Latest / Modularity Podcast / Stop the Bleed: How to Eliminate SaaS Sprawl and Subscription Creep

Transcript

Stop the Bleed: How to Eliminate SaaS Sprawl and Subscription Creep · Modularity Podcast

• 0:00
  Pull up your business card statement right now and find the software charges.
• 0:03
  I'll bet there's at least one you can't explain.
• 0:06
  A tool somebody tried once, or a seat for someone who left last spring,
• 0:10
  still billing you every month like nothing happened.
• 0:12
  Only one is optimistic.
• 0:14
  And nobody did anything reckless to get there.
• 0:17
  That's the part that gets me.
• 0:18
  Cloud software is built to grow quietly and renew automatically.
• 0:22
  A manager signs up for a $15 tool, someone else grabs a $40 one,
• 0:27
  and nobody ever has to cancel anything because nobody notices it.
• 0:31
  The industry term is subscription creep.
• 0:34
  When lots of people can buy software on a company card, with no one coordinating,
• 0:38
  you get what's called SaaS sprawl.
• 0:41
  SaaS just means software you rent online instead of installing.
• 0:46
  And the numbers are rough.
• 0:47
  Zylo, which tracks this stuff, found that 53 percent of software licenses go unused
• 0:54
  or aren't used often enough to justify the cost.
• 0:57
  Ramp's benchmarks land in the same neighborhood, 50 to 53 percent.
• 1:02
  Zylo also reports the average company uses only about 54 percent of the licenses
• 1:08
  it's provisioned, and other figures run lower, closer to a third.
• 1:12
  Keep in mind those are mostly larger company numbers.
• 1:14
  But the mechanics are identical for a small shop.
• 1:17
  Here's a sneaky one.
• 1:19
  A vendor says, buy 10 seats and the price per seat drops.
• 1:23
  You need six.
• 1:24
  Doing the math, 10 at the discount feels smarter than six at full price,
• 1:29
  so you buy 10.
• 1:31
  Then the introductory promotion ends, and those four extra seats renew at full price
• 1:36
  year after year.
• 1:37
  Shelfware.
• 1:38
  Software you pay for and never use.
• 1:41
  And AI is making it worse.
• 1:43
  Every product now has a standalone AI add on or a little specialized assistant,
• 1:48
  and each one is another subscription on another card.
• 1:51
  Zylo's data shows AI apps are among the most expensed by employees.
• 1:55
  So why should an owner care beyond the annoyance?
• 1:58
  Money first.
• 1:59
  One IT firm, Engel Tech, looked at businesses of 10 to 15 people and the estimate
• 2:05
  for waste from zombie licenses and overlapping tools is roughly $3,000 to $6,000 a
• 2:11
  year.
• 2:12
  Grow to 30 or 50 employees and it can reach five figures.
• 2:16
  That's pure margin, gone, for nothing.
• 2:19
  Second, it slows people down.
• 2:21
  Sales tracks tasks in Monday.com, operations uses Asana.
• 2:26
  Half the team is in Slack, half in Microsoft Teams.
• 2:29
  Now someone's hunting for a file across three places and asking a coworker where the
• 2:33
  thing lives.
• 2:34
  That's paid time spent searching.
• 2:37
  And the third one is the one that should bother you.
• 2:40
  The same Engel Tech piece cites research that 31 percent of companies have had
• 2:46
  former employees access company data in cloud apps after leaving.
• 2:51
  Think about how offboarding usually goes.
• 2:53
  You shut down the email account, Google Workspace or Microsoft 365,
• 2:58
  and everybody feels done.
• 3:00
  But the design tool, the CRM, the shared document site, the project board?
• 3:06
  Those logins often keep working.
• 3:09
  So you're paying for a seat and giving a stranger a key.
• 3:12
  That's the worst version of a subscription.
• 3:15
  Alright, the fix.
• 3:16
  And it doesn't take a consultant.
• 3:19
  Step one, forget your memory.
• 3:21
  Pull 90 days of statements from every business credit card,
• 3:25
  debit card, and anything you pay by invoice.
• 3:28
  Highlight every recurring software charge and sort them into buckets: communication,
• 3:34
  project tracking, accounting and billing, storage, AI tools.
• 3:38
  You'll find duplicates fast.
• 3:40
  Step two is where people go wrong.
• 3:43
  Don't ask your team, do you still need this tool?
• 3:46
  Everyone says, well, I might need it next quarter.
• 3:49
  That's just loss aversion, people hate giving things up.
• 3:53
  Instead, you or your office manager log into each platform's admin screen and look
• 3:58
  at the last active or last login date.
• 4:00
  A seat with zero activity in 30 to 60 days gets cancelled or reassigned.
• 4:05
  The data answers the question, not anyone's feelings.
• 4:08
  Step three, right size the tiers.
• 4:11
  A lot of platforms charge a premium for full creator or admin access,
• 4:16
  and plenty of people only need to check status or approve an invoice.
• 4:19
  Move them to a free viewer or collaborator level if the vendor offers one.
• 4:24
  Then where you have duplicates, like paying for both Zoom and Google Meet,
• 4:29
  or three PDF editors, pick one official tool and standardize.
• 4:33
  Step four, build a real offboarding checklist.
• 4:37
  On the employee's last day, every third party software seat gets revoked,
• 4:42
  not just email.
• 4:43
  That stops orphaned accounts from billing you and cuts off access to your data.
• 4:48
  Step five is my favorite.
• 4:49
  Virtual cards.
• 4:50
  Many business banking and spend platforms let you create a separate card number for
• 4:55
  each vendor.
• 4:55
  Put a monthly cap on it, so a sneaky price hike just gets declined.
• 4:59
  Give a free trial card an expiration date, and now the trial can't quietly turn into
• 5:04
  an annual plan.
• 5:06
  The renewal becomes a decision, not an accident.
• 5:08
  Now, quick wins for this week.
• 5:10
  One, take your payroll or departure records and compare them against the admin
• 5:16
  panels of your top five tools, CRM, project management, cloud storage,
• 5:21
  communication.
• 5:22
  Delete every seat tied to someone who's gone.
• 5:26
  Today, if you can.
• 5:27
  Two, list every annual subscription and set a calendar reminder 30 days before the
• 5:32
  cancellation notice window opens, not the renewal date itself,
• 5:36
  because many contracts need notice ahead of time.
• 5:39
  That gives you room to negotiate, downsize, or cancel.
• 5:43
  Three, pick a rule.
• 5:45
  Either move recurring software billing onto capped virtual cards,
• 5:50
  or require one person to approve every new subscription.
• 5:53
  One decision maker is enough.
• 5:56
  Here's the takeaway.
• 5:57
  Your software should serve the business, not quietly tax it.
• 6:02
  Get control of your tech stack and you protect your margin and your data at the same
• 6:07
  time.
• 6:08
  And if you want help consolidating systems or sorting out a smarter tech strategy,
• 6:13
  head to modularity.us.