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CEO and Founder, Zylo
It doesn’t seem that long ago when SaaS purchases were easy to make based on the needs of one team or individual. Those days may be gone forever
Whether real or perceived, SaaS bloat emerged at a time when cost-cutting became the top priority, and it’s up in the air as to whether the industry will ever recover.
Eric Christopher joins Closing Time to share Zylo’s 2024 SaaS Management Index that illustrates how SaaS buying is changing, what the future holds, and why platforms vs. point solutions are gaining momentum.
Go-to-market leaders can attest that the SaaS landscape, specifically the purchasing process, has undergone significant changes in the last decade—from aggressive growth-at-all-cost purchasing with minimal red tape to post-pandemic cost-cutting with high involvement of finance and procurement.
Today, some refer to it as “the great app layoff,” while others call it the “great rationalization.” Whatever you call it, organizations have taken stock of their software and started making data-driven decisions about what they need.
Eric Christopher and his company, Zylo, have been tracking the state of SaaS for over 7 years. Armed with data from 30 million SaaS licenses and over $34 billion in SaaS spend, they launched the 2024 SaaS Management Index Report. Let’s dive into some of the findings that Eric shared on Closing Time.
Today, the average organization has 269 apps, down from 291 apps in 2022, a 7% year-over-year decrease. And that’s plummeted from 2021 when organizations averaged 323 apps—a 10% decrease.
So, what’s behind this app exodus? It all boils down to money (as it often does). Back in the good old pre-pandemic days, SaaS adoption was booming, growing at a steady 20% year-over-year. Then came the pandemic, and everything went remote. Suddenly, companies were throwing money at apps to empower their new work-from-home teams.
Fast-forward to today, and the economic landscape has shifted. With rising interest rates, capital constraints from VCs, and tighter budgets, companies–especially in tech–are feeling the pinch. They’re re-evaluating every expense with a fine-tooth comb.
Think of it like this: during the scramble to remote work, companies experienced an “artificial increase” in software usage. Now, they’re just getting back to a more normal level of software spending.
The takeaway? Companies are becoming smarter about their app usage. They’re consolidating tools, eliminating redundancies, and focusing on getting the most value out of their remaining apps.
Are you getting ROI from every app in your tech stack? How many licenses across those apps are unused or unassigned? (Spoiler alert: it’s likely more than you think).
Traditionally, software vendors only show what features are being used, making it difficult to identify and eliminate underutilized licenses. This is where Zylo comes in—it acts as a third-party analyst, providing a clear picture of software usage and pinpointing unused licenses.
According to the index report, companies, on average, are only using half (49%) of their purchased licenses.
The average company (1-500 employees) wastes around $2 million on unused software, with enterprises (10,000+) losing over $100 million. For even larger companies with tens of thousands of employees, the wasted costs can skyrocket.
Imagine paying for a gym membership you never use. Unused software licenses are no different.
Eric’s advice? Do an audit, internally or with a tool like Zylo, of your current app usage. Check for recent employee turnover or unused features within paid plans (common in products like Zoom). You don’t need to be a software expert to save money on licenses; you just need a comprehensive view of the state of your current tech stack and a commitment to monitoring it over time.
Following the purchasing spree in 2020, many companies are ditching the app overload and embracing the power of consolidation. Team leads are tossing out redundant apps and unifying their software under fewer, more integrated platforms.
So, the question presents itself: if you can consolidate, should you?
Eric says the short answer is yes. Here’s why:
Unified Customer View: Imagine everyone in your company having the same, complete picture of your customers. Consolidation makes this possible, leading to smoother handoffs and better service.
Collaboration Boost: When departments use separate systems, information sharing can be a nightmare. A central platform breaks down these silos, fostering teamwork and efficiency.
Cost Savings: Multiple subscriptions can add up quickly. Consolidation can streamline your spending and potentially save you a significant amount of money.
