top of page

Speaker Details

Eric Christopher

Founder and CEO

Session Transcription

Welcome to the final session of day one of SaaS Metrics Palooza 23. As we were putting the speakers and agenda together, we knew in this year of operating efficiency, no metric-centric event would be complete without one of the leaders of the entire, actually, creators of SaaS Spend Management being on the agenda. So with that, I welcome Eric Christopher. He is the founder and CEO of Zylo. Eric, welcome to SaaS Metrics Palooza 23. Thank you for having me, Ray. This is awesome. This is going to be a fun session for me and hopefully valuable for all of you out there. I'll start today just welcoming you and a little introduction for myself. I'm Eric Christopher. I'm the CEO and co-founder of Zylo. And really, we wake up every day helping companies manage their SaaS portfolios and how to manage spend and how to maximize utilization, which we'll get into. But the purpose of today and why I want to give you that background is I'm here to share insights and trends and even some recommendations from really one of the world's largest combined sets of data ever put together that's managing spend and utilization and contract data from SaaS subscriptions that customers are using every day. And I'm really excited to share some of these trends and insights that we have. A little bit about the data and where it comes from. We're going to pull some great statistics out of our SaaS Management Index report. This is a report that we've been doing now for several years. And it's actually based on seven years of historical trending data of the use of SaaS applications inside some of the largest companies in the world all the way to SMBs. And it even includes some of the time periods that are really fascinating to understand, which is when we had the pandemic and the rise of digital work and the rise of SaaS. And then also now, as Ray had mentioned, this era of cost efficiency and operational efficiency, which is really forcing a lot of companies to think about and rationalize a lot of their software decisions. It's also based on monitoring over 30 million user licenses being used by employees across these different segments and industries. So not only what people are spending, but what are they actually using every single day. And then also, it's based on over $33 billion of SaaS spend under management. So we have an AI machine learning model that can identify software within companies and excited to kind of pull out this large set of spend and start to share some of the trends and what we're seeing today. So that's a little bit about the data. So this time that we're in today, we like to call it at Zylo, the era of responsible growth. And we're all feeling it within the rise of interest rates, the tame inflation and capital being expensive. Companies and a lot of uncertainty ahead, it's very hard to predict what next six or 12 months are gonna look like for a lot of companies. So really everyone now is focusing on a different level of operating rigor. And for CFOs, this is requiring a much different level of engagement with your teams, overseeing budgets. And a lot of ways you're now a co-pilot and even having the responsibility now to be on your shoulders, really to make the right decisions in your company. And specifically today, we're gonna talk about software being one of those. From public companies, the largest companies in the world, all the way to series A startups, there's a big focus on improving operating metrics, whether that's pursuing cashflow, positive business, whether that's actual to achieve profitability, maybe that's increasing your operating margins, maybe all of it. And I was speaking to one CEO, CIO, excuse me, recently, that's with a very, actually a company that's doing extraordinarily well in this time right now, that's a Fortune 50 company. And I kind of thought, are you guys really pushing for more technology spend? And really they're not, they're scrutinizing everything because of the uncertainty ahead. Everyone is expected to do more with less. That's how the markets are measuring all of us. That's how investors are looking at this. And then ultimately customers need that as well because of the rising costs in the economy. So this is forcing companies to do a lot more with less. And today, software is one of those key areas where we can focus. And anything we've learned, the future's pretty unpredictable. So software being an unpredictable expense for most companies, it's a good time to look at it. So for most companies, is bigger and more expensive than you think in your organization. At least we seem to find that. We learn this over and over again, especially when we talk to new companies that might be taking up a particular focus on software as a company for the first time. And what's happening is there's a misunderstanding because we're in an environment now where software, it's a distributed purchasing situation. No longer are we in the times when IT and finance or procurement might be the gatekeeper or a checkpoint for software. Many times those departments or those leaders are finding out about it after the fact. Employees now can swipe credit cards. They do free trials. So it's very difficult to get visibility and controls in place. And this has all been happening during a time over the last few years where it's been a growth really at all costs kind of environment, especially in the tech industry. And so companies have been encouraged by the tools that you need. We're now working from home or we're in hybrid. It's okay to buy another tool to connect our teams. And so we've got the market growing, we've got  rising, and literally is designed to be easy to buy now with free trials and product-led growth type of models to be easy as a one-click purchase on Amazon. So all of a sudden, after this world that we've been in, connecting digitally, buying a lot of tools, now here we are, you're looking as CFO at an expense that was bigger than you expected and what seems to be a little