What is SaaS Sprawl and What are its Challenges?

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SaaS applications have emerged as a key technology solution for modern businesses, providing organizations with flexible and scalable operational capabilities. 

This widespread use of SaaS applications brought a new challenge - SaaS sprawl. 

Even though using SaaS applications has its competitive advantages, too many of those applications without proper mitigation and management can lead to SaaS sprawl, resulting in security lapses, increased spending, and operational risks. 

In this article, we’ll discuss more about SaaS sprawl, its impact on organizations, its risks, and other challenges it brings in its wake. 

Only by embracing a proactive approach can help organizations prevent SaaS sprawl, optimize their SaaS investments, and derive maximum value from their SaaS portfolio

So let's get started;

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SaaS Sprawl Definition 

SaaS sprawl refers to the uncontrolled proliferation of SaaS apps within an organization, resulting in increased costs, security concerns, and difficulties in managing and organizing data.

SaaS sprawl is a digital pandemic that arises when a business uses a significant number of third-party SaaS apps that exceed the IT department’s scope and become unmanageable.

It occurs when various departments within an organization independently purchase software applications without proper coordination or approval, resulting in duplication and inefficiencies.

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The unsupervised use of cloud apps can disrupt your firm's workflow. Also, this can cause increased costs, security issues, and difficulties in effectively managing the applications and data. 

SaaS sprawl and shadow IT

Let’s deduce the common misconception: SaaS sprawl is not similar to shadow IT.

Shadow IT refers to buying and using software, hardware, and cloud-based services within an organization that are not sanctioned or approved by the IT department.

SaaS sprawl refers to the proliferation of multiple unapproved, redundant, and poorly integrated cloud-based software applications. 

SaaS sprawl is a consequence of shadow IT. The common factor between the two phenomena is that both reveal that the internal departments are not communicating or coordinating, and there is no ideal process to keep these unverified activities manageable.

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What Causes SaaS sprawl?

SaaS sprawl is not an isolated event; a string of causes leads to it.

Some of them include the following;

Uncontrolled Access

SaaS applications are designed to be easy to purchase and use, making it simple for employees to buy and install new applications without seeking approval from the IT department. This can lead to a proliferation of poorly managed or monitored cloud-based applications.

Lack of Centralized Management 

When firms do not have a centralized process or approach to managing SaaS apps, employees will download and use multiple applications, often with the same functionalities, resulting in duplication of efforts and inefficiencies.

Bring Your Own Device (BYOD) Policies

The growing trend of BYOD policies allowing employees to use their devices for work purposes has also contributed to the growth of SaaS sprawl. 

This is because employees will install cloud-based applications on their own devices, and there will be no company-wide monitoring software tracking their devices for unverified purchases and usage.   

Increased Popularity of SaaS Applications 

The increasing popularity of SaaS apps has also contributed to the growth of SaaS sprawl, as employees can now access a broader range of applications and services through the cloud that can be installed on their devices in just a few minutes. 

Lack of Awareness

Sometimes, employees may not be aware of other, more appropriate SaaS applications for their needs, leading them to download new applications for their work tasks.

Need for Speed

In some cases, employees may download new SaaS apps to meet immediate demands without considering the long-term implications and the impact they may have on the company's network.

Lack of culture 

But the most practical SaaS sprawl causes is poor company culture. If the company is not open to procuring cloud-based applications for employees’ daily needs. In that case, they’ll end up purchasing them without the approval of management, leading to uncoordinated and unmanageable applications in the stack. 

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The Business Impact of SaaS Sprawl: A Look at the Statistics

"The reason why companies have high SaaS costs is because they aren't combating SaaS sprawl."

— Carter Busse, CIO, Workato

Business Costs

Uncontrolled use of SaaS applications can lead to unexpected costs, such as unnecessary duplicated services, licensing fees, and maintenance expenses. 

