SaaS Spend Management Trends - with Eric Christopher, Founder and CEO Zylo
Highlights from Eric Christopher on the Metrics that Measure Up Podcast.
Welcome to The Metrics That Measure Up newsletter! We're excited to share the highlights from our recent episode featuring Eric Christopher, the founder and CEO of Zylo. Zylo has access to one of the largest SaaS spend repositories in the industry. Eric's expertise in SaaS spend management provides an interesting perspective on the world of SaaS purchasing, management, and governance. Our conversation with Eric covers three key topics: his definition and vision for SaaS spend management, insights on implementing a SaaS spend management program, and strategies for controlling SaaS spend in fast-growing, early-stage companies.
What is SaaS Spend Management?:
The catalyst for founding Zylo stemmed from Eric's tenure as a revenue leader in two social media platform companies. With this experience, he witnessed the challenges his customers faced managing a large portfolio of SaaS applications, Eric recognized the need for centralized visibility and control over SaaS spend, while also being able to enable employees to access the best tools to enhance “the jobs to be done”, while ensuring the company can better manage the ever-increasing number of SaaS applications across their business.
So, what exactly is SaaS Spend Management? Eric first highlighted the unique complexities that arise from the thousands of dynamic vendors offering comparable services in the SaaS market. Unlike traditional financial spend management solutions, SaaS spend management goes beyond the primary focus on managing price and tracking expenses, by also focusing on maximizing the value obtained from and delivered by each application. Key questions include understanding each application’s utilization, assessing the value received, and comparing value among similar solutions.
Eric's mission with Zylo is to help companies manage, measure, and maximize the value derived from every SaaS application.
Understanding and Measuring Value of each SaaS Solution:
Zylo utilizes a "value framework," which enables companies to measure the value of each application throughout its lifecycle. This framework involves comprehensive application discovery, ongoing license management, cost avoidance, and establishing governance. Managing adoption and usage is a crucial element for maximizing value, rather than primarily focusing on expense control and cost reduction. Gaining visibility into all SaaS products used within a company is the foundation for enhancing governance and control across the organization while enabling more informed purchasing decisions.
Implementing a SaaS Spend Management Program:
One revelation in the initial “discover” process is the sheer number of SaaS applications employees are using and the associated expenses. Eric emphasized that it's never too late to start proactively managing SaaS spend. When asked when a company should consider introducing a more formalized SaaS spend management process, Eric suggested that companies reach a point where they are spending one million to two million dollars per year, it becomes crucial to establish a program. With the right framework in place, companies can set behaviors, implement governance, and avoid future challenges associated with not having visibility into SaaS application presence, utilization and expense.
Furthermore, Eric addressed the role of SaaS spend management solutions in enterprise class organizations with established procurement functions. He explained that larger companies with dedicated procurement and IT teams have a higher opportunity to drive effectiveness and impact in SaaS spend management. Even traditional enterprises are transitioning to the cloud, requiring robust management practices for SaaS applications.
To wrap up our discussion, Eric highlighted the future growth potential of the SaaS market. Industry projections indicate that SaaS spending will grow from approximately $180 billion currently and reach $300 billion in the coming years, making it impossible to manage SaaS without a dedicated service and solution.
"SaaS Spend Management" benchmark data:
Zylo possesses a wealth of "SaaS Spend Management" data from managing over $30B in annual SaaS spending across various industries. Some noteworthy insights include a 50% increase in SaaS spend per employee over the past two years, consistent annual SaaS expense growth of over 20%, and underreported SaaS spend by 50% due to decentralized purchasing. On average, companies have over 300 paid SaaS subscriptions, and this number exceeds 1,000 in enterprise companies. Interestingly, for many organizations, one of the primary opportunities is in minimizing the risks associated with unmanaged data flow outside the company rather than solely focusing on the cost of SaaS spend.
Learn More:
If you're interested in the evolution of purchasing and managing SaaS spend, we highly recommend listening to this podcast episode featuring Eric Christopher, Founder and CEO at Zylo, as he provides valuable knowledge and insights to optimize a company’s SaaS investments.
The Zylo Benchmark report, which discloses several new trends in SaaS spend, was published on April 4th, 2023, as a highly informative read.
You can listen to the entire conversation with Eric on the Metrics that Measure Up podcast by clicking here.
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An infinite horizon of automation and AI-enabled solutions sounds great.. but it's going to lead to increased complexity of managing the subscriptions, Permissioning, and much else.