You may not realize it, but your business is probably paying for software that no one is using. This problem is so widespread that Gartner even coined a name for it—”shelfware.” They predict that, for the average company, 25% of their software is sitting unused or underused.
In this article we’ll cover what shelfware is, a few of its main causes, and seven steps to avoid accumulating unused software at your company.
What is shelfware, anyway?
Shelfware is software that was purchased but never used or is currently underused. This was a problem pre-cloud. Today’s cloud-based applications make managing shelfware even harder due to subscription contracts that lock you into monthly or yearly payments.
These unnecessary costs take the IT budget away from other initiatives. But that’s not the only problem. Third party software is one of the biggest causes of cybersecurity breaches and data leaks. Lack of compliance oversight and partially implemented shelfware is a dangerous combination.
How does this happen? First off, SaaS is easy to purchase. This leads to employees paying for new services without having to go through standard IT procurement processes. On top of this, most SaaS vendors push these buyers to agree to long term contracts of at least one year.
The thing is, business needs can change a lot in one year. Companies have unexpected layoffs, changes in their go-to-market strategies, or new regulatory laws to follow. This will inevitably leave them with products they no longer need or use.
So what’s the cause?
Let’s dive into the most common ways that companies end up with shelfware. If any of these apply to your business, know that the first step to reducing shelfware and cutting costs is to implement a SaaS management tool that can take the mystery out of your tech stack. Quolum can help identify causes such as:
- Software purchased without IT oversight
There are a number of reasons why IT would say no to new software: tech stack compatibility issues, security concerns and so on. Sometimes, buyers simply don’t know enough about the software market to make the right choice, and end up buying the wrong product.
- Tech stack integration issues
All your software and on-premise solutions need to communicate with each other. When your business is moving fast, you might cut corners and assume that important integrations are available. Later on you might find that the sales engagement tool you bought doesn’t integrate with your CRM system – and now you’re stuck paying for third partner APIs.
- No change management plan
Part of software change management is training employees on how to use new tools. Without robust adoption plans, many employees will fall back on the systems and processes they understand best. Best to discuss training with your new vendor before signing a contract.
- Implementation is too difficult, costly, or time consuming
When a business purchases new mission-critical technology, like an ERP or CRM, implementation can take months to complete. If set up takes much longer than expected, has too many problems, or requires frequent support costs, the whole project can be scrapped and you’re stuck with a tool you paid for and can’t use.
- Company ownership changes
When an acquisition or merger takes place, the new organization has to integrate two separate tech stacks. If each company uses different CRM, security, and communication applications, consolidation will push most tools out of the new stack—but the contracts will remain.
- You simply bought too much
Companies often purchase more than they need in order to accommodate growth over the next few years, or to avoid penalties during a vendor audit. Unexpected market changes (like a pandemic) result in reducing staff and cost cutting. The result is 100s of licenses that nobody uses or needs.
- Vendor product bundles
In order to expand their product footprint with customers, SaaS vendors will offer product bundles. These packages are attractive because they reduce unit pricing and give your teams access to more features. However, some of the add-ons won’t be as useful and might go unused. It’s almost impossible to pull apart a bundle without big increases in price. If so, you’ll keep renewing with shelfware because you have no choice.
7 steps to avoid shelfware
If you’re worried about shelfware in your organization, we’re here to help. Here are our top seven steps to avoid shelfware at your company:
- Keep a SaaS system of record
Management tools help companies track and audit every SaaS application that comes through their stack. Your tool should track vendors, licenses, users, and security compliance. It’s also important to know when your contract renews, and if there are any minimum notice periods for cancellations or downgrades.
- Follow a formal technology evaluation process
Your IT team and SaaS manager should be aware of every purchase to ensure that technical, legal, and financial obligations are met, the right quantities are purchased, and a change management plan is created. When one department buys a SaaS tool without oversight, they won’t have the processes in place to keep an eye on usage and adoption.
- Include all stakeholders including end users
Don’t make purchases without input from all stakeholders. This includes senior leaders, your SaaS management team, IT security team, project managers, and end users. If a purchase is made from above by a CTO or VP without asking what’s needed from the end users, you might end up with a tool no one wants to use.
- Usage tracking
Aside from knowing who your users are, your SaaS management tool should also track how often users are logging in and which features they’re using. A redundant tool may, for example, not notice users doing the bare minimum in one application while spending most of their time in another. If some users aren’t using their licenses at all, re-assign them to a new user who needs access.
- Encourage adoption with user training
Before purchasing new SaaS tools, ask your vendor what type of training and on-boarding is included. If this is left out of the implementation plan, your employees may resist change and be slow to adopt new technology. The longer this problem lasts, the more likely it is that shelfware will pile up.
- Manage SaaS renewals
Prepare in advance for your renewals. It’s a best practice to audit your tool a few months before the contract end date, and begin conversations with your vendor sales rep early. For instance, you can alert the rep that you’ll be reducing spend and licenses, or give them a heads up that you’ll be cancelling all together. If you’re spending too much but you still need the software, your sales rep will have time to fix this problem.
- Look for consumption based pricing when possible
License-based pricing is preferred by most SaaS vendors because they can predict future revenue and report earnings to their board. But consumption-based pricing, where you only pay for what you use, is becoming more popular and allows your business to scale up or down in usage and spend only when needed.
Cut shelfware down to size
Reducing shelfware puts money back into your IT budget so you can fund your important technology initiatives. Once you’ve tackled your shelfware problem, turn your sights to eliminating Shadow IT—software that your IT team isn’t aware of and can cause serious security and compliance issues. SaaS management software can help you tackle both, and give you the software visibility you need.