Reduced Risk: The more apps you have, the more data security risks you face. Consolidation simplifies data management and minimizes potential leaks.
But how do you consolidate effectively? Eric suggests a platform-based approach. Think of your CRM (Customer Relationship Management) system as your core platform. Then, consider adding features like marketing automation and customer service that integrate seamlessly within the CRM (heads-up: Insightly’s all-in-one platform does this!). Having one platform with multiple apps built within it creates a central hub for all your customer-related data and activities.
The same logic applies to other areas like HR and finance. Focus on building a strong platform and then carefully evaluate “point solutions” – specialized apps that might seem appealing. Ask yourself: Can my existing platform handle this task? Will the benefits of a single platform outweigh the added functionality of a separate app?
By carefully considering these factors, you can create a streamlined tech stack that saves you money, improves collaboration, and reduces risk.
Remember the days when IT departments controlled software purchases? Those pre-2020 times seem quaint now. In the SaaS boom, IT loosened its grip, empowering business units to buy what they needed. Fast-forward to the pandemic and CFOs went into full-on survival mode, issuing blank checks to get employees the work-from-home tools they needed—anything to stay afloat.
Enter the new era: the rise of procurement, or what Eric calls “procurement having its moment.” CFOs are still heavily involved in purchasing decisions, and procurement teams are no longer optional partners. They’re stepping up as expert negotiators, wielding their professional buying power. For salespeople used to smooth-talking their typical ICP decision-makers, this is a wake-up call. Playbooks need to be rewritten to convince CFOs and procurement of the software’s business value.
But hey, Eric sees the silver lining in this trend because he claims that the free-for-all SaaS buying frenzy might have gotten a little out of control. Procurement can bring us back to basics: building a strong business case, comparing vendors, and following a formal process.
Eric says it’s all about finding the balance between innovation and control. Sure, selling to procurement might seem daunting, but with the right approach – understanding their language and workflows – it can be a winning strategy.
Gone are the days of flashy features winning every deal. Today, buyers are laser-focused on value. So, how can you, as a SaaS company, make the cut?
Eric shares two key strategies:
1. Align with Business Objectives: Focus on core needs, not just departmental “nice-to-haves.” In the pre-pandemic rush to adopt SaaS solutions, some tools didn’t necessarily align with a company’s strategic goals. These are the first on the chopping block now. Make sure your solution directly addresses a company’s top objectives. Eric also emphasizes the need for an executive sponsor. Having a champion at the leadership level shows your solution is strategically important. This champion can advocate for your solution during budget discussions.
2. Become Part of the Business Workflow: Apps that integrate seamlessly into existing processes will have a leg up. If a new employee can easily pick up on how to use your tool, it becomes less reliant on any one individual. Becoming a well-oiled cog in the business machine makes you much harder to replace. Deliver clear customer value. Be the “plumbing” of a company’s operations, like a CRM system. These solutions are essential for core functions and unlikely to be cut.
Lastly, Eric warns against getting caught up in feature wars. Focus on demonstrating how your solution directly impacts a company’s bottom line and key objections—that’s the key to surviving the new era of SaaS sales.
While subscription models seem here to stay, Eric believes the way we interact with these tools will be revolutionized by Artificial Intelligence (AI).
He compares this potential shift to the impact of the iPhone. Just as the iPhone transformed the mobile landscape, Eric sees AI having a similar game-changing effect on SaaS. He draws a parallel to the early days of Salesforce and NetSuite, which ushered in a new era of cloud-based software.
Imagine a future where you point and click less. Instead, picture using natural language interfaces, like chatGPT, to find information within your software. Eric believes AI will streamline how we interact with SaaS, making it even more efficient.