• According to a study by Bitglass, the average enterprise has more than 1,000 SaaS apps, with 17% of those being rogue apps that are not managed by IT. These rogue apps can add up to significant expenses over time. 
• As per Productiv data, 56% of apps aren't managed by IT. Gartner reports that large enterprises spend 30% to 40% of IT spending goes to shadow IT. Everest Group found it to be 50% or more.
• More than 41% of organizations say that up to 19% of their total SaaS spend is unused or underutilized licenses. Up to 9% say they're wasting 40% of their SaaS budget. (BetterCloud, 2021)
• As a result of SaaS sprawl, 30% of a company's SaaS spend is wasted on unused seats, duplicate or redundant SaaS
• 2022 State of Business Technology Report from Systematic+ and Workato, which found 57% of IT teams are under pressure to reduce SaaS spending.

Inefficiencies and Duplication

SaaS sprawl can result in inefficiencies and duplicated efforts, as different departments or teams use different applications to perform similar tasks. This can lead to data silos and confusion, negatively impacting productivity and collaboration. 

• A recent survey found that over 30% of businesses reported duplicated work due to multiple SaaS applications.
• The average company wastes more than $135,000 on unused, underused, or duplicate SaaS tools. 
• According to a RingCentral and CITE Research survey of 2000 knowledge professionals, 7 out of 10 employees waste up to an hour of their workday just hopping between business tools. 

Moreover, 50% of employees claim that they find it challenging to look for resources in the jungle of applications in their office, and 46% of workers report that their job is chaotic while juggling between apps, a phenomenon currently represented by the expression "app fatigue."

As a result, up to 80% of productivity is lost, as are various other workplace difficulties such as stress, knowledge loss, and a drop in output quality.

Security Risks

Uncontrolled SaaS applications can increase security risks, as data can be stored in unsecured systems or shared with unauthorized individuals.

•  51% had experienced a ransomware attack that targeted their SaaS data, and 52% of these attacks were successful.  
• 43% agree that security misconfigurations lead to security incidents. To minimize these risks, companies must implement proper security measures and monitor SaaS usage within their organizations.

According to a recent survey, 75% of respondents believe that the most significant risk of SaaS sprawl is safety. It is given that SaaS applications hold a large amount of confidential data, consumer financial data, records, and other information. 

In conclusion, the uncontrolled use of SaaS applications can significantly impact businesses, including increased SaaS expenses, duplications, inefficiencies, and security risks. 

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What Are The Challenges Of SaaS Sprawl?

SaaS applications have become increasingly popular due to their flexibility and cost-effectiveness, but with this growth comes the challenge of SaaS sprawl.

Let us delve into these challenges and explore their implications for organizations,

1. Financial Challenges

These are associated with SaaS sprawl and can significantly impact an organization's bottom line. 

Uncontrolled spending

One of the main challenges is uncontrolled spending. As there are no guidelines or software to prevent these purchases, employees will be encouraged to purchase SaaS services without proper approval or budget allocation. This can lead to unnecessary costs and spend tracking hassles.

Want to put every dollar to good use? Here's a guide for startups on building a great SaaS stack on a budget.

Lack of visibility into SaaS expenditures

It makes it difficult for organizations to monitor and manage their spending effectively. Attributing the spending to each department will be cumbersome as the purchases are decentralized. 

Difficulty in negotiating group licenses 

Additionally, negotiating group licenses for multiple SaaS services can be challenging, as the costs can quickly add up, leading to higher expenses and less control over spending. 

Organizations must implement proper budgeting and tracking processes to overcome these financial challenges, monitor SaaS expenditures, and negotiate better pricing arrangements.

Check out how to reduce SaaS spend, get to know how industry experts did it in their own words.

2. Operational challenges 

These challenges can impact an organization's ability to use its SaaS software solutions effectively, resulting in inefficiencies and increased costs.

Inefficiencies and Duplication

Decentralized buying will lead to employees purchasing applications with similar functionalities, leading to duplications and increased expenses.

Data Silos and Integration Issues

SaaS sprawl can result in disparate systems that are not integrated, leading to difficulties in accessing and sharing data across the organization. This can result in data silos and limit an organization's ability to make informed decisions.

Difficulty in Managing SaaS Updates and Upgrades 

SaaS solutions are constantly evolving and require regular updates and upgrades. SaaS sprawl can make managing and coordinating updates and upgrades difficult across all systems. This can result in outdated solutions and increased security risks.

3. Security and Compliance Challenges 

These challenges will harm a company’s ability to manage sensitive data and negatively impact its reputation.

