Runaway SaaS Spend:  Salesforce and ServiceNow

“Salesforce and ServiceNow.  Those are the new Oracles that if you are not managing the contract terms very closely, the costs spiral out of control.  The monitoring and governing of SaaS saved us a lot and we have more reasonable terms now.  Just the management and insight alone got us a long way.”

  • Director, Indirect Sourcing, Agriculture industry

This is a significant perspective, as it implies that companies are not treating the governance of Salesforce and ServiceNow with the same rigor they apply to Oracle, IBM, SAP, and Microsoft. 

Yet, according to  Flexera’s 2020 State of Tech Spend Report, most companies rank SaaS applications Salesforce, ServiceNow, Google, and Workday in their top 10 spend by vendor. How can spend with a top tier vendor spiral out of control?

The disconnect is likely because SaaS apps don’t pose the same audit risk as traditional software. 

Instead, these widely used SaaS applications pose different risks:

  • the risk of paying for SaaS subscriptions that aren’t being utilized
  • the risk that ex-employees can access invaluable data like your sales pipeline

Companies have matured their software asset management (SAM) programs over time to mitigate the risk of unbudgeted spend.  Now they need to apply the same principles to control SaaS overspend and risk of data leakage. 

Reining in SaaS spend

Like traditional desktop applications, subscriptions to SaaS applications tend to sprawl over time.  Users may not be actively using apps like Salesforce because they have changed roles,  were never actively using it, are infrequent users, or have left the organization.  By actively collecting usage data, organizations can right-size their agreements and stop paying for monthly subscriptions that are not delivering value to the company.

Typically, companies sign three-year agreements with large SaaS vendors like Salesforce and ServiceNow.  This means you will need to guesstimate how many active users you need very early in the implementation process.  Most companies overestimate how many active users they will have and underestimate the length of time to get widespread adoption.   This leads to subscription shelf-ware through the term of the agreement.

Indeed, spending with Salesforce and ServiceNow can spiral out of control.  Like all spend, SaaS spend needs to be managed, otherwise it will continue to increase.  The question is whether the spend is optimized based on how the organization is using it.  Gartner estimates that 30% of software licenses costs are wasted.  To optimize SaaS spend, organizations need to know:

  • Number of Active Users
  • Number of Inactive Users
  • Number of Never Active Users
  • Per User Subscription Cost

By automating the collection of these elements across all SaaS applications, organizations can start to rein in spend and make better decisions.  This can add up to significant savings across your contract term simply by not paying for subscriptions you are not using. 

Protecting Invaluable Data

The other factor to consider is how SaaS comes into the organization.  According to Flexera’s 2020 State of Tech Spend report, a significant portion of SaaS spend is controlled by Business Units.  Most companies view the decentralized spend as a good thing – SaaS applications enable business units to be agile and nimble.  The concern isn’t what business units are spending, it is visibility and processes to govern what is in the organization and secure data.

What Business Units don’t have:

  • Employee offboarding processes to protect SaaS data
  • Tools required to manage and optimize SaaS expenses.
  • Ability to leverage buying power and reduce SaaS provider contract sprawl across the organization.

But, what do business units want?  They want to save costs on SaaS spend.  They want to protect their IP and data.  And, yes, they want autonomy to choose the SaaS applications to drive efficiency and agility. 

By cutting off subscriptions utilized by ex-employees, you are helping to protect your intellectual property and competitive edge. 

SaaS Management

By adopting a SaaS Management solution, IT can provide the value-added service of protecting company data stranded in SaaS applications by employees who are no longer with the organization or are not actively using the service.  IT can help business units save costs by finding unused and inactive subscriptions.

“You take a look at it and you go what if I reduce my cost by 5% over the lifetime of the Salesforce contract”

-VP, Data Strategy, Financial Services organization

Don’t let Salesforce and ServiceNow become your next vendor where spending and contract terms are out of control.  Start reducing spend today so you can reinvest the savings back into your business. 

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