maybe out of control and what do you do about it? Now it's your responsibility to try to clean up or kind of right size and rationalize investments across your company. So I'd love to take a moment and we're going to do an audience poll in the video experience. And I'd love for you just to take a minute here and just ask you how many employees do you have in your company? So we'll take a minute and have you respond to that real quick, which will be insightful. So I'll kind of tailor, to make some of this content relevant to each of you. Okay, great. We have a really great distribution here of companies by size. And you can kind of look at this chart. What we're laying out here is looking at portfolio or the number of apps and the spend associated to different company sizes. And I think you'll see, and most will agree, companies are powering their business with a lot of apps. I think that's for sure. A lot of . And in some small organizations, it's almost a one-to-one ratio of employee to apps. As you get scale, it gets a little better. But we find that most companies, they misidentify  so much in their organization. I'm going to get into why. By as much as 40%. So you think about like, if you were estimating that you might be spending, let's say $60,000 in  spend, or 60 million, whatever that is, it's actually going to be more like $100,000 or 100 million. It's that much of a big of a missed forecast in organizations. Because it's coming from marketing, it's coming from sales, it's coming from employee expense. And so it's crucial that you as a CFO partner with the departments and make everyone be a very good forecaster of software. And I mean, just imagine if your counterparts as a CRO is missing a forecast by 40% quarter after quarter, it's detrimental. And this missed forecasting expense is really critical. And the cost per employee is getting very real and material. If you look at the segments from one to 10,000, and you kind of blend that, it ends up coming out to be about $10,000 per employee is being spent on and cloud software. It's a lot, even the companies that are getting scale at 50,000 to 100,000 employees plus are seeing spend that's equating to $5,000 per employee. So it's getting very material. And there's a big reason why you're probably not aware of everything that you have. I mentioned earlier that software is purchased in a distributed manner. So IT and finance who have typically been the checkpoint really are finding out about software during the fact after it's been purchased or even after it's been implemented. It's kind of like at home, you think about like if you have kids, you get a little surprised by how many Roblox purchases that might be popping up or maybe why you have three Disney Plus accounts maybe across the family. Think about this kind of death by 1,000 cuts across a company that's 500 employees, 1,000 employees like your companies and how many different purchases are happening across the business. And so you look at the environment, it makes a lot of sense. Your CMO, your CRO, and even your HR leader now have technology investments that could be equal or even greater than what's being purchased by a CIO or a CTO in some organizations. So many tools have been developed to meet these different business functions. So if you look at this chart over to the right, just for a second, it's a comparison of 2020 to 22. And what we're looking at is where software purchasing is happening. And the way we kind of think about it is IT owned and have kind of centralized visibility. Then you have business units where these are typically approved within budgets, but many times we still lose visibility within IT and finance, then also employee expense software. So kind of the credit card purchases. And just from 2020 to 2022, it's gone from just over 50% of software being the investments coming out of the business units outside of IT to now almost 70%. And that's all been while software has been growing, Gartner has been tracking to be growing 20% year over year for the last several years on average. And even during the, in 2020 and 21, that was even higher. So you might hear the term shadow IT, especially coming from maybe a chief security officer or a CIO. And the definition of shadow IT, there's probably many definitions, but the one kind of found most recently is anything that's purchased that's IT related that doesn't have explicit approval from IT. That's actually very outdated now, that definition and our viewpoint, because we do want to encourage purchasing to happen by the business owners within their departments to get the software that they need. But when we think about this issue for this conversation, let's think of it as just employee expense software. One in six employees typically expense some sort of  application inside of organizations today. And out of that 50% of these  transactions are typically mis-tagged in the expense systems. They're in your T&E, so you've got a recurring subscription, it comes up as something quite different than the software, and this happens over and over and over again. We see it every single day. The cost of this can add up, so that can be an implication, and we've seen organizations have success in reducing operating costs in this area. But the big issue is risk. It's a lot of applications, and your highest risk area in your organization is typically when an employee does something either intentional or unintentional with your data. And having these type of applications that has typically company-owned information that's being uploaded, being shared out, and so these are really big challenges without visibility. So it's a really important area that you can focus on. And I think sometimes finance leaders don't really, they underestimate their ability to help IT track this down through employee expense software, and that's a really good opportunity for you to be a great partner and impact the organization. I'm gonna switch gears and just talk about budgets, kind of the bigger kind of implication that  can cause. And