SaaS Spend Management
Eric Christopher, the founder, and CEO of Zylo is sitting on top of one of the industry's largest SaaS spend data repositories and thus benchmarks, a key reason I knew I needed to have Eric as a guest on the podcast.
What was the catalyst for founding Zylo? It started with Eric's experience as a revenue leader in two social media platform companies. Eric realized that by introducing new solutions directly to the Marketing department, it was becoming difficult for companies to manage and govern SaaS spend.
"A business idea with complexity is worth pursuing" - the words an advisor shared with Eric which was part of the motivation to founding Zylo!
Since anyone in a company can be a buyer of a SaaS solution, coupled with the existence of thousands of vendors with very different features and pricing, buying a SaaS product is complex. Moreover, measuring the value is very difficult and often, ill-defined.
How does Eric define SaaS Spend Management? "Helping companies manage, measure and maximize value from every SaaS application purchased".
The lifecycle of a SaaS solution starts with understanding how to receive the best price, and then how to optimize the value received. Questions to ask include, are employees using the product, are they receiving value, and how does the value compare to other solutions with similar functionality?
Zylo uses a "value framework" that starts with understanding every application being used through a discovery process. Next, is being able to manage adoption and usage, which may be as much about maximizing value versus reducing costs. Next, identify opportunities for cost avoidance, while considering the renewal process to know the best terms based on the current utilization rates. Finally, gaining visibility into the existence and usage of every SaaS product in a company materially increases the ability to have the governance and controls in place to purchase, utilize, renew, and purchase the right products in the future.
One surprising aspect of SaaS sprawl is that many organizations do not know what SaaS solutions are being used by their employees and the associated expenses! The best SaaS Spend management programs start with the ability to conduct "discovery" to identify all the SaaS tools being used in a company....but when is it the right time to consider implementing a SaaS Spend Management solution?
Eric highlighted that when you are hitting $1M - $2M in annual SaaS spend is one milestone. Another milestone is that at 500 employees if you do not have a SaaS Spend Management program in place - alarms should be sounding. ...however, Eric shared that it is never too early to introduce a more structured SaaS purchasing, management, and governance process.
Zylo is sitting on a treasure trove of "SaaS Spend Management" data from over $30B in annual SaaS spending across industries including a few of the below :
SaaS spend by employee has increased by 50% over the last 2 years
SaaS spend has been increasing by over 20% per year for several years
Total SaaS spend is underreported by 50% due to decentralized purchasing
The average company has over 300 "paid" SaaS subscriptions
This increases to > 1,000 in Enterprise companies
Interestingly, the cost of the SaaS spend may not be the primary opportunity for many companies, it may be minimizing the risk of not managing and governing the flow of data outside of the company!
Several new trends in SaaS spend will be disclosed in the Zylo Benchmark report being published on April 4th, 2023!
If you are interested in the evolution of purchasing and managing SaaS spend in your company, this product with Eric is a great listen!