Smart SaaS cities

How is SaaS management like a smart city?

Why give it attention and how to approach it?

Both are significant, continue to grow and have many facets, challenges, benefits, risks, with varying stakeholder opinions.

Just as urbanisation is higher in developed territories, so is SaaS adoption in more digitally transformed enterprises. SaaS spend is predicted to reach $300 billion in 2025 with further growth projected. As the population of cities overtook rural areas, some projections have SaaS doing the same for software spend or cite it as the largest expense. No matter the specific statistics, SaaS is huge.

The similarities do not end there. Smart cities and SaaS management can have wide reaching impact on their environments by creating opportunities, generating costs, benefits and risks. There are many community factions with variable perspectives. There are numerous paths to improvement, and it is an ongoing mission that can include many tactical milestones and reporting on success.

Hopefully, this article provides an interesting perspective and drives debate and progression on the SaaS management conversation. Having drafted it, there are so many areas that can be expanded upon that it might spawn a series of topic specific posts. Feel free to append with your thoughts, provide critique, raise questions or suggestions for follow-up pieces.

Let us start by bringing the analogy to life.

The smart city

Smart cities aim to boost connectivity, services, efficiency, sustainability, safety, qualify of life etc. At the same time, it can enable reductions in congestion, waste and unwanted behaviours. Results include increased investment, innovation and satisfaction for residents and visitors. In short, to make places better. SaaS management is similar in that both:

Usually evolve from an existing complex physical environment.
Exist in a time of increased and diverse data sets.
Have a plethora of concerns, including viability, security and adoption.
Recognise vast areas of inefficiency and offer a variety of methods and use cases that can help tackle it.
Serve many different communities with different priorities and perspectives but broadly seek the same outcomes.
There are many people who will be apathetic and/or resistant to change.
Exist because the scale of cost, consumption and issues warrant attention but are not prominent in the day-to-day workings of the general population.
Benefit from the capabilities, knowledge and tooling held by multiple trades.

The list could go on, but hopefully the sentiment resonates. Moving on to the question of why pay attention to SaaS management, an obvious argument is the sheer scale.

SaaS cannot be ignored

Saying SaaS is too big to not be managed is perhaps a redundant statement. On the macro scale, regardless of calculation criteria, spending is up and forecast to keep growing. It becomes more meaningful when put into context for an individual organisation. Although statistics can show or hide many things, the following are quite compelling[1]:

Gartner predicts 14% growth in software spend in 2025, much of which is driven by GenAI features. SaaS management firms show similar figures.
Spend per employee is not a great metric, but is increasing, with figures ranging between $4.5k up to $9k. Smaller enterprises have higher figures, possibly due to the workforce profiles of larger businesses.
Inflation in SaaS is reported to have remained in double digit ranges. Whilst there is much to be unpicked from this, simple price increases from vendors appear to be making value per unit outlay stagnated.
Like rodent populations in cities, SaaS in widely underestimated and often hidden. Some report actual levels that are multiple times what is believed, both on volumes and values.
Figure on discovered SaaS application numbers per organisation vary from 120-140 for ‘smaller’ organisations to between 250 and 500 for larger ones. Some averages fall around 275, although this can be skewed by the populations surveyed.
Waste is ubiquitous. Many years ago, empirical review of on-premises software deployment averaged around 77% of entitlements, with only a portion of that being fully utilised. SaaS also shows significant leakage with levels of 30% to over 50%. As we will explore later, those statistics usually exclude the question of how valuable the usage is or whether the application capabilities are actually leveraged. One published case study had the successful result being utilisation of only 75%.
Translating to financials, reporting varies hugely from unused licensing of $175k per year in ‘smaller’ businesses to over $100m for the largest enterprise categories.
Reporting on the impact of SaaS management shows major returns. One suggests just moving out of basic lists and spreadsheets delivers average savings of $270k. Anecdotal observations support the view that there is significant opportunity within close reach.

Even when factoring in large error margins and professional scepticism, the quantum of SaaS alone makes it worthy of governance. As with smart cities, there are a plethora of other topics around SaaS management.

The domain is diverse

The statistics above demonstrate that spend is a major factor. The commercial drivers may be enough for a SaaS management business case, but there are many others.

Security

At least one survey suggests this is the most frequent driver for SaaS. Shadow IT is a big contributor as the likelihood of vulnerabilities and security issues from unknown applications is going to be higher than those that have been vetted.

