The hidden cost of SaaS: How companies end up spending too much

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Anthony Garza
October 26, 2022
The hidden cost of SaaS: How companies end up spending too much

In fact, up to a third of a company's SaaS spend can be wasted on costs that are often overlooked. These hidden costs come from several sources such as Shadow IT, redundant applications, app renewals, and unused or underutilized licenses.

Let's dive deeper into each one!

Shadow IT

Another hidden cost of SaaS is 'Shadow IT.' This refers to the practice of employees signing up for and using SaaS applications without the approval of their IT department. The issue with Shadow IT is that companies have no way of tracking the licenses being used, what the app is being used for, and what data is at risk. This leads to wasted spending on apps that are never used or abandoned and puts a company's data at risk in potentially unsecured tools.

Unused or Underutilized Licenses

One of the biggest contributors to wasted SaaS spending are unused or underutilized licenses. When companies buy more licenses than they need, they end up paying for services they aren't using. It's essential to track your licenses and ensure that you only have what you need to reduce the amount you spend on SaaS.

App Renewals

Most SaaS applications are subscription-based, meaning they auto-renew each year. This can become a problem if a company is no longer using an app or is using it less than they thought. Automatic renewals can make it challenging to track the total amount spent on SaaS, leading to hundreds or even thousands of dollars being wasted on services that aren't being used.

Redundant Applications

When a company has multiple employees using different apps that perform the same functions, it can lead to redundant applications. For instance, a company might have both Asana and Trello for project management, Slack and HipChat for team communication, etc. This not only leads to wasted spending on unused apps but also to confusion and decreased productivity among employees.

The bottom line

In conclusion, SaaS can provide a wealth of benefits to a business, but it's essential to keep an eye out for hidden costs that can quickly add up. By being aware of the potential sources of these costs, such as Shadow IT, redundant applications, app renewals, and unused or underutilized licenses, you can save your company up to a third of its SaaS spend while keeping the data secure.

Curious how you can get a better handle on your SaaS budget and uncover opportunities to save?

Talisman gives companies a complete picture of their SaaS spend and identifies opportunities to save money. Cost management is a lot easier when it’s all in front of you.

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Sources: Gardner Newsroom