How to optimize SaaS costs in the cloud

Cloud computing is the future. But companies need to ensure that spending on software as a service (SaaS) do not rise too much.

Cloud computing offers several advantages. So the effort for the introduction of a cloud solution is relatively low; the usually happens a few mouse clicks. As the cloud provider provides about the updates to the software, the administration expenses for the operation of the IT solution is not necessary. Even greater investment in local hardware are no longer necessary. Paid for exactly those services that are actually needed.


But cloud services can be expensive, especially when it comes to licensing costs and compliance. Analysts at Gartner Group describing the dilemma as follows: “Those responsible for IT sourcing and procurement management must realize that SaaS subscriptions solve the complexity of the licenses are not turnkey, but also increase the cost risks and the requirements for SAM (Software Asset Management) expand . ”

Office 365: benefits vs. financial risk

The most widely used SaaS application in the world is Microsoft Office 365. It illustrates how cloud software must balance the benefits against the financial risks. For IT administrators to lower hardware and maintenance costs appear attractive. In addition, Office 365 offers certain advantages for users, for example, that they always have access to files and emails. However, these benefits come at a price.

Microsoft has added not too long ago that Office 365 users pay on average 80 percent more over the entire product life away for use as they normally do for a perpetual license. With 85 million users Microsoft hundreds of millions earned every month – alone Office 365th

What is added complication for companies that many IT and financial executives have not the necessary insight to understand the use and the cost of Office 365 and to control accordingly. Without a consolidated consideration of on-premise, cloud, and mobile use of Microsoft Office, the company budget will be used incorrectly – in unnecessary subscriptions, unused accounts and duplicated on-premise licenses. This makes it very difficult to make cost-effective decisions, especially for contract extensions.

Five Tips for Investing in SaaS applications

This SaaS does not become a cost driver and leads to unnecessary compliance risks should consider the following five points companies: apply IT governance for SaaS

IT governance ensures effective management of IT and provides measurable and verifiable rules and control mechanisms ready. When it comes to locally installed applications, most companies are well positioned here. If must be installed on a server, a new application that is mostly responsible for a particular department.

SaaS eliminates this clear responsibilities, as it is very easy to launch new platforms and services and operate. Individuals and groups choose now in self-service technologies and sign up – usually without the knowledge of the IT department – for new services and subscriptions. These shadow IT is strategically neither technically nor integrated into the IT service management of the company. For these applications, no service level agreements apply (SLAs), the IT department does not provide support or data backup, since she does not know.

IT governance does not end with the purchase and deploy software, but it relates to the entire life cycle through to disposal or delete the application. Since users do not work according to experience here reliable, many virtual machines and user accounts remain in the cloud that are no longer needed – but debit the company’s account monthly. This can lead to sharply rising costs.

The answer to this governance challenge is not to return to a centralized IT control. IT leaders must rather allow the departments, efficiently and to buy software in a way that ensures transparency. This can be done via automated, workflow-driven processes for access request, provisioning and deprovisioning.

Create Overview: Who uses what software?

Many companies do not know what applications are installed and who uses them. This can also apply to companies that already use solutions for software asset management. It may be that the SAM software SaaS applications not found and inventoried. But companies need a single, integrated view on the user, the use and cost of their SaaS applications. Unfortunately, the administration portals of many SaaS providers work incomplete:

While the portals indicate which subscriptions have been bought, but almost none has actively an overview of whether and how these SaaS applications and subscriptions to be used.

If no information about the usage patterns are present, it is difficult or impossible to optimize the SaaS spending. This is not surprising. After all, why should the providers help the companies to reduce the cost of SaaS?

For applications such as Office 365, which are available both on-premise or as a cloud version, this overview should include all user data, not only the information on the SaaS applications.

When companies increase the number of SaaS vendors, it is almost impossible to track usage across all SaaS portals.

Shift focus from compliance to cost optimization

Since the cloud reduces the compliance concerns, the IT department can shift their focus from compliance more toward cost savings when the cloud adoption in the enterprise increases. Especially software asset manager can concentrate on optimizing the licenses stronger.

Here is important to clarify who is responsible for the balance of licenses and the calculation of the software spending. In the on-premise world of software vendor itself was responsible for identifying the customer that violated the license agreement and not paid lawful. In the SaaS world, the IT department for the administration and control of licenses is responsible. SAM solutions support the licensing and cost management by providing an overview and transparency of users and user behavior.

Beware of hidden costs

Another challenge are SaaS offerings that appear to be free, but in practice require expensive corporate subscriptions. One example is box, a popular provider of cloud-based storage. While the offer for individual users is free, between five and 15 dollars are due for enterprise use per user. Box is not the only provider of such a “freemium model”, which can mean a cost trap for companies.