring Your Own” expensed apps that may hide in a corporate credit card or a phone bill.

Third, expect to see Zluri show up more frequently in your due diligence of SaaS management solutions. Amalgam Insights currently recommends Zluri as a solution to manage SaaS costs, support service orders and onboarding through native workflow automation, and to support application discovery, especially in disaggregated environments. And in our research, we have found that Zluri is a solution that wins deals in the majority of competitive evaluations that Amalgam Insights has seen, which indicates alignment with current customer needs. With this funding round, Zluri now is prepared to compete for its fair share of opportunities in a market that is both deep in competitors and in demand from enterprises seeking to control over $200 billion in annual SaaS spend.

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Market Alert: Vendr Raises $150 Million B Round to Help Enterprises Purchase SaaS More Efficiently

On June 16, 2022, Vendr, a SaaS (Software-as-a-Service purchasing platform) announced a $150 million Series B round co-led by prior investor Craft Ventures and novel investor SoftBank Vision Fund 2 and joined by Sozo Ventures, F-Prime Capital, Sound Ventures, Tiger Global, and Y Combinator. The company states that this funding will drive platform enhancements.

Why this funding announcement matters

To fully contextualize this announcement, Amalgam Insights will dig into the context of the macroeconomic issues driving the importance of this announcement, the tactical importance of a SaaS purchasing solution in the Technology Lifecycle Management (TLM), and the nature of the investment compared to other historical funding announcements in the TLM space.

Macro Trends for Corporate Spend Reduction

First, this announcement comes at a time when the United States is facing inflation that approaches double-digits. The current 8.6% inflation rate in this country threatens to devour the average 8.19% net margin that publicly traded companies (excluding financial services) currently achieve. In addition, we are facing a global recessionary trend driven by COVID, supply chain issues, geopolitical strife including the occupation of Ukraine, strained Sino-US relations, inconsistent oil and gas policies, and an excess of money supply created over the past several years. In the face of these global challenges, it is prudent for companies to seek to reduce discretionary costs where it is possible and to shift those costs to strategic growth areas. Traditionally, recessions have been a time when strong companies invest in their core so that they can execute when the economy picks up again.

SaaS as a Strategic and Expanding Complex Spend Category

In this context, SaaS is a massive, but complex, opportunity to cut costs. Amalgam Insights estimates that the SaaS market has grown 25% per year in each of the last two years. Multiple studies show that enterprises that have reached the billion-dollar annual revenue threshold average over 300 apps directly purchased by the organization and over 900 apps running over their networks, either on in-office networks or on employee devices. The hundreds of apps here obviously equate to hundreds, possibly thousands, of accounts and bills that can be consolidated, negotiated, and potentially rationalized to concentrate spend on strategic vendors and gain purchasing power. It is not uncommon to find large enterprises using 20 or more different project management solutions, just to look at one SaaS subcategory.

This rationalization is vital if enterprises are to take the IT Rule of 30 seriously. Amalgam Insights states that the IT Rule of 30 is that any unmanaged IT category averages a 30% opportunity to cut costs. But that 30% requires following the Technology Lifecycle to fully uncover opportunities to cut costs.

Technology Lifecycle Management

The majority of companies that Amalgam Insights speaks to in the IT expense role limit their diligence in IT spend to the right side of this lifecycle including timely bill payment, possibly cross-charging to relevant business entities and cost centers, and right-sizing expenses by finding duplicate or over-provisioned accounts. While this is necessary to execute on the IT Rule of 30, it is not sufficient. In the SaaS space, Amalgam Insights believes there is conservatively a $24 billion spend reduction opportunity globally based on improved SaaS purchasing and negotiations. At the micro level, this equates to a 2 million dollars for the average billion-dollar+ enterprise, with results varying widely based on SaaS adoption (as SaaS only makes up 30% of overall enterprise software spend globally), company size, and level of internal software contract knowledge.

Putting The Investment in Perspective

Amalgam Insights understands the scale of this business opportunity. Even so, this $150 million B round represents a massive round in the Technology Lifecycle Management space. Consider other large funding rounds in this space including:

Zylo’s 2019 $22.5 million B Round for SaaS Management

BetterCloud’s 2020 $75 million F Round for SaaS Management

Productiv’s 2021 $45 million C Round for SaaS Management

Beamy’s 2022 $9 million A Round for European SaaS Management

Torii’s 2022 $50 million B Round for SaaS Management

and looking further across the Technology Management spectrum

Cloudability’s 2016 $24 million B Round for IaaS Management (later acquired by Apptio)

CloudCheckr’s 2017 $50 million A Round for IaaS Management (later acquired by NetApp)

CloudHealth’s 2017 $46 million D Round for IaaS Management (later acquired by VMware)

MOBI’s 2015 $35 million investment round for Managed Mobility (later acquired by Tangoe)

I hasten to add here that more is not always better. But this range of funding rounds is meant to show the amount of investment that typically goes into solutions designed to manage technology expenses, inventory, and sourcing. At first glance, Vendr’s funding round may seem like just another funding announcement in the billions and trillions of dollars involved in the tech sector to those who do not cover this space closely. But as someone who has covered telecom, cloud, and SaaS expense management closely for the last 14 years, this round stands out as a massive investment in this space.

In addition, the investors involved in this round are top-tier including Craft Ventures, where founder and ex-Paypal founder David Sacks has been a proponent of Vendr, and the combination of Tiger Global and Softbank, which may be the two most aggressive funds on the planet in terms of placing big bets on the future. The quality of both smart money and aggressive money in this investment during a quasi-recessionary period speaks to the opportunity that exists here.

What to expect from this round?

The official word from Vendr so far is that this funding round is about data and platform. Vendr acquired SaaS cost and usage monitoring firm Blissfully in February 2022 to bring sourcing and expense management together and support the full lifecycle for SaaS. Amalgam Insights expects that some of these funds will be spent to better integrate Blissfully into Vendr’s operations. In addition, the contract information that Vendr has represents a massive data and analytics opportunity, but this will likely require some investment into non-standard document management, database, machine learning, and data science technologies to integrate documents, tactics, terms, and results. Whether this investment takes the form of a multi-modal database, graph database, sentiment analysis, custom modeling, process mining, process automation, or other technologies is yet to be seen, but the opportunity to gain visibility to the full SaaS lifecycle and optimize agreements continuously is massive not only from a cost perspective, but also a digital transformation perspective. The data, alone, represents an immediate opportunity to either productize the benchmarks or to provide guidance to clients with ongoing opportunities to align SaaS usage and acquisition trends with other key operational, revenue, and employee performance trends.

This part is editorializing, but Vendr has the opportunity to dig deeper into tech-driven process improvement compared to current automation platforms that focus on documenting and driving process, but have to abstract the technologies used to support the process. In the short term, Vendr has enough work to do in creating the first SaaS Lifecycle Management company that brings buying, expense, and operations management together. But with this level of funding, Vendr has the opportunity to go even further in aligning SaaS to business value not only from a cost-basis perspective, but from a top-line revenue contribution perspective. Needless to say, Amalgam Insights looks forward to seeing Vendr deliver on its vision for managing and supporting SaaS management at scale and to tracking the investments Vendr makes in its people, products, and data ecosystem.