Organizations may spend nearly $10,000 per employee on software-as-a-service in 2023, according to a new survey. study from the SaaS management company Productiv. The annual comparison between 2021 and 2023 examined 100 million SaaS licenses using Productiv’s own services, primarily within the United States.
Which SaaS applications are most used by organizations?
The average department currently uses an average of 87 SaaS applications, a 27% increase between 2022 and 2023. The top five SaaS applications overall are:
- Sales force
- Atlassian Cloud
This list has remained largely unchanged since 2021, with the five apps listed above swapping places but still remaining in the top five. Zendesk is another popular app among customer success teams, while Figma is in the top five for engineering teams.
Engineering teams tend to use the most SaaS applications, with an average of 108 applications. IT and security teams saw the largest increase in the use of SaaS applications between 2022 and 2023, with a 33% increase, mainly in point solutions and ROI tools.
SEE: Discover how software-as-a-service impacts your business.
SaaS spending rises even as governance improves
The prevalence of SaaS is gradually increasing. The average SaaS portfolio has grown by 32% over the past two years.
Broken down by organization size, the data shows that:
- SMB SaaS portfolios grew by 5%.
- Middle market portfolios grew by 41%.
- Corporate portfolios grew by 49%.
“Our data shows that the immediate path to action for CFOs is to better identify and consolidate SaaS applications, given the cost reduction pressures facing all companies today,” said Jody Shapiro, CEO and co-founder of Productiv. Press release. “Software purchases and renewals never stop, but procurement best practices require collaborative decisions using IT, procurement, finance and functional leadership data about what software to purchase, renew, reduce and consolidate.”
SEE: Download this customizable software procurement policy from TechRepublic Premium
Some SaaS hide in the shadows
Shadow SaaS are applications purchased and used by employees without the approval and knowledge of the IT team. IT may not know how much these applications cost, how and to what extent they are being used.
The most common shadow SaaS applications are Evernote, Coursera, and Canva.
The amount of shadow SaaS in organizations decreased between 2022 and 2023, showing that organizations became more aware of bloat and took more effective management measures to reduce expansion. However, shadow SaaS still accounts for more than half (51%) of the applications in the average SaaS portfolio.
Productiv detected shadow SaaS apps using Google Social Login and employee expense reports.
Organizations are slowly reducing unused applications
Another area where organizations can improve the efficiency of the SaaS they use is to reduce the number of unused applications. Among the surveyed organizations, 53% of SaaS licenses remained unused. License usage increased slightly (by 2%) from 2022 to 2023. At the same time, companies using more applications per category and the increase in license usage suggest that organizations are improving their rationalization and consolidation efforts, Productiv said.
The apps with the lowest percentage of license usage are Greenhouse, Asana and Jira. Productiv noted that no single type of application dominated the list of unused licenses.
ChatGPT is making waves among shadow SaaS
The trendy AI app ChatGPT can count as shadow SaaS if employees use the free or subscription tier without IT involvement.
“Given that our report reveals widespread shadow use of ChatGPT, now is the time for companies to figure out how to drive innovation using ChatGPT without security risks,” Productiv CIO Aashish Chandarana said in a press release.
In the cases Productiv found, employees most often use ChatGPT to write emails and marketing content, summarize meeting notes, research issues, write code, and find coding errors. Marketing, engineering and product departments use ChatGPT the most.
Changes in SaaS releases: Contracts are getting shorter
As more and more companies move to telecommuting, many are finding that shorter (one-year) contracts are preferable because they allow for more flexibility. Reducing the lifetime of contracts is also a way for organizations to reduce overhead costs.
One-year contracts accounted for 79% of all contracts in 2020 and 85% of all contracts in 2022. Contracts of three years and longer decreased the most compared to the same period of the previous year.
In 2023, SaaS spending per employee averaged $9,643, down from the previous year. Large companies spent an average of $7,492 per employee in 2022, while medium-sized businesses spent $10,045 and small and medium-sized businesses $11,196. Enterprises spent less because they got volume discounts and enterprise-level licensing agreements, as well as greater scale with consumption-based applications, Productiv said.
“To avoid shadow IT, organizations need to develop proper SaaS governance policies that help teams bring their free and purchased apps out of the shadows and ensure the right level of corporate policies around procurement, security and compliance,” said Chandarana.
SEE: Download this customizable shadow IT policy from TechRepublic Premium
When it comes to SaaS consolidation, organizations need to make sure that IT, finance and procurement teams are working from the same data to prevent shadow SaaS intrusions, Chandarana said.
“Having a detailed understanding of what software you own, how it’s being used, down to the team and function level allows you to make intelligent decisions that drive value from your software stack and significantly contribute to productivity, financial efficiency and business growth . ,” he said.