Discover the Alliancy's latest editorial 👉 Shadow IT and digital resilience: SaaS Management on the ExCom agenda


What is SaaS Sprawl?

SaaS Sprawl is the unchecked proliferation of third-party cloud applications procured directly by employees or business units without adequate vetting, sanctioning and SaaS life-cycle management.

Its impact amplifies exponentially in the context of large organisations. This article discusses the challenges of SaaS Sprawl, with listed recommendations and best practices to prevent or overcome it.

  • SaasManagement

Software-as-a-service (SaaS) vendors have made no mistakes in extending their technology’s target persona from just the IT teams to end-users (employees).

Looking back at the SaaS industry growth, they solved the problem even before it showed up. When the pandemic forced companies to operate online; the ones already thorough with the SaaS model fared better than the conventional ones with on-prem software.

But over-consumption of anything, no matter how good, can be harmful. The same is true of SaaS tools.

There hasn’t been a cap to this consumption lately, and this uncapped adoption of SaaS software is the so-called, “SaaS Sprawl”.

SaaS Sprawl definition

SaaS Sprawl is the unchecked proliferation of third-party cloud applications procured directly by the employees or the business departments without adequate vetting, sanctioning and SaaS life-cycle management.

SaaS Sprawl has a different meaning altogether, and its impact amplifies exponentially in large organisations (1000 employees or more), where collaborative efforts will have to address an extra layer of business units before sorting out sprawling at the departmental level. This article discusses the challenges of SaaS Sprawl, with listed recommendations and best practices to prevent or overcome it, once and for all.

Challenges of SaaS Sprawl

1. Tempting qualities:

Although Google Docs serve the same purpose as Notion or any other collaborative workspace tool, the latter is a specialised platform and thus more relevant to its niche. SaaS publishers have managed to know the ins and outs of their target market; it is only natural that their customers reciprocate their efforts.

Subscription-based cloud software with a short time to value (TTV) and extensive scalability is in itself a very sustainable model and explains how SaaS has become the de facto standard in application delivery.

Not to mention how its qualities are not just limited to the feasibility of its model; credit also goes to these applications’ capabilities, designed specifically by keeping the digital consumer in mind. For example, no-code solutions are lowkey revolutionary or some vendors offer ample irresistible customisation options like self-service SaaS models.

The pace of SaaS adoption reflects a rapid digital transformation in organisations, but with that comes the challenges of managing the constantly upgrading tech stacks.

All these qualitative factors help SaaS tools to multiply their quantitative reach in organisations giving way to unintentional SaaS sprawl.

2. Choices abound & choices allowed:

SaaS users are always looking for tools that can help them improve their efficiency and productivity, and no employee has to think twice before switching to a better alternative. But with such extensive choices come grave consequences.

Plenty of options mean that the employees don’t have to adjust to other departments’ choices and would want to use the most familiar technology.

It is a growing trend or rather a ‘common practice’ - that employees have become autonomous in choosing SaaS apps by and for themselves, also decentralising the typical tech procurement and sanctioning methods. The lack of sanctioning these apps by the IT department results in their unauthorised use by the employees or the so-called Shadow IT.

But IT departments have only recently offloaded the burden to obtain and manage technology to these innovative business teams. They have every reason not to stop this innovation from the bottom up as it only allowed them to come closer to the businesses. But it also brings in the unforeseen challenge of persisting SaaS Sprawl.

3. Digital Employee Experience (DEX) & collaboration gap:

A marketing team might prefer Hubspot as their CRM, while the sales team might choose Salesforce, depending on their expertise and preferences.

The above example implies the following:

  • Different teams prefer two different apps for the same purpose.

  • It suggests a lack of cross-departmental visibility.

  • And also reveals the collaboration gap between the departments, resulting in suboptimal business workflow efficiency.

  • These are indeed the signs of a sprawling SaaS portfolio.

  • But if these teams are to be met with any resistance, like IT’s interference in choosing between the 2 apps for financial reasons, it will directly affect their digital experience.

  • Digital Employee Experience signifies their satisfaction with the tech stack, which is vital to minimise employee churn.

4. Absence of SaaS Management:

Unchecked SaaS sprawl results in hundreds of unmanaged SaaS applications across an organisation, each acting as an exposure point for unwanted risks.

Unmanaged SaaS apps present a significant challenge in the following ways:

  • In the absence of a SaaS Management strategy, there is no guarantee that the business teams will only procure the apps that add real value to the company and might end up purchasing something similar to already existing applications, as explained in a previous example.

  • Poor visibility into the enterprise’s existing SaaS environment leads to mismanagement of licenses, functionally redundant apps, missed renewal deadlines, the anonymity of app owner/stakeholder, untracked usage and offboarding (ex-employees) ambiguity adding to the sprawl with every new tool added to the portfolio.

  • Unmanaged SaaS also pose security threats like non-compliance and data exposure risks, far exceeding the financial damage due to unrevoked licenses or automatic renewals.

5. Financial aspect:

Beamy’s client organisations (large enterprises) add an average of 30% of new SaaS tools to their tech stack yearly. This proves that SaaS is becoming mainstream and accounts for a significant share of the Enterprise IT budget. But on the other hand, measuring the ROI of every SaaS procured is not feasible because it depends on the extent of its adoption (or usage) by the employees. Underused licenses, inactive applications, overlapping apps, etc. signify unoptimised and wasteful spending.

6. Secure scaling:

The SaaS inventory is replenished every year as the business scales, and the outdated apps must retire to avoid risks like data breaches from the SaaS Sprawl. But most companies are not agile enough to upgrade in such a manner every year.

With additional cloud software being procured to address the unique challenges of a large enterprise, the old data gets siloed. Collaborators are spread across all levels in a company. Automated SaaS Management solutions should be introduced to avoid the fragmentation of existing processes and keep agility unimpaired. 

6 Best practices to mitigate SaaS Sprawl:

  1. SaaS Inventory: A SaaS inventory is indispensable to stop the SaaS tools from sprawling off right under your nose. It maps all the applications in your company’s tech ecosystem or hybrid environments and records the related app data. The inventory allows you to keep a check or apply a cap to both SaaS investment and sprawl.

  2. SaaS procurement: To prevent SaaS sprawl, companies should introduce a one-off procurement process requiring approval from the related stakeholder(s) before making a purchase. This allows transparency from the get-go and informed decision-making down the road.

  3. Rationalisation & Standardisation: By comparing all departmental tools, eliminating irrelevant ones, and streamlining and standardising the remaining applications present in the SaaS inventory, companies can readily avoid redundancies and security risks eventually.

  4. SaaS Spend Optimisation: By keeping a constant check on all the renewals, cancellations, unused, underused or overlapping SaaS and monitoring the SaaS ROI, companies can control the sprawl of unwanted SaaS solutions.

  5. Training & onboarding: New employees will need to be briefed on the limits of their freedom to purchase SaaS apps, involve IT in their decisions and use the apps optimally to avoid SaaS Sprawl. And the former employees will have to undergo training on similar subjects and their revised responsibilities.

  6. IT-business partnership: While both IT and the other teams can be autonomous, it is in everyone’s best interests to partner in the right manner over technology decisions, to keep a check on SaaS Sprawl and monitor the associated risks.

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