As inflation and general economic uncertainties spur C-suites to identify cost-cutting areas within their organizations, software-as-a-service (SaaS) spend is becoming a prime target.
SaaS is obviously a broad category, covering any centrally hosted software that’s licensed on a subscription basis. But no matter the flavor, SaaS is a growing line item in companies’ budgets — a line item that’s threatening profitability.
According to a recent report from SaaS purchasing management platform Vertice, SaaS pricing inflation is growing four times faster than global inflation. Moreover, customers are putting 53% more toward licensing than they were five years ago, the survey found, with $1 in every $8 that enterprises spend today going into SaaS products.
“Most organizations have grown their portfolio of software vendors dramatically over the past 10 years … it’s not uncommon to have more than doubled that vendor portfolio.” Stephen White, senior director-analyst, Gartner
That might sound like an enormous pile of recurring cash. But it’s not surprising when you consider the average organization now uses around 110 SaaS solutions, according to BetterCloud, with large companies using an estimated 447.
Management has come down aggressively: Fifty-seven percent of IT teams told Workato in a 2022 poll that they’re under pressure to reduce SaaS spend — a task that’s easier said than done in organizations where teams and even entire divisions rely on SaaS suites to get their work done.
To get a sense of the SaaS landscape in a time of cutbacks and cost reductions, we spoke to analysts at Gartner and PwC who study trends in the software procurement market.