Will 2024 be another record setting year for SaaS? Let’s dig into it in this episode of Closing Time. Welcome to Closing Time, the show for. Go to Market Leaders. My name is Chip House. I’m the CMO at Insightly CRM, and today I’m a super excited to be joined by Eric Christopher. He’s the CEO of Zylo, a SaaS management firm. Welcome to the show, Eric. Hi, Chip. Thanks for having me.. I am delighted to be here. Yeah. Eric So we used to work together long time ago in SaaS and I was exciting to have you on, I’ve admired Zylo from afar for quite a long time and super interested in the data you have. I know that you created a research report called the 2024 SasS Management Index, and I’d like to dig into that today. Is that cool? Yeah, that sounds awesome. So, you know, being in the software space, you know, some have called it the great app layoff. Yeah, I think you’ve called it the great rationalization, but you’re seeing more and more firms in the last couple of years trying to justify their spend and reduce the number of applications they have in the organization. And this data is crazy to me. Today, the average organization has 269 apps down from 291 apps in 2022, a 7% year over year decrease. And that’s plummeted from 2021 when organizations averaged 323 apps or a 10% decrease. And so in my head, I was thinking like 15, 20 apps for orgs, you know,. But this data is incredible. Why is that? Yeah, well, let’s kind of step back. You know, when you mentioned the SaaS management index report, it’s something we’ve been building for seven years and we’re analyzing every single dollar that goes into software spend. And a lot of times there’s an assumption that a company’s powering their business on just maybe a dozen apps or something like that. But when you really get into understanding how many tools are being used, it’s really tracking every spend because you have employee purchasing, you have every department, like you’re in the marketing and sales category. And so there’s just so many different buyers and users of SaaS. And so this, this data has been generated, what we’re looking from a trend perspective to answer your question, you know this is from $40 billion of cloud and software spend. And I think what’s interesting too is it’s a track periods of time like, you know, we go back when you and I started in the early 2000s, which is hard to say, but, you know, SaaS had been growing steadily for 20% year over year. This is a Gartner statistic. Hit the pandemic. It explodes. Every CFO is even encouraging buy application to empower remote work. So holding back software was the least of the concern at the time. Post-Pandemic capital crunch a bit with venture capital and inflation rates and things like that, with interest rates. Now companies, especially tech companies, have to really, you know, reduce costs. So that’s what’s happened with this kind of plummeting of SaaS is we had a bit of a peak of 20%, 20% and then pop, a lot more application purchasing. And now we’re contracting back to. I think, you know, if you put a curve of 20% year over year, we’re kind of coming back to that steady curve. We just had a artificial increase because of the pandemic and remote work. Yeah. Makes sense. So, I mean, you and I are both from the software space. And so we know that utilization of the software you buy is critical. And clearly organizations aren’t using all of the licenses that they buy, which I think probably drives a lot of the work that you get, right? Yes, absolutely. You know, I think the getting visibility in the utilization of software is difficult, even though you’ve got access to user portals that show activity and things like that, vendors typically haven’t focused on displaying what’s not being used. Right. They show what’s being used. And so what we’re really doing is helping have a third party analysis of monitoring what’s being used and what’s not. And that could be, sometimes it’s when an application is you have employees no longer there and they’re going completely unused. But also you have different levels of features. I think like a really good example, most people might understand if you’re using SaaS platforms or use Zoom, for example, Zoom, you can have free licenses, if you’re an employee that does not host meetings. And then if you are an employee that hosts meetings, then you need a paid license. Many times companies are oversubscribed in licenses that are to produce content, but they might only be view only. So companies can do this on their own. But that’s something we make really easy from a business standpoint with our software platform is to see those types of trends. So I think at our pre call, Eric, you mentioned that the average organization feels like it’s wasting about $2 million on software and some of the larger enterprises are wasting over $100 million are those numbers, right? That’s crazy. Yeah. They’re right. Now we work with a spectrum of companies. We have companies that are 500 to 1000 employees that are, especially in the tech space, are wasting nearly $1,000,000 a year in underused licensing or redundancies. And then we also work with some