The Brightwork Research Guide to Managing the Challenge of SaaS Sprawl

Executive Summary

• SaaS sprawl has become an increasingly important area to understand.

Introduction

SaaS sprawl results from large numbers of SaaS applications being purchased and used by businesses rather than IT departments to meet needs not met by the approved IT purchased applications.

What is a SaaS Sprawl How Can It Lead to SaaS Chaos?

This quote does an excellent job of explaining SaaS sprawl.

SaaS sprawl is a natural consequence of the SaaS revolution. An analysis of Okta’s 2020 customer database revealed that companies employing 2,000 or more individuals maintained an inventory of 175 SaaS apps on average. A similar survey conducted by Blissfully in 2019 indicated that firms employing more than 1,000 individuals used 288 SaaS apps on average. And finally, two-thirds of the companies included in Productiv’s 2021 SaaS Management survey employed 100 or more SaaS apps.-TechCrunch

As does this quote.

In the age of the SaaS-Powered Workplace, organizations’ needs are fulfilled by a wide variety of best-in-breed cloud applications from many vendors. Over 1,400 new SaaS applications have launched in the last five years, and research shows that 86% of users say SaaS applications help them succeed more than desktop alternatives. In fact, 74% of users’ time is spent working directly in SaaS applications.

But as companies grow and adopt more SaaS applications, a new set of challenges arises. Yes, SaaS applications are a major boon to productivity and collaboration–you can work from anywhere, anytime, on any device–and they’re easily interoperable from an end user perspective. But they’re also creating a massive information sprawl, the likes of which IT has never seen before. – Better Cloud

What is Happening in SaaS Software?

Lots of SaaS applications being purchased without the concern of having a minimum number of licenses purchased means SaaS sprawl.

SaaS software allows companies to access many more types of software, are “cornucopia” of different SaaS software that was never possible under the on-premises model.

This video does an excellent job of explaining SaaS sprawl and brings up some of the implications of using so much SaaS software.

Content Disclaimer

*The use of quotes or content from vendors should not be construed as an endorsement for any SaaS vendor management vendor. We are independent and include this material to provide a better understanding.

Hybrid On-Premises, Big Vendor SaaS, and Small and Medium Vendor SaaS

Currently, we have a hybrid situation where there are core and approved applications and then shadow applications. These are defined like this.

Application Type #1: Core Applications

Core applications of a company are a combination of on-premises and SaaS. However, the SaaS applications tend to be from prominent vendors like Oracle or Workday. These types of large vendors are what IT departments are comfortable with and incentivized to buy from.

Faux SaaS Selected by IT Departments?

While prominent vendors are called SaaS, upon inspection, most of these IT department-selected major vendors assert that they are SaaS, but they are not. For example, vendors like SAP and Oracle lock companies into six-year contracts, which removes the flexibility of SaaS, and neither vendor offers multitenancy. This is because SaaS does not fit the business models of the prominent software vendors, so they co-opt the term SaaS without actually being SaaS.

Application Type #2: Shadow Applications

Shadow applications are purchased by departments and not approved or supported by IT. Many people make a big deal out of this lack of SAP support, but most of these SaaS applications are so easy to use that they don’t require internal IT support, and of course, there is the support of the SaaS vendor.

Increasingly a company does not use one application for a requirement. But instead, different departments may use overlapping applications from other vendors. During the pandemic, with so many people working from home, SaaS applications only increased in demand, as remote workers felt freer to use the SaaS applications they wanted.

How We Live the SaaS Lifestyle

We have no IT department at Brightwork Research & Analysis, and in all the companies we have worked for we never liked the restrictions placed on us in terms of what applications to use. We have expertise in a number of applications that none of the IT departments we worked for had any clue about. So all of our applications are shadow applications. Airtable, Dropbox, Wordpress, Google Drive, Google Docs, Google Sheets, Grammarly, Pocket, etc... We also rent a dedicated server and have no servers on-premises. This is freedom, and this is how it should be.

