The Hidden Costs of Unmanaged SaaS Subscriptions

Today, many businesses use Software-as-a-Service applications to improve efficiency, collaboration, and business operations. While SaaS applications have come to make many processes easier, ineffective management of them can lead to hidden costs. Many times, organizations unknowingly end up overspending on SaaS because licenses are not being effectively used, subscriptions are duplicated, or they fall under auto-renewal without being checked.

According to Forbes, an average business is usually spending around $3,500 per employee on SaaS tools. Besides, unmanaged SaaS subscriptions pose security and compliance risks that lead to even greater loss. To minimize these problems, businesses need to adopt proactive SaaS management strategies that manage costs, offer more improved overall security, and streamline operations.

This article explores the hidden costs of SaaS subscriptions and how businesses can manage them effectively.

The Growing SaaS Expansion in Businesses

The rapid adoption of SaaS applications in various departments makes it more convenient for teams to acquire specialized tools suited to their needs. However, this availability also has led to corresponding decentralized purchasing: as employees or teams independently subscribe for SaaS applications without any supervision from the IT department. This practice is called ‘Shadow IT’, where unauthorized tools are used without the knowledge or approval of the IT department.

Shadow IT leads to duplicate applications, where an assortment of teams, unknown to each other, are paying for the same services. Besides, companies often find it challenging to track and manage those subscriptions, which leads to financial waste and inefficiencies. If unsupervised, organizations may find themselves incapable of monitoring expenses, imposing security policies, or shutting down unnecessary software, leading to increased operational risks and costs.

The Hidden Financial Costs of Unmanaged SaaS

The financial implications of poorly managed SaaS subscriptions can be substantial and often underestimated. These costs, extend far beyond the initial subscription fees and can manifest in several ways:

1) Unused and Underutilized Licenses

Many organizations pay for licenses that their employees no longer use due to moving within roles, leaving the organization, or simply not needing the tool as expected.

Due to lack of visibility into SaaS usage, businesses unnecessarily renew such license subscriptions and hence end up with unnecessary costs.

Consequently, they find it challenging to distinguish between applications that are adding real value and those that simply pile up costs. Hence organizations must conduct audits of their SaaS usage and adjust licensing plans accordingly to avoid financial waste.

2) Duplicate or Overlapping Subscriptions

Another specific concern is that multiple teams buy similar software independently, without coordination. This often happens due to the absence of a centralized SaaS management policy in an organization. As a result, companies get billed for multiple tools, with overlapping functionality.

For instance, one department may be subscribing to one new project management software while another department is using the same tool. These overlapping applications add to the cost of SaaS and increase complexity to IT management. Standardizing SaaS purchases and ensuring a level of alignment across teams on tool selection would save plenty of avoidable expenses.

3) Auto-Renewals and Forgotten Subscriptions

Auto-renewal is a prevalent feature in most SaaS subscriptions, intended to keep services running. However, unless organizations keep track of their subscriptions closely, they may end up paying for tools that are no longer necessary. Forgotten subscriptions accumulate over time and inflate software expenses for no reason.

Many organizations forget to cancel unused SaaS subscriptions before the renewal deadline and end up incurring unwarranted service charges. Automated notification and tracking would allow for timely cancellations and avert unnecessary recurring charges from unnoticed renewals.

The Security and Compliance Risks

If IT teams are unaware of all the SaaS tools in use, they cannot enforce security policies like multi-factor authentication, data encryption, or secure access controls. This increases the risks of data breaches and unauthorized access to sensitive business information.

Failure to comply with organizational standards such as GDPR, HIPAA and SOC 2 Type 2 can result in huge fines and reputational damage. So, to minimize risks and to remain compliant, visibility and control must be ensured across all SaaS tools.

The Operational Inefficiencies of Poor SaaS Management

When SaaS applications are not managed properly, the IT teams resource their time to keep track, manage, and secure all the applications. This increases workloads and diverts resources from other strategic initiatives.

The onboarding and offboarding of employees pose one of the greatest operational challenges. Without automation, the IT team must manually grant and revoke access to multiple SaaS applications, resulting in delays and security loopholes. Sensitive company information may still be accessible to a departing employee if his access is not revoked in a timely manner.

Moreover, when SaaS applications are incorrectly integrated, workflow errors disrupt the processes, thus introducing inefficiencies. Employees waste time switching between applications while performing manual data transfers or duplicating work. This hinders productivity, thus minimizing the effectiveness of the entire investment in managing SaaS applications.

How to Reduce the Hidden Costs of SaaS with a SaaS Management Tool?

A Software-as-a-Service (SaaS) management tool is essential for businesses seeking cost optimization, improved security, and better operational effectiveness. Implementing an SMT encourages optimal control of the SaaS environment of any business through visibility, automation, and cost-saving. Let us see the key strategies for it:

1) Conduct a SaaS Audit

A comprehensive audit of SaaS should identify all active subscriptions, track user activity, and examine whether each tool is needed. This enables businesses to eliminate under-utilized applications and consolidate redundant ones.

2) Optimize License Allocation

Data-driven insights empower organizations to redefine license allocations based on actual usage patterns for a successful SaaS license management. Employees who do not require full access to a tool can receive less expensive plans or cancel their licenses altogether to avert unwanted expenditure.

3) Automate User Provisioning and Deprovisioning

An SMT automates the process by allowing the employees access to the right tools, when necessary, thus preventing security gaps when they leave. This reduces the burden on IT and enhances security by cancelling access to important data immediately.

4) Centralize SaaS Management

Having a centralized platform for the SaaS aids in real-time monitoring, usage tracking, and expense management. It prevents teams from making unauthorized purchases and ensures that all SaaS applications spent is in line with the company needs.

Conclusion

Say Goodbye to SaaS Overpayment and Maximize Your Business Efficiency!

Looking to get rid of the hidden costs of unmanaged SaaS subscriptions? CloudFuze Connect presents a fully-fledged solution to control SaaS spending, strengthen security, and boost operational efficiency. Our powerful platform provides complete visibility into your SaaS environment, helping you identify and remove all excess expenses, optimize license allocation, and automate user provisioning.

Contact us today and see the difference! Request your demo now!