How and where data is used and processed, especially personal or commercially sensitive data, versus regulations and policies is a second area of concern. Another is who, when and how data is accessed. These are akin to ethical use of surveillance and protection systems in a city.

Joiners, movers, leavers (JML)

As well as the risks associated with preventing unauthorised or undesired access to SaaS by contractors, partners and ex-employees, there is a big employee/user experience consideration. Productivity, motivation and perception of an organisation is linked to personnel having timely access. There is a balance to be struck between administration, automation, and support for new entrants and changed roles.

Licensing management

The other side to JML and complement to access controls is capacity management and reclamation. It is easier to provision access from requests than determine when it should be revoked and costly allocation of entitlements reclaimed. That links to the subject of effective or productive consumption, to explore later. It is the same for a smart city that needs to provide minimum levels of service for society to function. At the same time, it should be looking for areas where well meaning ding has become redundant and suggest ways to channel expenditure on other initiatives.

Complexity

Outside of the sheer volume of SaaS applications, the licensing landscape is challenging. Even with a simple per seat metric, this can vary from those directly accessing an app right the way through to all potential users across an extended enterprise ecosystem.

SaaS continues to change with a growing prevalence of usage and per action elements in SaaS costs. The larger the vendor and SaaS platform / portfolio, the greater the challenge. This is another point to be expanded upon.

Risk from volumes

There is no universal licensing agreement or set of rights. There has not ever been for software, even despite earnest efforts made by many giant corporates. Each SaaS vendor will have its own terms that can change from time to time and have internal inconsistencies across components and modules.

With the diaspora of SaaS entry points, knowing the obligations and limitations, commonalities and differences within the estate is arguably impossible. Risk lies in both the unknown and complexity.

Overlap

It is common for applications to have functional overlap, creating redundancy and inefficiency, contributing to technical debt. With the growth of capabilities and features in SaaS tools, duplication is inevitable. Having different tools performing similar functions for multiple teams is sub-optimal.

The technology landscape can be simplified by targeted analysis and action. A most basic intervention is on a purchasing level, where cost and effort can be optimised by reducing multi-channel purchasing for the same publisher or product. A second easy step is to look at technology taxonomies that reside in existing systems, especially connecting with Enterprise Architecture (EA) professionals.

Interoperability

Many SaaS pitches highlight the ease of set-up, connecting to data sources and quick time to value. Analysis engines and reporting have utility but need to fit into the EA.

There are dangers of dashboard overload, analysis paralysis and multiple proclaimed (single) sources of reference. Consideration is needed around feeds into and flows out of SaaS applications. They should be synergistic and have the ability to handle changes to related infrastructure without creating major burdens. It is analogous to a city needing transport, communications and utility systems to work together.

Changing landscape

On top of the many aspects outlined above, the world of SaaS must cope with evolving business pressures.

Valuable / effective consumption

Most SaaS management tools have one or more methods to report on utilisation. For example, specific app APIs, browser scraping, single sign on (SSO) or bespoke data feeds. It usually results in a utilisation figure with a value for licences not used in the past 30 or 90 days. Some go further by reporting on licensing tiers, modules accessed or a proxy measurement to highlight downgrade opportunities or provide login volumes or activation times.

Being able to delve into the depths of consumption data allows ITAM / FinOps functions to help enterprise architecture (EA), adoption, lines of business (LoB) and procurement teams to make business value assessments and future planning decisions.

The accepted level of inefficiency in the technology sector is beguiling. Comparing it to the services that apply to smart cities – load factors below 70% would cause chaos for passenger airlines, shipping, warehousing, vehicle fleet use etc. Action would be taken to drive improvement and avoid commercial failure.

Licensing models

User-based metrics remain the most prevalent, with figures suggesting it applies for around half of SaaS applications. Most of the remainder is made up of usage-based costings such as per activity or a combination of user and usage. Outcome linked pricing is growing in an attempt to align IT costs to business value.

Cynics might say the changes are by-products of vendors exploring avenues to grow revenues. It is rare that a licensing metric change has the end-customer at its heart. There are parallels with per server metrics moving to processors, then cores, then assigned values. The same could be said for the regularly bundling, decoupling and functioning. Eventually benefits of grandfathered rights or previous negotiated positions are undone and cost rises.

