Report: Companies Keep Wasting Money on SaaS Every Year
- By CDOTrends editors
- April 17, 2023
As organizations increasingly rely on Software as a Service (SaaS) solutions to meet their operational needs, a growing concern has emerged: wasteful spending on unused or redundant applications. This hidden drain on resources costs businesses millions of dollars annually, highlighting the urgent need for efficient SaaS management and optimization. By identifying underutilized and overlapping applications, companies can effectively reduce waste, save money, and better allocate their resources to drive innovation and growth.
Zylo, an enterprise SaaS management platform, revealed in its Saas Management Report that organizations waste USD17M+ on unused or redundant SaaS applications each year despite economic constraints and mass layoff decisions. Worse, the organizations have no idea it’s happening.
The 2023 SaaS Management Index Report aims to help businesses understand their tech stack and relieve budget constraints associated with underutilized SaaS applications, redundant functionality, and inefficient purchasing.
With more than 102,000 workers in U.S.-based tech companies laid off in mass job cuts so far in 2023, Zylo argues that a round of layoffs only reduces short-term expenses. However, it does not solve the need to stabilize organizations in the long term. Zylo's report recommends that companies begin their financial audits by examining their software spending instead.
According to Zylo, on average, 44% of businesses’ SaaS licenses are wasted or underutilized. This problem will continue to increase, especially with SaaS investments growing significantly. Gartner predicts SaaS spending will rise to USD195B in 2023 (a 17% increase from 2022).
Zylo also found that enterprise organizations (10,000 employees) spend over $224M on SaaS but only utilize 50% of their SaaS licenses. Despite being underutilized, 70% of SaaS application contracts were renewed in 2023, with the average organization adding six new apps to its tech stack monthly.
“For companies looking to reduce costs and navigating budget constraints, software optimization is your greatest missed opportunity,” says Zylo co-founder and CEO Eric Christopher. “Our report shines a spotlight on software optimization and smart consolidation so organizations can understand their tech stack, reduce SaaS waste, and uncover budget to curb the need for layoffs.”
The Saas Management Index Report also identified cutting redundant SaaS applications as a prime opportunity to reduce spending before slashing headcount. The top three areas of redundancy to target are online training classes, team collaboration, and project management. Collectively, these equate to over 44 applications that overlap in functionality and drastically impact SaaS spending.
“As the SaaS space grows, it is paramount that companies manage their existing tool stack before purchasing new SaaS applications,” says Ben Pippenger, co-founder and chief business development and strategy officer at Zylo. “Removing redundant functions is a great first step to help organizations to take control of their SaaS portfolios.”
Image credit: iStockphoto/ohmygouche