Controlling SaaS Costs Amid Microsoft Price Hikes

Over the last several years, we’ve seen SaaS vendors leveraging the freemium model to fuel their growth. Many platform vendors have adapted this model and have added numerous features for ‘free’ to increase their adoption and market share. Consumers be aware – once adoption goals are met, prices to account for this ‘free functionality’ may increase. For example, Microsoft’s announcement this past August to raise prices for its Microsoft 365 customers displayed the end of “free” application services that have been added over the years to its communications platform. While most vendors – particularly those in competitive environments like cloud – will hold steady on pricing to avoid the cloud pricing wars we saw in 2014, larger, widely used services have the flexibility (and luxury) to adjust pricing strategy, especially when cloud and SaaS products have proven themselves critical to new hybrid working models.

The massive shift to remote work has opened the door for employees to download all kinds of SaaS applications. As trial periods end and vendors raise prices of tools that employees have become dependent on, IT leaders need to regain a handle on their applications to mitigate SaaS sprawl and control costs. In order to regain this control, IT departments must adapt their strategies for the future as the SaaS market continues to evolve.

The risks of unsanctioned SaaS applications

According to our recent survey on hybrid work, 50% of IT leaders said controlling SaaS sprawl is currently their biggest challenge, followed by discovering unmanaged applications (26%). A report from KPMG shows that two-thirds of organizations allow technology to be managed outside the IT department, and over 40% are not even involving IT in the purchase process. Most organizations we surveyed are using between 100 and 1000 applications, and the majority of IT leaders indicate this is an increase from a year ago.

IT teams need increased visibility into their SaaS applications and how those are being used, and now is the time to thoroughly review your application catalog. Understanding your tools can help determine where to cut down and how to improve operations with a condensed list of applications. Specifically, eliminating unsanctioned purchases and duplicates of similar applications can help you avoid two primary problems: wasted company spending and increased security and compliance risks.

For example, does your company use Teams or Slack, or maybe SharePoint, Box, or Dropbox? You only need to pay for one of these across the organization, so ensure that employees are clearly informed on company-wide standards to avoid unnecessary purchases of similar tools.

If your employees are using free tools or applications not vetted by IT, then your company or customer data could be at risk. Are your employees using strong passwords for these applications? Does the provider enlist two-factor authentication and other security protocols? If your organization is unaware that employees are using these applications, you can’t answer these critical questions to protect your data.

Make the most of what you have

There are many ways that companies can successfully use the technology they already have on hand and avoid application sprawl.

First, IT teams need to be very familiar with what their organization already pays for. This will allow you to quickly answer requests for tools, offer alternative options to potential duplicates, and clearly explain the reasoning for using one application over another.

Having a centralized inventory of applications in use also benefits end users looking to add new capabilities. It is normally much faster and easier to leverage technology already in use in another part of the business. Approved vendors reduce procurement and legal paperwork, and having knowledgeable users to learn from can reduce the time to onboard new software.    

Understanding how applications are used can also ensure you are getting value from what you’ve paid for already. Most, but not all, software vendors have built customer success teams to help their customers make the most use of the software. However, sometimes features of the software are not required as widely as initially anticipated. If you're able to capture application usage details, then at renewal time, you may be able to use this data downsize from premium to basic tiers of the software.

Finally, employees need to be well-informed of the options available to them to help avoid requests for incongruous applications. One option that has proved effective for us at Snow Software is to provide employees with a catalog of pre-approved applications. This offers clarity to employees and removes unnecessary back-and-forth with IT. With built-in policies, you can also reclaim licenses after a certain period of time if the application goes unused.

It’s a partnership, not a battle

Ultimately, no one can really control SaaS usage, but we can make it easier for employees to access the programs they need. Sometimes IT is viewed as the rule makers and enforcers, but it’s important to arrive at decisions together with each department. IT departments must partner with business leaders across the organization to gain visibility into what applications are being used and to detect if any are unfavorable for the business.

Greater visibility allows IT to find the employees using unsanctioned SaaS applications and engage in a conversation. By coming across as easy and non-threatening, you can better collaborate across lines of business to find the best fit for everyone. This allows for opportunities to educate employees on the tools available and on the risks associated with unsanctioned tools. By partnering with employees across the company, we can help keep shadow IT at bay and eliminate security threats and wasted resources.

Jennifer Kuvlesky is a SaaS Management Expert at Snow Software

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