we talk about it as, we describe  as a silent budget killer because it has kind of a lagging effect to all of us when it grows or our usage or adoption is unanticipated either maybe by using something more than we expected or less. We all love , but it has some unintended consequences, and I'm gonna share a little bit about what those are. So the first one, which is where we start with just kind of why this happens. So let's talk about how this becomes a budget killer. First, I mentioned has been growing 20% year over year, so we've got the rise of . Also, companies have been growing. Typically, we've been adding employees, and so there's more mouths to feed, if you will, from a technology perspective to do jobs. And next, going back to this trend of software being easy to buy. So you've got all of these factors, this perfect storm, perfect recipe of consuming a lot of software. And many of these tools that have been purchased, they start with maybe this one employee starting it. I remember in the S1 of Zoom, they really made it an attribute of how well their business was doing was that many of their $1 million more customers all started with either one trial or one free license account. That's how this begins to happen. And you go back to the beginning of the purchase. The point of purchase is where this all starts, is that typically, it's a purchase made for a small group. It's short-sighted. The purchase strategy is not designed to think about a broader rollout. And then over time, now, procurement and their finance teams are really kind of digging out of that original purchase. That's sort of the setup, if you will. Now, once you have it and this purchasing has happened and the rollout and the adoption is beginning to evolve, over 50% of the applications, just barely over 50% are being utilized to their intent. So we find that 47% of licenses or available usage is being wasted in your organization. That's a lot. And so examples, many, many examples, but you've got a department heads down, decides we need an application. Every employee in this department needs it. You find out very quickly, not everyone needs that application and nothing's done about it. It's just maybe renewed over and over, or it's even just the company's unaware of it because you're not monitoring the usage. And then on top of it, those same applications, you might have employees leave that are still licensed again and there's not a checkpoint to remove those licenses. And then potentially an auto renewal will happen. Even app owners leave and auto and renewals are happening in the organization. And that's not all. Even tools that you might know that employees are using it, their entitlements are way more than what they need from a functionality standpoint. So good examples are, think about video conferencing or project management tools, how many employees are actually hosting meetings versus maybe just being a participant. So just tons of examples of how you might have the right number of license allocated, but now you really gotta pay attention to how the contract's set up and what level and plan you should have. And if you have that data and that information, then you can help work with your partner to work through those issues. I'll move ahead to the next, which is app, just pure redundancy and just having too much of the same thing. And this happens because many times software decisions just aren't made through the lens of the entire company's needs or perspective. And that's probably okay. And even the intent of it's right, but many times what we find is many of the same applications, the very same company or app is being purchased by multiple employees across different departments. We have one example of a large enterprise company that had over 3000 of the very same project management tool in addition to having a multi, a seven figure plus enterprise agreement. And those dots were not being connected. And so a ton of waste within costs and also using different applications from a context switch perspective wasn't ideal. And also we find that there's categories of software that aren't being rationalized. So kind of stay on that project management example. Maybe it's not the fact that it's the very same application, but it's that you have multiple project management tools that do very closely the same things. And you need, many times you need multiple tools in the same category. But one example we had is one company had over 40 very specific project management tools that do that. That's their core functionality. And then we're able to kind of work over the year to bring that down to a more reasonable set of 10 to 12 project management tools across the application. So it creates a lot of real challenges. Not only is it the cost, which is the responsibility of the CFO, but also just think about the increased risk of the data that we talked about earlier. And then also the fact of just wasted productivity of not being in the same application and sharing data across different tools is a really big impact to the organization. So again, silent budget pillars just kind of pop out out of nowhere. And the next is just pure overpaying of software. I'll reference a third party here with Gartner who does some great research in particular the IT and software space. They find that 25%, that overspending on  software is at least 25%. And this is due to unnecessary entitlements and just not doing some of the rationalization and some of the important work that needs to be done as you're thinking about these renewals and applications that you're purchasing year over year. So it's really, really important that you focus on looking at the licenses from a negotiation standpoint, monitor license to make sure you need them and so on. And you've got all of those different scenarios that we've talked about. And then one thing we'll add is, and I think you're all experienced it, or maybe your company's even working on this as a strategy, nearly every single  vendor are working to find ways to sell more into their existing