It's About Time It Was Easier to Manage SaaS Applications

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It's About Time It Was Easier to Manage SaaS Applications

We’re now over a decade on from Adobe’s controversial switch to subscription (SaaS) licensing for its key products. Salesforce, the pioneers of SaaS, is in its 25^th year of operation. SaaS expenditure continues to grow by around 20% year-on-year and shows no signs of decelerating. Given the multiple, expensive bolt-on AI capabilities announced by major vendors in 2024, it’s more likely to accelerate.

Most of this growth is at the cost of perpetual license spending. To use Oracle as an example, its FY24 results showed perpetual license spend down 15% and SaaS spending up 12%. Like Adobe, Oracle has transformed from a company where perpetual license and support revenue were key to a subscription-first publisher.

Clearly, this shift presents a great opportunity for SAM teams to pivot and develop new skills and address emerging business needs. In theory, it should be easy, right? No perpetual licenses to track, reduced risk of unlicensed use, reduced risk of costly and time-consuming audits. Just a simple per user per month metric to track.

If only it was that easy

SaaS platforms such as SAP 4/HANA, ServiceNow, and Salesforce have multiple metrics, including user roles, storage, number of transactions, etc. Often, for legacy reasons, metrics may not be consistent across product lines. Furthermore, SaaS applications are so easy to procure that shadow IT is still a problem. And, with the growth of departmental IT, a single unified view of cost, risk, and usage is difficult to obtain.

SaaS Management Platform (SMP) solutions approach this by deploying multiple methods – many of them proprietary – to help companies manage and optimise their SaaS estate. Most will leverage API connections to SaaS provider management portals and access to financial systems to uncover expenditure. Others will use Enterprise Single Sign On, a browser plugin, or network edge solutions such as Cloud Application Security Brokers (CASB) to enable management.

A common standard for SaaS discovery and inventory

This is, quite frankly, a mess. It results in imperfect solutions to SaaS management use cases such as cost management, risk management, and user on/off boarding. Right now, if you used two different SMP tools to manage your SaaS estate, it’s likely they’ll come back with different answers to every question you ask. The reason is because there is no common standard for discovering and managing SaaS applications. It’s about time there was. But, I’d argue it’s not in the interest of publishers with revenue targets to help you optimise your quantities and usage. If you ask most SMP providers, they’ll estimate SaaS wastage to be roughly 25-35% of your contracted license quantities.

That’s around a $60-80bn cost optimisation opportunity, so the impact on SaaS revenues per publisher would be significant. What’s particularly frustrating is that the data is likely collected by software publishers for telemetry and analytics purposes. It’s not provided in a means accessible to an end-user or third-party tool. Adobe, for example, is infamous for not providing usage data via the Creative Cloud admin console.

What’s needed is a common standard for SaaS discovery and inventory. With that in place, and providing guaranteed trustworthy data, SMP providers could focus on higher value capabilities such as predictive analytics and automation. Right now, part of their approach to competition and marketing is to call out the number of direct connectors they have. And they know that even then, they won’t have a complete and accurate view of their customer’s estate. Effectively, the message is “Hey, we’re less bad at this than our competitors”.

There’s hope on the horizon

From my conversations with SMP product managers, most would prefer to focus research and development on higher value tasks. But, instead, they’re constantly running to keep up with changing publisher metrics and end-user requirements. But there is perhaps hope on the horizon.

In June 2024, the FinOps Foundation released version 1 of its FOCUS standard for public cloud management. This standard focuses on the core FinOps use case of managing all aspects of public cloud. Importantly and admirably, this standard has been adopted by Microsoft, Oracle, AWS, and Google. All these providers now normalise data. This means the FinOps tool providers don’t need to reinvent the wheel every time a provider introduces a new product or metric or makes changes to APIs. It’s early days, but this is likely to be a huge step forward for Cloud Cost Management.

Could this also be applied to SaaS? I see a couple of challenges.

• Firstly, the SaaS market is far more diverse than the public cloud market. Rather than four main providers, there may easily be 4,000.
• Secondly, public cloud customers tend to be enterprise-scale. SaaS customer bases start at a handful of users, as illustrated by volume pricing tiers for SaaS apps.

The FinOps Foundation has stated it expects to add SaaS data to a future version of the FOCUS standard. It remains to be seen if this is successful. To me, it sounds like a cat-herding problem given the number and diversity of SaaS application publishers. Its best hope is perhaps for enterprise customers to add compliance with the standard to their procurement requirements. One would also hope that so-called Tier 1 publishers like Microsoft will choose to comply with the standard, thereby providing enhanced capabilities for managing enterprise-scale SaaS.

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