The Hidden Costs of SaaS Oversubscription: Data-Driven Insights and How Schooley Mitchell Can Help

Introduction

The adoption of Software as a Service (SaaS) has skyrocketed over the past decade, with organizations leveraging these cloud-based solutions for flexibility, scalability, and cost-effectiveness. However, a data-driven analysis reveals a concerning trend: most businesses, municipalities, and hospitals are oversubscribed to SaaS services, either from a license usage or features usage perspective. This oversubscription leads to significant financial waste and operational inefficiencies.

According to a 2022 report by Flexera, companies estimate that nearly 33% of their SaaS spending is wasted due to underutilization. This article delves into the data behind SaaS oversubscription and explores how Schooley Mitchell, North America's largest independent cost reduction consulting firm, can help organizations optimize their SaaS expenditures.

The Data on SaaS Oversubscription

License Underutilization

• Inactive Licenses: A study by Blissfully in 2021 found that the average company has $135,000 worth of unused SaaS licenses annually.
• Redundant Applications: BetterCloud reported that organizations use an average of 80 SaaS applications, with many functionalities overlapping, leading to unnecessary costs.

Features Underutilization

• Limited Feature Adoption: According to Gartner, enterprises utilize only 60% of the features of their SaaS applications on average.
• Over-Purchasing Tiers: Companies often subscribe to higher-tier plans for features they seldom use, resulting in an estimated 20% overspend on SaaS services.

Financial Impact

• Global Waste: With global SaaS spending projected to reach $157 billion in 2023 (Statista), the potential waste due to oversubscription could exceed $50 billion.
• Organizational Overspend: Zylo reported that enterprises could reduce their SaaS spend by up to 30% through effective license and feature management.

Sector-Specific Insights

Businesses

• SMEs: Small and medium-sized enterprises often lack the resources to monitor SaaS usage effectively, leading to an average of $55,000 in annual waste (Blissfully).
• Enterprises: Large organizations may have thousands of SaaS licenses, with 15-20% being unused or underutilized (Flexera).

Municipalities

• Budget Constraints: A survey by Government Technology indicated that municipalities could save $3 million annually by optimizing SaaS subscriptions.
• Service Impact: Overspending on SaaS limits funds available for critical public services, affecting community welfare.

Hospitals

• Healthcare Costs: HIMSS Analytics reported that hospitals spend an average of $4 million annually on SaaS applications, with 25% potentially wasted due to oversubscription.
• Patient Care: Redirecting wasted SaaS expenditure could improve patient care by investing in medical equipment and staff training.

Why Oversubscription Happens

1. Lack of Visibility: Shadow IT: Departments independently purchase SaaS solutions without centralized oversight, leading to duplicate services. Usage Tracking: Only 20% of organizations have effective SaaS usage tracking systems (BetterCloud).
2. Complex Pricing Models: Tiered Plans: SaaS providers offer complex plans, making it challenging to select the most cost-effective option. Automatic Renewals: 65% of SaaS contracts renew automatically, often without usage review (Blissfully).
3. Growth Anticipation: Companies purchase extra licenses expecting growth that doesn't materialize, resulting in 10-15% excess capacity (Flexera).
4. Employee Turnover: Inactive Accounts: Departed employees' licenses remain active, with 56% of organizations lacking a process to reassign or deactivate them (Gartner).

The Role of Schooley Mitchell

Schooley Mitchell specializes in cost reduction consulting, helping organizations optimize expenses across various services, including SaaS subscriptions. With over 20,000 clients and a presence across North America, Schooley Mitchell has saved businesses an average of 28% on their expenses.

How Schooley Mitchell Can Help

1. Comprehensive SaaS Audit: Inventory Assessment: Catalog all SaaS applications and licenses currently in use. Usage Analysis: Utilize proprietary tools to assess actual license and feature utilization.
2. Cost Optimization Strategies: License Rightsizing: Adjust the number of licenses to match actual usage, eliminating unnecessary costs. Feature Alignment: Recommend downgrading to plans that align with the organization's feature usage.
3. Contract Negotiation: Vendor Liaison: Leverage industry expertise to negotiate better terms and pricing with SaaS providers. Bulk Discounts: Identify opportunities for cost savings through consolidated purchasing.
4. Ongoing Monitoring and Support: Regular Reviews: Schedule periodic assessments to ensure continued alignment with organizational needs. Alert Systems: Implement alerts for upcoming renewals and changes in usage patterns.
5. Security and Compliance: Account Management: Ensure inactive accounts are closed to reduce security risks. Regulatory Compliance: Align SaaS usage with industry regulations to avoid potential fines.

Case Studies

1. Manufacturing Firm Reduces SaaS Costs by 32%

A mid-sized manufacturing company was spending $600,000 annually on SaaS subscriptions. Schooley Mitchell's audit revealed:

• Unused Licenses: 150 out of 500 licenses were inactive.
• Underutilized Features: Premium features in CRM and ERP systems were rarely used.

Outcome:

• Savings: Reduced annual SaaS spend by $192,000.
• Improved Efficiency: Streamlined applications led to better employee adoption and productivity.

2. Municipality Saves $500,000 Annually

A city government faced budget overruns due to escalating SaaS costs. Schooley Mitchell identified:

• Redundant Applications: Multiple departments using different tools for the same functions.
• Automatic Renewals: Subscriptions renewing without usage evaluation.

Outcome:

• Savings: Achieved a 25% reduction in SaaS expenses.
• Reinvested Funds: Allocated savings to critical public infrastructure projects.

3. Hospital Enhances Patient Care with SaaS Optimization

A regional hospital's SaaS spend was impacting its ability to invest in patient care. Schooley Mitchell found:

• Inactive User Accounts: Accounts of former staff remained active.
• Underused Clinical Software Features: Staff were unaware of features that could improve patient care.

Outcome:

• Savings: Cut SaaS costs by $300,000 annually.
• Better Care: Invested savings in medical equipment and staff training.

Why Choose Schooley Mitchell

• Independent and Unbiased: No ties to vendors ensure recommendations are solely in the client's best interest.
• Performance-Based Fees: Fees are derived from a portion of the savings, ensuring alignment with client goals.
• Expertise and Experience: Over two decades of experience in cost reduction across various industries.
• Proprietary Tools: Advanced analytics and monitoring tools provide detailed insights into SaaS usage.
• Ongoing Support: Continuous monitoring and advice to adapt to changing organizational needs.

Conclusion

The data is clear: oversubscription to SaaS services is a widespread issue causing significant financial waste across businesses, municipalities, and hospitals. By taking a data-driven approach to analyze and optimize SaaS usage, organizations can reclaim wasted expenditures and redirect funds to strategic initiatives.

Schooley Mitchell offers the expertise, tools, and proven strategies to help organizations tackle SaaS oversubscription effectively. By partnering with Schooley Mitchell, organizations can achieve substantial savings, improve operational efficiency, and enhance their competitive edge.

About Schooley Mitchell:

Schooley Mitchell is the largest independent cost reduction consulting firm in North America, with offices coast to coast. They deliver expertise to help businesses optimize expenses in telecommunications, merchant services, shipping, waste management, and SaaS subscriptions. With a commitment to client success, Schooley Mitchell has helped thousands of organizations save millions of dollars without compromising service quality.

For more information on how Schooley Mitchell can help your organization optimize SaaS spending, contact Keith Harpelund at 847.485.0400 x100