You Are Overspending on Cloud and SaaS: Here’s Why and What to Do

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Read more about author Ramin Ettehad.

The shift to public cloud, private cloud, and SaaS is ubiquitous and occurring at an accelerating pace. The benefits of well-known cloud services and infrastructure are easier to deploy and manage and, typically, are cheaper and more efficient than operating a data center. Those same benefits, however, also introduce the potential for overspending, orphaned resources, and duplicate services. The pandemic and its subsequent ripple effects turned that potential into reality for most companies. Our customers wanted to know to what extent and why, so we decided to find out.

We commissioned YouGov to survey more than 200 senior-level IT professionals on the nature of their cloud and SaaS spending. The resulting report2023 Snapshot Survey: SaaS and Cloud Spend Optimization & Automation, illustrates how much enterprises appear to overspend on unused, unaccounted-for, or mismanaged SaaS and cloud subscriptions. It also explores the maturity level of their processes for managing SaaS and multi-cloud licensing and use.

Process Inefficiencies Lead to Cloud and SaaS Data Security and Management Issues

We found that most enterprises spend more than 10% of their annual budget on unused or mismanaged software, SaaS, and cloud infrastructure. In addition, a third of respondents reported wasting between 10% to 20% of their annual application expenditures.

The root cause for both SaaS and cloud overspending is decentralized and fragmented purchasing across business units, IT and functional teams, and the resulting lack of centralized management and oversight. Increasingly, these resources are purchased by business leaders – not IT. In fact, Gartner estimates that the majority of IT and software asset management teams, about 60%, do not focus on SaaS management.

The lack of centralized IT oversight, management, and governance means that no one really knows how much was bought, who has what, and who is using what services. This, in turn, causes overspending on unused, orphaned, and redundant SaaS and cloud subscriptions.

When the time comes to reconcile cloud services and SaaS subscriptions – like, for example, when an employee quits or is terminated and needs to be offboarded – a complete view of SaaS and cloud resources assigned to and in use by each employee is missing. As a result, companies cannot create good processes to reassign and transfer application data and workspaces to managers or other peers.

This also creates orphaned storage and compute in cloud instances, which aren’t reassigned or reclaimed, and leads to further overspending. Because there is a lack of centralized management, not only are companies overspending, but they also risk security exposures. When they offboard employees, companies miss deprovisioning access to various cloud and SaaS resources. And ex-employees can still have access to critical data after they leave, resulting in unauthorized access and data exposure.

Large layoffs amplify the problem. Previous YouGov research focused on secure offboarding showed 42% of companies experienced more than 5% of unauthorized access to SaaS applications and cloud resources stemming from incomplete deprovisioning.

This presents a serious data security risk. Recently, Block (formerly Square) in a filing disclosed that failure to remove a former employee’s access to confidential Cash App PII resulted in a data breach potentially affecting 8.2 million customers.

Process Automation Is Key to Optimizing SaaS and Cloud Spend

To manage offboarding well, you need to manage SaaS and cloud better. And to manage SaaS and cloud better you need to manage onboarding and offboarding well. It’s all interconnected, connected by business processes.

Unsurprisingly, the majority (64%) of respondents expressed that their organization experienced unplanned cloud and SaaS expenditures and issues with varying maturity levels of workflow automation. Roughly 10% of the organizations surveyed are losing chunks of their SaaS and cloud budgets due to immature and nominal process automation resulting in unplanned expenditures and issues.

As companies continue to embrace the cloud, it behooves them to get their spending under control. So, the key for companies to fix their cloud and SaaS overspending problems is to fix their cloud management and process problems. There is no single standard for doing this; in fact, managing and connecting disparate sets of cloud services and applications starts with visibility and ends with automation. 

While areas such as sales, finance, operations, and manufacturing have embraced business process automation, IT has been slower to adopt it. SaaS and cloud optimization are still heavily reliant on service tickets and human orchestration across tools and teams. Service tickets are appropriate for people-centric processes such as incident management and customer support, not so much for automating technology-centric processes.

Cloud is not the future. Cloud is now. This research taught us that optimizing SaaS and cloud management can save organizations between 10 and 30% of their software and cloud spend. Even at 10%, for some companies that can translate into millions in savings instead of being lost to mismanagement or inefficiencies.

I know how I would reallocate that money in my organization – how about you?