of the world’s biggest companies that have 25 to 50000 employees. And that’s where those numbers really start to just compound and multiply. When you think about a company that’s using a thousand apps, maybe the average app is 50 or 100k a year, you know, and you can start to see how the numbers really do add up. Yeah, makes sense. So we hear from our customers that one of the benefits they get from our CRM platform is that it was built together with marketing automation and our customer service application, you know, And so when a customer adds on marketing automation or customer service or our middleware product AppConnect, they cite one of the main reasons was, Hey, it’s the same view of the customer, which helps across my organization and it’s just easier to consolidate rather than trying to combine all my different software. Do you think the message is, if you can consolidate, Eric, you should? I think the short answer is yes. You know, the reasons you just mentioned, like the idea that you can have one single view of the customer, you can have departments collaborating and working together more efficiently. All those reasons have always been true, you know, and I think what’s happened with the cost pressures and the sheer overwhelming nature for many of the organization of how each department might be using different applications, there is a real cost issue now with that. And so you have cost issues, you have risk issues as well because you have data moving into different places. And so I think when you have more apps and less consolidation, your risk profile does go up because when employees leave, where does the data go? Do they still have access just in general, you know, having a point of view of kind of what are your platform technologies,. You know, so CRM is one of those, right? You have CRM for customer relationships and sales. So very, very smart to think about how when you add point solutions, how do they kind of enrich that, that all in one experience and then also their systems like HRIS systems, you know, so you want to have a platform for HR. You want to have a platform for financials, and then you start to kind of build out your point solutions from there. And that’s where you really need to weigh. Do i need something that’s really best of breed to add on or can the platform that i have today do what we need? And those benefits of being in the same platform from a cost, collaboration perspective outweigh that next great feature of a point solution. So you’d mentioned that, I mean, clearly more like larger companies are likely to have procurement and you’d mentioned that procurement is maybe having a moment. So talk us through how roles of I.T.,. Procurement and actual hands on teams are evolving when it comes to SaaS purchases. Sure. Going back to the point I made earlier about like go back to pre 2020 when SaaS is just increasing, there was a sort of this moment of where there was a shift in kind of the 2010s where I.T. was no longer the gatekeeper of software, you know, it was business can make the decision. You don’t need to implement software. You know, that was the era that we were in. Pandemic hits and kind of that two year, kind of period of time where we have to empower our workforce at home for an unknown period of time, CFOs sort of gave a blank check to everyone to buy software. And it was kind of survival mode. It was just get every application that you can. And then now we’re kind of back to this moment in time, which I think is the procurement moment in time, which is we’re no longer an optional business partner of yours. We’re here now to be professional negotiators, the experts on software, CFOs are now either in the driver’s seat to make a final call or be in the copilot seat to be a very, very influential, you know, in the decision. And so I think this is kind of it feels maybe like an overcorrection, especially if you’re in the sales seats selling software. And now that you’ve got to get playbooks on how to sell a CFO and convince them on the business case and things like that. But I think it’s a healthy reset of where we were. I think software buying really was accelerated, probably too much for the businesses to absorb, and now it’s the procurement time to help kind of bring us back to getting back to the basics. You know, you build a good business case to why you need the application to the business and then you go through a formal process and, you know, look at a few different vendors and go through it. And I think we’re back to that. So it’s kind of maybe we’re just back to the way that things should be to balance, you know, bringing in innovative SaaS, but also doing it with some controls. I think you’re a brave man to have your main ICP be procurement and CFOs, by the way, I mean they know how to buy, you know, it makes it challenging for your team. Yeah well you know my background is from sales and I part of the originating idea and concept of Zylo came from the experience of selling into organizations and seeing inefficiency. But to handle it, I, I took some advice from a probably a couple of mentors of mine, but I sought out and