Increased Risk of Data Breaches

High-number of unverified third-party SaaS applications increases the risk of data breaches. With multiple sources of sensitive data from various apps, securing the data and preventing unauthorized access becomes challenging.

Compliance with Data Privacy Regulations

SaaS applications may be subject to data privacy regulations such as GDPR, HIPAA, SOC, etc. Organizations must ensure that their SaaS applications comply with these regulations and that data is handled appropriately.

SaaS sprawl will make compliance challenging for businesses, as they’ll have no visibility on the actual size of their SaaS stack. 

Difficulty in Enforcing Security Policies

Multiple unsanctioned SaaS applications within an organization will make it challenging to enforce security policies consistently. This can lead to different security levels between applications, making it difficult to secure the data effectively. 

Organizations must increase their application visibility and ensure that their security policies are integrated with their SaaS applications to provide adequate protection for their data.

4. User Adoption Challenges 

SaaS sprawl will make it difficult for the teams to coordinate and make informed decisions. 

Poor integration

Decentralized buying will lead to the purchase of non-compatible applications with limited integration capabilities. This will lead to user frustration and poor coordination between teams. 

Training and Support for End-Users

Training and support are critical for ensuring successful SaaS adoption. The end-users must be trained to use the new Software as a service solution and have access to support when needed.

But the uncontrolled proliferation of third-party applications will make it challenging to train the end user, leading to low adoption rates and limited utilization. Users will refrain from using the application, leading to SaaS wastage. 

Resistance to Change 

Change can be difficult for many people, especially when it involves adopting new technologies purchased without proper knowledge or inter-departmental coordination. 

Employees will resist adopting new SaaS solutions due to a lack of familiarity with the technology, perceiving that the new solution is less efficient or user-friendly than existing solutions, or general resistance to change.

A transparent Software as a service purchasing process and policy will be required to make users more welcoming to new purchases, and it's the ideal way to minimize SaaS sprawl. 

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Best practices to mitigate SaaS sprawl

SaaS sprawl is a common occurrence in organizations with decentralized SaaS purchases and poor application management approaches. But the interesting aspect of software sprawl is that you can easily overcome it with proactive approaches.

Here’s a quick rundown of the best practices:

1. Centralize your SaaS applications for easy management

2. Create SaaS adoption guidelines and policies

3. Conduct regular SaaS Audits to identify redundancies

4. Use a SaaS management tool

5. Be proactive in preventing Shadow IT

6. Rationalize your SaaS stack

7. Train and educate your employees

8. Automating your SaaS procurement process

Click here to learn more about the best practices to overcome SaaS sprawl →

To learn tips for optimizing Shadow IT in organizations and increasing ROI, listen to Joshua Peskay, a 3CPO (CIO, CISO, and CPO) at RoundTable Technology. He shares effective Shadow IT management strategies and introduces an ROI score for SaaS tools to optimize business technology investments.

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Conclusion 

SaaS sprawl is undoubtedly a significant crisis vector for enterprise businesses, but it is more alarming that companies are reluctant to accept their inability to manage SaaS applications.

It exists in 70% of enterprises, but only a handful have accepted it and started using a SaaS management solution to increase visibility and eradicate SaaS sprawl. 

This article listed the causes and challenges of SaaS sprawl and how it can impact organizations in the long run. 

But on the bright side, there is a way to eliminate SaaS sprawl from your system by increasing visibility into your SaaS stack and creating a centralized Software as a service buying process.

Platforms like CloudEagle were built with the primary goal of helping businesses eradicate SaaS sprawl using application visibility, Software as a service management, and centralized procurement features.

To learn more about it,

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Frequently asked questions

1. What are the common signs of SaaS sprawl?

Signs of SaaS sprawl include a high number of software subscriptions, difficulty tracking software usage and spending, and difficulty integrating and managing software applications.

2. What are the benefits of managing SaaS sprawl?

Managing SaaS sprawl can lead to reduced software costs, improved software security, enhanced software performance, and increased user productivity and satisfaction.

3. How does SaaS sprawl affect an organization's IT operations?

SaaS sprawl can result in decreased IT efficiency, increased IT costs, and difficulties with software updates and upgrades. It can also lead to security and compliance risks.

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