Ultimately value for money is linked to knowing whatever X can be derived from licensing rules. Restating for X is a simple theory: you define what data points are needed to calculate X, seek logs of past values and indicators of the future variables and compare it to the amount of X you have permissions for. The trouble with evolving metrics is that it might not be picked up by scans or easy to obtain quality insights from the SaaS application. For many SaaS APIs, users counts, and last accessed dates are the best available alternative.

AI

AI in the SaaS world is in a rapid state of flux. The huge rush to embed it in applications has helped hugely in areas such as discovery and summation, but in others it can be gimmicky and superfluous. Time will refine the most promising of the myriad potential use cases – just as it will for smart city initiatives.

One certainty is that that AI gold rush has created price inflation as providers needs to pass on the outlays to customers and retain margins. This is in line with analyst insights into IT trends. The emergence also adds to the challenge of budgeting for the number of automated interactions, resolutions and credits that might be consumed.

Arguably, SaaS has taken the opposite direction to telephony bills, moving from unlimited calls and text to pay as you go. There are options to have data allowance type commitments but limited visibility over how much the equivalent of a streaming session will use.

Price inflation

Gartner says that a considerable proportion of increased IT spend is due to vendor price hikes for renewals. Incidentally GenAI is also referenced as a major influence. There is also the ‘moving goalposts’ feeling of any new feature being an extra cost option rather than included as natural development of what has been licensed. Effectively, growth in CIO budgets is offset by technology inflation. SaaS management observers reference prominent vendors raising rates by well over 20% and that the majority have increased prices in successive years.

Diversified purchasing has led to a lot of SaaS being acquired without discounts. Limited data visibility means that requirements are unclear and, combined with the AI topic, makes challenges demand planning difficult. Without a level of certainty and ‘locked-in’ pricing, it is unsurprising that multi-year contracts are rare – reportedly falling further to under 23%. The short-term renewals themselves then contribute to even higher vendor pricing.

Combining all this creates a cocktail of spiralling expense. Instead of ITAM’s remit to help do more for less, it can be a case of mitigating the inevitable damage from a continuous pricing storm.

Focus areas from vendors

There are plenty of ways the market has responded. Tooling and service providers keep strengthening capabilities such as:

Visibility – methods include browser extensions, API connections, agents on endpoints, linkage with SSO systems, internet traffic and even email monitoring.
Discovery of shadow IT – including connections to finance and expense systems.
Cost optimisation – including the identification and elimination of underutilised subscriptions. Further work is needed for more complex licensing scenarios.
Technology overlap – categorisation and connection with EA toolsets and support for a more streamlined technology portfolio.
Process automation – supporting onboarding and offboarding workflows as well as changes during the product lifecycle.
Distributed governance for LoBs as well as cost allocation support and application.
Adoption – profiling what is used, when, how and by whom to support user productivity.
Security – access management and reporting on application or data usage. Some go further into security profiling and policies.
Compliance – supports alignment to regulations such as GDPR or facilitating data flows into governance systems.
Renewals management – supporting efficient scheduling, demand planning and identifying duplicated purchasing from a single vendor.

There are also areas that are less richly served, not least the business value profiling around how hard are the ‘assets’ being worked. Other examples include system interactivity, unit economics and TCO reporting, and supply chain angles such as obligation management in licensing agreements and sustainability insights.

At risk of repetition, like an aspiring smart city, there are so many facets to SaaS management. The multi-disciplinary nature of it requires team play.

A team sport

ITAM and FinOps have a key role to play. They are not the power brokers like politicians, civil servants and business leaders in a smart city. Instead, they need to use influence to drive progress. They combine community leader, service provider and town planning roles to help facilitate progress.

The personas extend well beyond procurement and IT finance. Security, Enterprise Architecture, LoB representatives and IT operations play a key role, with the obvious need for leadership support. Other stakeholder groups include HR, business transformation, user experience, legal, sustainability, product and systems owners. The list goes on.

It is not feasible to keep everyone fully engaged and informed all the time. There will be setbacks and failures. A key to success is looking for the areas of closest alignment first and finding opportunities to collaborate by sharing tools, access, knowledge etc. that is mutually beneficial, ideally symbiotic. From there it is a case of developing relationships and maintaining communications around each initiative being pursued.

