Digital Transformation » Cloud » The hidden bill attached to Saas and cloud

The hidden bill attached to Saas and cloud

Firms have developed an insatiable appetite for cloud computing and software-as-a-service (SaaS) offerings.

The cornucopia of on-demand tools promising efficiency and scalability has proved irresistible for companies seeking a competitive edge. Yet this indulgence in the cloud economy’s all-you-can-eat buffet comes with a catch: an array of lurking costs that are eroding the very efficiencies they were meant to create.

The expenditure is staggering.

Per-employee SaaS subscriptions alone cost businesses around $2,000 annually on average. Add public cloud services and a quarter of corporate IT budgets are now earmarked for these on-demand solutions. Small wonder the global SaaS market is projected to swell to $371 billon by 2024 as firms engage in feverish adoption.

For CFOs, this cloud-resource bingeing presents a harsh reality.

Hidden away from plain view, expenditures on everything from zombie subscriptions to shadowy workplace apps to unpredictable surcharges are devouring spending allowances. A full 83% of companies admit staff are subscribing to unvetted third-party cloud tools, inviting risks like data leaks and compliance violations but little financial oversight.

Among European Union firms, over a quarter overspend their budgets by 15% on unnecessary SaaS rentals.

Spiralling spend

 Even after projects conclude, workers frequently neglect to cull superfluous licenses and cloud resource reservations they had provisioned, treating them like unkept digital storage units accruing monthly fees.

One in ten corporate SaaS subscriptions lays completely fallow in the first 90 days as new rollouts stagnate. With over half of businesses juggling over 100 different workplace apps, redundancies between overlapping tools become inevitable cost sinkholes.

Compounding the waste, cloud services’ pay-as-you-go models can morph into pay-through-the-nose scenarios. Usage-based pricing allows costs to escalate without warning from overages on cloud consumption, inter-regional data transfers, database queries and a smorgasbord of specialty services. Temporary bursts in demand stemming from anything from new product launches to seasonal marketing campaigns can trigger unplanned surcharges.

Perhaps the most insidious hazard, though, is the litany of ancillary fees SaaS vendors are adept at obfuscating until it’s too late. Charges for migrating legacy data, architecting multi-cloud workflows and integrating with third-party tools often kick in as afterthoughts. Bespoke engineering requests and “white-glove” services can send bills into the stratosphere. As one exasperated tech manager lamented, “Once you’re on the SaaS treadmill it feels like just invoices, invoices, invoices.”

Then there are the professional services that SaaS sales reps are adept at underplaying until invoices hit. Fees for everything from integration to custom engineering often materialize stealthily. Monitoring and optimizing this tangled hairball of on-demand services is an epic challenge.

Discipline is the key

The situation is spurring enterprises to embrace a new financial discipline dubbed “FinOps”, centered on rigorously tracking cloud outlays. Cross-functional teams well-versed in both IT operations and accounting principles collaborate to gain real-time visibility into SaaS and cloud usage patterns across the organization. Their forensic mission is to root out waste and optimize spending via an array of measures.

Rightsizing deployments is a core tactic, whether that means pruning idle resources, downsizing overprovisioned services or switching to more economical pricing tiers. FinOps sleuths also negotiate aggressively with vendors, leveraging up-to-date usage data to secure sharper discounts on renewals while consolidating redundant contracts. For smoothing spiky cost curves, recommendations include implementing autoscaling policies and committed-use pricing models.

Utilise spending tools

Cloud spend analysis platforms provide the crucial visibility layer, rolling up billing details across scattered deployments and surfacing anomalies. Automated policies allow pre-set budgets and quotas to enforce fiscal discipline before overages spiral out of control.

Make no mistake: SaaS and the cloud remain potent enablers in the digital economy. Software delivered as a service allows companies to rapidly scale technical capabilities while sparing the capital outlays of traditional licensing models. And cloud infrastructure provides enviable flexibility in dynamically provisioning computing resources.

Left unchecked, however, the cloud economy’s hidden toll could spoil its entire value proposition.

CFOs need to make sure they are tracking and optimising outlays, so that their teams can finally lift the veil on SaaS and cloud computing’s true price tag—and reap the full benefits of these powerful technologies.

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