It is important to get the most out of every IT investment. Consequently, items such as cloud waste, data loss and storage waste have all been hot spots recently, but what is your organization doing to optimize and return on investment in applications and systems, especially in the SaaS era?
Not much attention was paid to him. Instead, the daily focus on applications and systems is on performance and uptime, without much emphasis on how much an individual application or system is actually being used and whether it is bringing value to the organization.
Why companies don’t pay more attention to applications and system maximization and optimization?
Honestly, there’s no incentive to do that. For decades, companies have been content to let their software licenses automatically renew, pay for rack equipment they can’t even remember buying, and run systems that are only used by one or two users in the company.
Given the other priorities facing IT, does this laissez-faire approach make sense?
In 2023, a SaaS management company Zylo reported that “44% of enterprise SaaS licenses are wasted or underutilized and the average organization was losing $17 million on unused SaaS licenses each year.” Zylo went on to say, “Enterprise organizations (10,000 employees +) spend over $224 million on SaaS, but only use 50% of their SaaS licenses.” Zylo added that “70% of SaaS application contracts were renewed in 2023, despite underutilization.”
CIOs know this, but most feel they don’t have the bandwidth to address it. However, should they?
In the first four weeks of 2024, nearly 100 tech companies, including Salesforce, Google, Amazon, Microsoft and Meta, dismissed workers. Some of the layoffs are caused by companies looking to boost their stock prices and the loss of “easy money” in the credit markets. However, the need to cut budgets is also a factor.
“For businesses looking to reduce costs and manage budget constraints, software optimization is your biggest missed opportunity,” said Zylo CEO Eric Christopher. “Our report puts the spotlight on software optimization and smart consolidation so organizations can understand their technology stack, reduce SaaS waste, and uncover the budget to reduce the need for layoffs.”
Understand the 5 culprits of application underutilization
Shelves. Shelfware is just that: applications and systems that sit on a physical or virtual shelf because no one uses them. They could even be installed, where they take up storage space.
Shelfware doesn’t start out that way. Someone bought that software at some point because they thought it would meet a company’s needs. Then, either because of disappointment with the product or because of product obsolescence, they discover that the product does not meet their needs.
There will always be well-intentioned software failures like this in businesses, but unless IT cleans up the debris by getting rid of software and canceling contracts, shelfware will continue to appear as an expense in the IT budget.
Underutilization. When I was a development manager for a commercial software company, we did an analysis and found that only 15% of our most advanced customers were taking advantage of the enhancements and functionality we were providing, even though all of our customers were paying for them.
When we approached clients who weren’t using all the functionality our software offered, they told us they didn’t have the time or resources to cram in these new features. Other than that, they said their users are pretty happy with what they already have.
From a selfish perspective, this non-use made our technical support much easier. However, the software did not return well to many of our customers. Today, underutilization of software (ie, not using all the features of what you pay for) is a major source of waste for businesses.
Integration issues. There are few software installation problems more painful than system integration, especially when vendors tell you they have interfaces for your systems and you discover major flaws in the interfaces that you have to manually correct.
Complicated integrations slow down projects and are difficult to explain to management. If the integration becomes too difficult, the software will probably be dropped, but someone forgot to take it out of the budget.
Outdated software. Imagine you are using an operating system or application and the vendor has told you that they will retire this system and end support in two years. From a budget standpoint, you weren’t planning to fund the upgrade in two years.
What often happens in small and medium-sized businesses is that you continue to use outdated software past its end-of-life date, hoping it won’t break until you can afford to finance an upgrade. In the meantime, security and functionality improvements to the software are released for the new release, which you cannot take advantage of.
Software overlay. There are plenty of dual tools for monitoring and fixing things, especially in the systems and network areas of IT. Unfortunately, IT doesn’t always take the time to clean up its own toolbox, so it continues to overpay for multiple software products that do the same thing. Budget spending can be reduced when duplicate products are removed.
If I were to survey CIOs right now and ask them if they have metrics in place to measure software usage, I suspect most would say they don’t. Conversely, these same CIOs have metrics in place to measure network, server, storage, and even space utilization.
It’s time to clean out both the physical and virtual back room closets of software junk. This is the only IT waste management strategy that is still being worked on.