This is an intervention: Now is the time to stop the compulsive SaaS purchases.
The average company spent 50% more on SaaS in 2019 than in 2018, and that number likely jumped even more in 2020. The sheer volume of the spending is only the tip of the iceberg:
- Duplicate app subscriptions increased by 80% over the same time period,
- Roughly half of IT spending at large enterprises is for shadow IT, and
- Orphaned subscriptions are up nearly 100%.
What’s worse, businesses are spending millions of dollars on apps none of their employees use (30% of SaaS purchases go unused). It is clear that IT departments have struggled to keep up and accurately measure overall SaaS usage in the organization.
And no wonder: The average enterprise with 1,000 or more employees is using hundreds of apps across the entire organization, which means there are tens of thousands of people-to-app connections. Those connections are managed by dozens of unique billing owners. Even if one could keep up with manual measures and updated spreadsheets, that only raises the question: What needs to get measured?
Measuring SaaS Usage at Three Levels of Detail
To be clear, what we are talking about here are SaaS usage metrics that client companies use to track their software usage and spend, not metrics that SaaS companies themselves should measure. (That said, this information is important for SaaS companies too since it helps to know measures are likely being used to measure their performance and hold them accountable!)
Managing SaaS subscriptions is more complicated than managing previous types of IT assets such as licensed software. Traditional Software Asset Management SAM processes have their shortcomings when it comes to managing SaaS spend, and the subscription payment model requires a constant comparison of expenses and ROI. Modernized approaches should monitor three different aspects of SaaS usage:
- Licenses. This is the most basic level of SaaS measurement and management. Businesses can easily identify how many seats they pay for, and track how many they currently need. Unlike with the classical approach to software license management, there is little need to keep additional inventory on hand. Physical discs and license codes are no longer necessary, and the nature of SaaS makes it simple to get instant access to new licenses. Under the new billing model, unused licenses lead to recurring spending every month without any ROI.
- User Logins. This could be considered an extension of tracking the licenses, as it provides the next level of visibility. For example, the IT team might assume every member of the marketing team needs a subscription to Mailchimp, Sprout Social, and Hubspot. Once login tracking reveals that only a few members of the marketing team actually manage those applications, however, it becomes easy to cancel the excessive subscriptions.
- Features. The ability to measure SaaS usage by feature provides the most granular levels of control for IT teams and business leaders. Most SaaS software offers different price tiers depending on which features are made available; discovering that higher-tier features are going unused can save an organization money by signaling that they need to “downsize” their subscriptions. Optimizing SaaS spending down to the very feature ensures the most ROI on any budget.
Leading SaaS management tools make it possible to optimize SaaS spending by analyzing it based on numerous metrics.
SaaS Usage Metrics Will Vary by Application
A Saas management tool pulls data from IAM data from GSuite and Azure AD to track SaaS utilization. This enables business leaders to discover which apps are connected and identify which are being used. Adding native integrations makes it possible to monitor SaaS utilization and optimize spending on the feature level.
Consider, for example, how feature-based SaaS usage tracking works for a Zoom subscription:
- Hours of Meetings: By integrating directly with Zoom, a SaaS management tool like Quolum can provide insights into how many hours of meetings each user is consuming, and what the average meeting length is.
- Storage Used: Recording zoom meetings and calls takes up storage. But does every meeting need to be recorded? Some users may not participate in training, external communications, or other types of video calls that require them to record and store their Zoom conversations. Or, even if they do, they might not be needed for longer than, say, 30 days.
- International Dial-In: Those users who do not communicate with clients, colleagues, and other stakeholders outside of the country may not need the international dial-in number.
All these metrics have a direct bearing on the cost of a company-wide zoom subscription.
Every app will have its own unique metrics, of course. Which you choose to measure should depend on the opportunities to rightsize subscription levels. SaaS feature usage tracking empowers insights that apply to the entire enterprise, specific departments, and even individuals within the organization. Tracking SaaS spending and consumption makes SaaS cost optimization possible by exposing subscriptions that can be eliminated or downsized. This reduces investment without sacrificing returns or productivity.
SaaS Usage Metrics That Generalize Across Applications
Even given the above, there are some general SaaS usage metrics that can potentially apply across a number of applications:
- Price/user/month. The most basic metric for most SaaS subscriptions. This allows for an apples-to-apples comparison of price over time, even as a company grows.
- Spend over time. If your monthly spend takes a sudden jump or dive, you need to know the reason. It could be that you added enough users to jump to the next pricing tier, or someone upgraded your subscription without your knowledge. Or, there simply could have been a price increase. Watching spend trends will let you know when you have to do some investigating.
- Inactive users. How many users did not use a given application in a given month? Do these represent people who have left the company? If so, should their licenses be recycled?
- Usage percentage. Which applications have low usage? These might be targets to phase out or replace with more robust applications. Likewise, those with the highest usage are ones where you might want to upgrade, or even negotiate an enterprise contract.
How to Start Measuring SaaS Consumption
One serendipitous aspect of SaaS usage measurement is that tools exist to help teams save time and get superior insights simultaneously. Instead of tracking spending and measuring consumption manually, businesses can use a SaaS management tool to automate the process. Contact us to learn more about how Quolum leverages IAM data and 40+ native integrations to track expenses, measure consumption, and optimize SaaS spending.