customers and even raise pricing to accomplish goals and kind of line value to the buyer. So it's time to get your in gear. You know, we shared some highlights here that just to kind of recap a few, 40% of licenses are being wasted each year. So that's a big deal and a big area of opportunity. You're likely overspending on a lot of software. Maybe it's 25%, maybe it's even more. We do find that by the way, pretty frequently. And that's only increasing as that spend and growth is increasing. Even though we're talking a lot about bringing software costs down, we are still in an environment where we know the industry is only growing and software industry is gonna be bigger. And it's now, it could be your second largest operating expense, which is common for a lot of companies now to have technology or it's becoming very, very close. So this is very, very important. So what can you do about it? Well, first thing, I'll just lay out a few recommendations. And it requires some effort and it requires some team. And it can even, you can add some tools and technology to help along the way too. First thing you need to do is focus on visibility. You have to have a source of truth for the entire organization. Just like you have a CRM for all of your sales, just like you have an ERP for all your planning and resources or an AP system to manage your cash. You've got an HR system to manage your people. You have to have a system of record for your software. And I'll give you a hint as CFO, you're in a driver's seat to really help IT with this because I'll give you the first hint is follow the money, follow the transactions, and that can help you get a really big handle on your software investments. Enable your teams to optimize current investments. Empower your IT teams with tools or processes and resources to optimize licenses. You really have to think about these recurring investments as living and breathing applications. And you have to rationalize your portfolio. You have to look at these categories. You have to understand what these applications do. I like to say and recommend, treat your applications, manage them very much like you manage your teams. Make sure they have a job description of what they do. Make sure that each applications that you use, they have a purpose towards a goal that your teams or your company's seeking to achieve. And give them performance reviews. Look at them on a regular basis ahead of renewal. Very important that you do that. And that will help you keep out of buying tools that you may not need in this issue. And really capitalize on the renewal opportunity. Most organizations are very reactive. The first time you think about a renewal, you're heading into the quarter, and there's just so many missed opportunities to be proactive. And it is the time to really actualize your savings, because that's the time when you can make the cost changes and see the impact right away. So maximize that opportunity. Arm your teams with data, your own data. There's opportunities to leverage external data sources, but you can really be a much smarter than what maybe you've been in the past with your vendors and really put together a better, really kind of win-win renewal as it relates to a negotiation. And you can leverage a lot of this data for better negotiation. There's negotiation services, companies, there's consultants, there's a lot of opportunities here. But you as CFO can really, and as a finance leader, can really guide this for your company. And one bonus kind of thought is, you can make this actually, I think, fun in a lot of ways by empowering teams. I think CFOs and IT leaders are really in a position of typically being a gatekeeper or having to shut something down for what's the good of the business. And this is a really good opportunity to get a clear understanding as a business partner within the organization, set up clear maybe compliance or kind of governance concepts at a high level of when to buy and how to buy and how to communicate those purchases so that you're on one kind of playbook from a central kind of source of truth. But this really can create an environment where it's a win-win. You're bringing costs in line, you're getting the right tools in the hands of your employees, and everybody's operating better, which is what it's all about. So the time is now. So hopefully these insights help you think about your, connect to your organization, give you a few ideas of maybe where to get started. And also maybe to help bring the business case to the CEO and maybe get your allies and counterparts on the leadership team kind of on board with the idea of moving into this era of responsible growth together and operational efficiency and really set up your organization to be much more resilient for the time ahead and be set up for success. So thank you. And I'll pass it back over to Ray so we can close up for maybe a few questions and close up. So thank you very much. Eric, really thoughtful, a lot of great insights there, but I can't help think every time I speak with you and talk about  spend management, this is a double-edged sword for our audience out there. So we have the CFOs who have the financial responsibility to make sure they're operating as properly as possible, reduce expense, and we've got the CEOs who have that responsibility, but also they have to go out and grow their company by selling more  products. So here's my first question to you. Do you have any insights or recommendations of what the B2B  providers can do to try to avoid being the victim of unexpected downsells, renewals, and churns based upon CFOs finally getting insight into their  spend? That's a great question. And we kind of admittedly find ourselves sometimes in the uncomfortable spot as I talk to a CEO of a  company, because our business is really about really getting to the right value for the customer using . But I really believe that everyone wants the same thing from the standpoint of, if you're the CEO of a  company trying to grow your  business, and you're a buyer and a consumer