Cloud Age Challenge: Managing SaaS Applications Costs

Ekaterina Mizrobova

“SaaS shows no signs of decline”, – Gartner says. According to the world’s leading information technology research and advisory company, “cloud application services (SaaS) [market] is expected to grow 20.1 percent in 2017”.

Attractiveness of Software-as-a-Service (SaaS) applications is explained by ease of their purchase and installation. With plenty of public and affordable cloud services any employee can quickly create an account and/or purchase a service without informing their IT department. Such simplicity is of great help and benefit for businesses employing an agile model, as it allows employees quickly switch between applications suiting their immediate needs without slowing down the dynamic business process.

This means that the trend of moving from on-premises applications to software-as-a-service (SaaS) will continue, requiring more control on SaaS applications costs. While SaaS applications may be cheaper than on-premises software, cloud purchases still require management. Due to their ease of purchase SaaS applications tend to be purchased and used without knowledge of IT departments, which nowadays is considered routine in some companies as it serves the dynamic nature of their businesses or projects. But even if the IT is aware what SaaS applications are used across its company, SaaS spending still requires control and management.

Wide-scale and unmanaged purchase and use of SaaS applications can lead to “cloud sprawl” – uncontrolled proliferation of cloud services in the organization. This means that one and the same SaaS can be unreasonably purchased multiple times, which results in extra costs voiding SaaS cost advantages.

Another issue is the diversity of cloud pricing models. The most popular model is a pay-per-user pricing model – a separate payment is charged for each user. To manage costs, one should know how many licenses were purchased and how many of them are really used.

Usage-based pricing is also called a pay-as-you-go SaaS pricing model – the more you use a cloud application, the higher is its cost. On the one hand, it’s convenient to correlate costs and usage. But on the other hand, it’s hard to predict costs which vary according to the amount of usage.

Another popular SaaS pricing model is tiered pricing, that is payment is charged per package. The price of a package depends on a combination of features offered. To optimize costs, one should check whether purchased packages are used to the full.

For instance, Salesforce offers four Sales Cloud Lightning Editions: Starter for $25, Professional, which costs $75; Enterprise for $150; and Unlimited for $300. If a company purchased 50 licenses of the Unlimited Edition, but only 30 are fully used – money are wasted.

Organizations are recommended to use special SaaS tools to facilitate SaaS utilization and cost management.

For instance, Binadox intercepts all events of SaaS subscription and usage and the corresponding data, including a user name, the number of instances, and terms of services. Thus, you can see what SaaS was subscribed to/used, by whom, how many times, and what the conditions of use are.

This way your IT department can manage and control SaaS costs smarter and faster. All the instances of excessive SaaS purchases will be revealed in real time, allowing the IT to take proactive measures to avoid cloud sprawl and unreasonable expenditures. Besides, the IT will be able to detect underused SaaS applications and downgrade the corresponding licenses to cut costs.