{"id":15015,"date":"2023-09-23T02:39:08","date_gmt":"2023-09-23T02:39:08","guid":{"rendered":"https:\/\/mysourcefunding.com\/startups\/the-hidden-cost-of-the-saas-revolution-for-businesses\/"},"modified":"2023-09-23T02:39:10","modified_gmt":"2023-09-23T02:39:10","slug":"the-hidden-cost-of-the-saas-revolution-for-businesses","status":"publish","type":"post","link":"https:\/\/mysourcefunding.com\/?p=15015","title":{"rendered":"The Hidden Cost Of The SaaS Revolution For Businesses"},"content":{"rendered":"<div>\n<p>Do you know how much your business is spending on software-as-a-service products? New research suggests SaaS costs are spiralling out of control, with many companies struggling to track spending or to limit the power of individuals to buy whatever tools they like. The average business is now spending around $3,500 per employee on SaaS tools, according to procurement platform CloudEagle.<\/p>\n<p>Its statistics echo other analysis of the booming SaaS market. The market research group Gartner is expecting spending on SaaS tools to reach $197 billion this year, an increase of almost 18% compared to 2022.<\/p>\n<p>The result is that SaaS has become the third biggest cost centre for many companies (after staff and office costs), says Nidhi Jain, CEO and founder of CloudEagle. \u201cDigital transformation accelerated during the pandemic and that hugely increased the take-up of SaaS solutions,\u201d she explains. \u201cNow people are beginning to count the cost.\u201d<\/p>\n<p>The appeal of SaaS is also its Achilles heel. The traditional approach to buying IT was cumbersome, with business functions expected to get each new purchase signed off by the finance and IT departments. The advent of SaaS, by contrast, enables individual business users and departments to buy affordable tools for specific jobs direct from the provider. That has provided valuable agility and functionality, but it has also taken control of spending away from finance and IT.<\/p>\n<p><fbs-ad position=\"inread\" progressive=\"\" ad-id=\"article-0-inread\" aria-hidden=\"true\" role=\"presentation\"><\/fbs-ad><\/p>\n<p>\u201cIn this tough economic environment, we\u2019re going to see the pendulum start swinging back,\u201d predicts Jain. \u201cFinance leaders have understandably become more conscious of cost; and they\u2019ve recognised that SaaS is one area that requires much greater scrutiny.\u201d<\/p>\n<p>The problem for many businesses is that finance lacks visibility of SaaS tools. The relatively low cost of licenses \u2013 particularly at the outset of contracts \u2013 means business users are able to make a purchase without referring it to finance for authorisation. And since the whole point of SaaS is to offer tools that are simple and easy to integrate, even for non-technical business users, IT often doesn\u2019t know what is being bought either.<\/p>\n<p>Even businesses that do try to maintain records of SaaS licenses often have an incomplete picture, Jain warns, because the cost and terms of these deals varies over time; adding extra users or spending more time on a tool, say, may take the business into a higher price by bracket, or an introductory deal may simply come to an end. \u201cMany companies are still trying to map their SaaS exposures on spreadsheets,\u201d Jain warns. \u201cWhat they actually need is a real-time inventory.\u201d<\/p>\n<p>Another concern is that many businesses aren\u2019t getting good value from their SaaS purchases. Business users may not have to assess metrics such as time-to-value or return-on-investment when making a purchase; they may simply stop using a tool but fail to cancel the license. In some businesses, users in different functions are buying different SaaS tools to do the same job, incurring unnecessary expense through such duplications.<\/p>\n<p>Jain believes that the growing financial pressures businesses now face is likely to prompt a backlash, with some companies announcing budget cuts of up to 30% for software spending. The problem is not limited to large enterprises, she points out. CloudEagle\u2019s data suggests even relatively small businesses \u2013 those with between 10 and 100 staff \u2013 are typically spending $250,000 to $1 million a year on 50 to 70 apps.<\/p>\n<p>CFOs now focusing on how to tackle this problem are putting much tighter controls in place; while businesses are keen to continue taking advantage of the benefits of SaaS tools, they\u2019re also determined to get better value for money. \u201cSpend analysis, streamlining procurement and building a cost-conscious culture will enable companies to make informed choices and reduce overall software spend,\u201d Jain argues.<\/p>\n<p>The potential backlash against SaaS spending will also have an impact on providers, who may find churn rates increase \u2013 and recurring revenues fall accordingly \u2013 as businesses try to rein in their spending on less effective tools. That will require them to work much harder to articulate the value their solutions offer. \u201cVendors are going to have to be 10 times\u2019 better to avoid that churn,\u201d warns Jain.<\/p>\n<\/div>\n<p>Read the full article <a href=\"https:\/\/www.forbes.com\/sites\/davidprosser\/2023\/09\/22\/revealed-the-hidden-cost-of-the-saas-revolution-for-businesses\/\" target=\"_blank\" rel=\"noopener\">here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Do you know how much your business is spending on software-as-a-service products? New research suggests SaaS costs are spiralling out of control, with many companies struggling to track spending or to limit the power of individuals to buy whatever tools they like. The average business is now spending around $3,500 per employee on SaaS tools, [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":15016,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","footnotes":""},"categories":[77],"tags":[],"class_list":{"0":"post-15015","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-startups"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v20.9 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>The Hidden Cost Of The SaaS Revolution For Businesses | Brandiary<\/title>\n<meta name=\"description\" content=\"Do you know how much your business is spending on software-as-a-service products? 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