found an amazing co-founder who is a procurement veteran for like 15 years before starting Zylo. And so we have some friendlies on our side and expertise on how to handle that buyer persona. Yeah, just that makes sense. Like being able to use the right language and know how they work, it’s got to be key. Yeah, exactly. So I’m going to put you on the spot for a couple of questions here, Eric. So the first is what advice, if any, do you have for SaaS companies that want to make the cut, so to speak? Making the cut is, I think it’s important that you demonstrate clear value to the business objectives of the company. You know, the top objectives.. And I think that’s where you could say on one hand when we talked about that explosion in kind of the over adoption of technologies, it was part of that survival mode. But also because of that, I think applications were getting justified that were not necessarily part of the core strategic plan of the company. They were kind of add ons, maybe considered nice to haves, maybe they helped a department. Those are the tools that are typically at risk now because everything is being re centered at the exec level. And it’s important that you find a way to have an executive sponsor and confirmation that the work you’re doing is in line with a key objective like that is so important. The second thing that I think might be if you’re unable to understand that maybe clearly, which sometimes is a disadvantage if you’re not like, you know, one of the maybe the most considered strategic apps. It’s important to be in an existing business process. So, you know something that when an employee leaves or like a champion or a sponsor, that when a new employee comes in, there’s something to pick up, you know, some kind of, you know, maybe it’s a workflow that you’re running, maybe it’s a, you know, business process. But I think to make the cut, be in an established business process and or, you know, direct customer value,. I think is really important. Yeah, it makes good sense. I was on a podcast last week and the host called CRM, like the Plumbing in your house. Yeah. So I think that is true definitely of organization of a certain size. So yeah, I feel good to be in that company anyway. Yeah. Yeah, absolutely. It’s like, if you can be a system of record of something that’s important enough to the company, then I think that that’s another element and CRM is certainly in that category. Yeah. So if you’re in SaaS, take care of your customers. Right. I mean that’s make sure they’re getting value and help them drive utilization with their teams, etcetera, etcetera. Yeah, and I think sometimes the answers are, are the simplest ones, you know, like the right, the right answer is I think that going back to, you know, I keep saying the basics, but it’s, you know, that really is what it’s about. It’s, you know, it’s tying the software and the solutions that you’re providing back to these key objectives. And I think that kind of solves a lot of the maybe the challenges versus worrying about you don’t have a next feature or something like that. It’s more about tying to the business value. So, Eric, second question, putting you on the spot, what is the future of SaaS? It is a great question. I think there’s a lot of interesting things that are happening of like, is there a question of will a delivery model change? It does seem like we’re that still, the future is a subscription model. I think there’s question of maybe how pricing works and, you know, things like that. I do think it’s hard not to call out. I personally believe that the movement of. AI that we’re in right now is similar to when the iPhone was released where, you know, since the iPhone was released, the mobile market and smartphones took over the world, changed how it changed everything. And then I think that’s very similar to, you know, I’m not sure to maybe to pinpoint it, but maybe when Salesforce came to market or the SaaS, kind of that beginning of the SaaS, NetSuite,. Salesforce, that whole generation. Yeah. It’s like everything came forward, you know, AWS and all of that. All those shifts.. And I think A.I. is that big. And so I think the future of SaaS is going to be where the interface will change a lot for us as users, where we may point and click a lot less and find information through chatGPT type interfaces in searching for data. And I think the efficiency of using software is only going to get better. And so I think that’s kind of the next 5 to 10 years is we’re going to see a major shift on how we interface with these products. Yeah, makes sense. And we’re going to be introducing some. AI into our marketing automation app this summer. Excited to talk about that. That’s awesome. So, Eric, unfortunately, that’s all the time we have so great data, great insights, Looking forward to chatting again sometime. Yeah, I would love it. So we’ll continue collecting billions of more SaaS data and ready to talk about it any time. Yeah man, I appreciate it. And thanks to all of you for joining us on this episode of Closing Time. Make sure you tick the bell, subscribe and we’ll see you next time. Thank you.