We don't know how much longer IT will continue to serve its gatekeeper function for the core applications, but there is little doubt the control of the IT department has eroded. This is the present and more so the future, as SaaS vendors for every possible need continue to proliferate.

SaaS and Application Diversity

It means not only SaaS applications gobbling up more real estate from the on-premise application delivery but also many smaller SaaS applications gobbling up real estate from more prominent SaaS vendors.

The Outcome of SaaS on User Satisfaction and Productivity

The outcome is much more user satisfaction and choice for the users within a company.

There is very little research on the productivity of the increased use of more SaaS applications. However, one study showed that users are now spending more time trying to find things in different SaaS applications, as you can read about in the following article. There is debate on the overall productivity due to using many SaaS applications. Having more options can allow the user to choose just the more appropriate tool for the task.

However, one undisputed thing is that managing many SaaS applications has increased overhead.

IT Departments Manage SaaS Sprawl?

When researching this topic we ran into quotes that discussed how IT departments struggle to manage SaaS sprawl. Such comments misunderstand what is happening with SaaS. IT purchases primarily from large vendors that say they offer SaaS solutions but do not. SaaS sprawl is occurring in the business departments that use their own budgets to purchase true SaaS applications. So increasingly the IT departments are irrelevant to applications selection, and the management is falling to business departments. Therefore, SaaS sprawl is primarily a business department issue, not an IT department issue. This is explained in the following quotation. 

Our 2022 SaaS Management Index shows that IT now manages only 27% of an organization’s SaaS, a 35% decrease year-over-year. Business units, on the other hand, manage 66% of SaaS, representing a 22% increase. With more business units and even individual employees purchasing SaaS, it can be difficult for IT teams to maintain central visibility into what’s been purchased, how much was spent, and who is using those tools over time. - Zylo

And this quote.

Compounding the potential risks of shadow IT for larger organizations is the continual, unmanaged addition of unknown apps into the SaaS inventory. Based on Zylo customer data and feedback, it’s estimated that eight unique applications enter the inventory of the average organization every month. Given this fact, it’s not surprising that businesses often underestimate the actual number of apps used by the business by two to three times.

While the democratization of SaaS purchasing and management has provided business units more control of decision-making for needed technology, the potential downside for IT teams is a lack of enterprise-wide visibility into this shadow IT. - Zylo

These quotes contain important statistics, however, we disagree with the assumption -- which is that IT needs to know what applications are being used by the business departments. However, why? IT does not support and does not pay for these applications, and so what business is it of the IT department. 

More Overhead of Managing a Multitude of SaaS Applications

However, it also means more overhead in managing many more applications than ever before, and as mentioned, this trend shows no sign of slowing. But this means a large assortment of applications that must be managed. And this is where SaaS vendor management comes into play.

What We Do

We are knowledgeable about SaaS vendor management and the different SaaS vendor management applications.

SaaS Vendor Management Overhead for Non-IT Departments

With departments within companies taking control over their systems and relationships that are unsupported by the IT department. This means that with SaaS application proliferation, non-IT departments have more overhead than before. This is a distribution of knowledge and experience in vendor management outside the IT department. Non-IT departments may not want to do this, but there is no real alternative. If these non-IT departments reach out to IT for assistance, the IT department will demand to control the procurement process and force the purchase of applications that the business departments do not want. 

Business departments have begun to figure out that the more IT is involved, the worse the business departments’ solutions will have to use. And each IT-approved purchase comes with a lengthy implementation timeline and a corrupt consulting firm in tow.

The disregard by IT departments for the needs of business departments is something we have witnessed first hand due to our extensive experience working with IT departments. After seeing enough of them, it became apparent that they have their agenda and are easily controlled by corrupt consulting firms and mega software vendors. Our research was censored by IT departments who did not want the business departments to see our analysis.