Software as a service (SaaS) has provided greater flexibility and savings for companies that could not afford the cost of paying a one-time software license fee and for those wanting to be more flexible in the software they use as their needs evolve. The SaaS model has grown to a point that recent data from Productiv has indicated that the average company today has over 250 SaaS licenses. On the flipside, this means that a company has to oversee hundreds of software contracts, ensuring that it is following the terms of usage for each software, not to mention overseeing that each user of each application are accessing the data and functions that they are authorized for.
As such, managing SaaS licenses is a critical practice in which all procurement managers should be proficient. That entails addressing six key challenges in SaaS license management.
License underutilization
The problem of software licenses being used less than often or not at all is a common problem. This can arise from different instances, such as a company paying for 100 user licenses but only 60 of them are being used, software ends up being used only rarely, or software was purchased specifically for one project and the subscription has not been cancelled even after the project’s completion. SaaS license management teams must regularly track and report on license utilization and take appropriate action. If a software platform isn’t being used at all, cancel the subscription. If licenses are rarely used, investigate whether the software is actually required or if the function can be managed without software or by using another SaaS tool. If there is a significant percentage of unused licenses, renegotiate the license agreement.
Overlapping SaaS subscriptions
There are instances when some organizations are paying for multiple products that offer similar features, resulting in overlapping spend. This often occurs when SaaS purchasing is done by different departments and no centralized procurement system is in place. While overlapping spend can be identified manually, this can be a cumbersome and labor-intensive process, made even more complex by the fact that it’s not always obvious where software apps overlap. In such instances, it is best to consult with a SaaS license management partner who can do a deep dive into the organization’s tech stack and pinpoint opportunities to consolidate licenses and reduce costs.
Non-compliant software licenses
SaaS applications purchased outside established procurement processes or at companies where such processes are non-existent run the risk of non-compliance with internal IT regulation, putting the organization at risk of a data breach or even of government data regulations. It is imperative for SaaS license management teams to assess all existing software licenses against internal and external regulations to ensure all expectations are met and to create a clean slate. More importantly, SaaS license management teams should establish and implement a strict procurement process to prevent non-compliant purchases.
Unmanaged vendor risk
SaaS licenses that aren’t managed closely open companies up to vendor risks that include extended software downtime, vendor reputation risks, and cybersecurity threats. SaaS license management teams must create risk profiles for existing and new SaaS vendors and ensure these vendors have a positive reputation. Automated approval workflows can also help minimize this risk by ensuring all purchases are run past a senior leader who has greater insight in vendor risks. This is especially helpful in a decentralized procurement process.
Internal security risk
Part of SaaS license management is managing and restricting access to certain types of data, functions, and processes within software platforms. As such, unmanaged SaaS licenses, such as when all users rather than a selected few are provided unrestricted access to a particular software, can present a significant security risk. And while some SaaS apps may allow permissions to be managed individually, this can be inefficient for the organization on a greater scale. The solution would be to create role-based permission sets that will allow certain users access to certain data and functions while other users will be restricted to access them.
Runaway SaaS spending
Reducing software expenditure is a key goal of SaaS license management and Saas license management teams must be on the lookout for instances of runaway spending such as paying for additional storage space or users beyond what is prescribed in the license, increased pricing due to lapsed contracts. The best way to curb runaway spending is to manage all of software vendor relationships in a centralized platform.
For companies needing assistance in their SaaS license management needs, 3GC Group is a trusted partner that can provide a high-level view of SaaS spend and usage and recommend the most optimal terms for your company’s SaaS license needs.
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