of , you really want the same thing. You want to buy the tool that you need and get value and deliver success, but you do want to pay, as a CEO, as the buyer, you do want to pay the right value for it, of course, but it's all about, you also, you want to use it. If you're using tools and you're finding success, as a buyer, you're happy to write those checks. That's your partner, you're growing. And it's the same thing for the CEO that's making the software or selling the software. You don't want to have unused licenses and customers not getting satisfaction. So as a CEO, you really got to think about the true north of the lifetime value of this customer and align that value. And I think if we can focus on creating more transparency between what people are consuming and ultimately what you're buying and creating transparency around that, I think it's a great thing. So I think CEOs need to be more proactive from the customer success lens. If adoption is lagging, you need to bring that forward and you need to work with your customer and demonstrate value much sooner than maybe avoiding it, not showing it and hoping it goes away at the time of renewal. It's not good for anyone. Yeah, I think what you said there at the end is so important to, number one, ensure that new customers are engaged effectively. And number two, that using the outcomes validation or verified outcomes that your CS team is constantly checking with your customer to make sure they're getting the value that they use to get the ROI for the investment. Great advice. Second question, over the last two or three years, and I know you have the data here, so that's why I'm gonna ask you, RevTech, SalesTech, MarTech really exploded during the go-go days of 2021, 2022. Is your data showing some significant, may I say consolidation or reduction in spend at RevTech? Do you have those insights, Eric? We do. I think thematically, we're not seeing any surprises. We're sort of validating what everyone's sensing and feeling from the vendor side where I think in probably boardrooms, there's been challenges with, if you're a smaller software company and you're not a platform that is, maybe the organization's building around. So a lot of the sales and MarTech in general might be solutions that have been built around the Salesforce ecosystem or Microsoft or something like that. A lot of organizations right now are beginning to try to see if they can go to less vendors and try to get capabilities and get some efficiency that way. But it's not all doom and gloom by any means. I think we're just seeing, I think, a natural contraction more so, even though it might feel kind of challenging for specific companies out there. But we are validating and seeing that larger companies are seeing more kind of upsell. And then we're seeing new adoption of new products, lagging from a new business, kind of new customer perspective. We'll have a lot more to share as the year closes, as we release our next  major index, but that's the direction that we're seeing. I will add one fun one though that I think is interesting is AI specifically. So at the rise of all of these new AI tools, we have a mix of data that kind of cascades between SMBs all the way to enterprises. We are seeing the rise of a lot of adoption of tools, but it's more of freemium or single licenses, or we have not yet seen kind of larger kind of deployments of AI yet. And I think we're gonna, it'll be interesting to see kind of that factor of when that starts to maybe pick up. I think there's still a lot of reservation from companies on deploying and picking the right tool and things like that. So I thought I'd throw out that, because that's always kind of an interesting one. I was gonna ask you that question, it's the last one, because we have several AI kind of thought leaders presenting, including Boston Consulting Group, which is kind of the state of AI adoption of the enterprise. And one of your lead investors, Bessemer Venture Partners, Janelle Teng is talking tomorrow morning, and she's talking about how the initial benefits of AI are gonna accrue to the individuals, because that marketing person is gonna get a AI tool to help them with microclips on their podcast. But you mentioned data governance and the risk. To me, it sounds like CFOs right now with their CIOs need to get in front of the AI adoption at the freemium level because you have data risk, and that one free license could become a hundred paid license in a couple of years if you're not in front of this. Does that make sense? Yes, absolutely. And I think it could be a more severe risk. We don't know yet, but you think about it, it is certainly adoption for individual usage. You've got that, that is spot on. And I think companies are still just in, a little bit on their heels on knowing what they're, as they should be. I mean, this all kind of happened very quickly of the opportunity with these large language models and things like that to be kind of pushed out so quickly or what seems to be. And I think a lot of companies still are trying to figure out their posture and what they should be doing. You've got a lot of companies have a lot of proprietary data and a lot of great opportunity for AI to unlock it. But once you unlock it, it's there. And so you can't put that genie back in the bottle. So I think a lot of companies are really trying to work with a lot of these new cutting edge companies and really try to understand who's the right one, what's their vision and bring that all together. But huge risk. And I think the more that you don't, it's kind of like just with generally the , if you kind of, if you try to ignore it, or not that it's an intentional, but it is a hard problem to solve that, these risk elements are really adding up for companies if they don't pay attention to it. Eric, thank you so much for your time. I could talk to you for another hour easily, but that's Eric Christopher, founder and CEO of Zylo. And please follow him, Eric Christopher on his LinkedIn. Thanks, Eric. Thank you.

bottom of page