Angle of attack

Tactical approach

Such a vast subject suggests the need for a grand plan and massive action. Certainly, the vision for a truly smart city needs planning at scale. However, SaaS management needs to be pragmatic to avoid getting permanently stuck in planning reviews and filibustering that result in not getting funding on permission to implement anything.

Unless there is widespread support with obvious C-level sponsorship, running pilot activity is the smartest route. Providing evidence of benefits early on builds the foundations for further investment and creates allies and partnerships to deliver incremental success.

Foster relationships

Strong bonds are a cornerstone for ITAM and FinOps to leverage resources of well-funded areas in the future. To go back to the smart city analogy: public safety groups (IT security) might be looking at improving visibility and lighting. Meanwhile, city maintenance (EA and procurement) could be looking at replacing aging road infrastructure.

Smart city protagonists (ITAM / FinOps) have the potential to append the redevelopment with intelligent traffic lights – to improve traffic flow (SaaS utilisation), pedestrian access (JML, requests management) – and add air quality sensors (data insights for sustainability) and boost wi-fi connectivity (user productivity). The combined benefit has a business case for the treasury department (finance) to invest, even though ITAM / FinOps does not have specific budget.

Potential forays

ITAM / FinOps has several options to enhance value from IT investments in SaaS. Action plans should be determined based on the unique circumstances an organisation faces – much like cities need to consider its environment and demographics. They also should be accepting that priorities can change, and multiple or conflicting initiatives need to be balanced. Some of the options for next steps include:

Focus on discovery – provide an understanding of the SaaS inventory and communicate what the data shows to different persona groups.
The portfolio angle – look at areas of feature overlap between products and duplication in purchasing channels.
Profile spending – this can easily be focused on the known publishers of prevalent, expensive or business critical applications. If SaaS management tooling exists, its attention could be directed to discovery of distributed spending and shadow IT.
A broad sweep – investing in a specialist tool or add-on module can provide incredibly valuable insights. This would usually need a business case for a 12-month commitment. Any trial or proof of value (PoV) warrants careful assessment, particularly as the scope will lean towards specific, typically simple issues or products.
Connect to IT security – this is a key driver for many SaaS management programmes. Look at the specific risk management that SaaS management could support, such as rogue users, data residency or secure and appropriate access.
Support procurement – with software inflation rife, enable those that are negotiating to balance ubiquitous unit cost increases with evidence to bring down volumes. It is not just about price x quantity, but lowering on part of the calculation helps.
Consider workflows, especially JML – there are strong soft benefits on the inbound side (e.g. HR and end-user compute groups will welcome provisioning), during a lifecycle (e.g. employee experience and less temptation to pursue shadow IT) and around outbound events (e.g. reclamation and data protection). Automation can reduce effort, cost and risk.
The adoption angle – if there is commitment to a major tool or suite, such as CRM, finance or productivity tools, profile the functionality it contains. Look at detailed consumption data to see what is being used in anger. Link to change management and learning and development colleagues to help increase productivity.
Talk to other personas such as legal around the challenges with licensing agreements and sustainability about supply chain governance and reporting needs. There are likely to be tangential but intersecting use cases that can be used to drive value.

In conclusion

Cities are significant enough to require governance but need to be sensitive to citizens and operate within environmental constraints. It is a good parallel to the need for SaaS management – there is huge environment that needs for security, efficient operations, costs to be optimised to allow for further investment, and planning around sprawl. The ultimate aims are to provide a quality of life for the community as a whole, its people and the many interacting aspects.

SaaS management requires a holistic strategy to combine with tactical plans. By drawing on lessons from smart cities, SaaS management will improve outcomes.

If you are interested in how SaaS management can help drive value for your organisation, then get in touch. CurioValue can provide a sounding board on your strategy, help with tooling plans, and develop or execute tactics. There is no obligation beyond an initial conversation and given your interest levels have got you this far, investing 30 or so further minutes of your time is a worthwhile investment.

[1] Sources include those involved in SaaS management such as Zylo, Flexera, Vertice and Bettercloud as well as analysts such as Gartner, IDC and Forrester, industry publications and thought pieces. Rather than produce an enormous listing of citations that could cause distraction, they are provided to illustrate the general theme of the article. CurioValue has collated or reviewed a large number of sources and content and would be happy to respond to specific questions or queries.