Overview 

Impacts 

• Senior executives are starting to challenge the value of digital transformation, having encountered dramatic growth in software and cloud usage without adequate management and optimization. 
• Where software asset management (SAM) and FinOps do exist, they have limited influence or authority to optimize consumption and value across a growing, increasingly complex set of environments. 
• Despite their interdependencies, SAM and FinOps often operate independently, in different silos and with limited resources, eroding their value-maximization potential. 

Recommendations 

Executive leaders responsible for maturing software and cloud governance disciplines should: 

• Consolidate and mandate SAM and FinOps disciplines to drive enhanced visibility and understanding that maximizes value and opportunity while minimizing cost and risk. 
• Create an integrated unit that profits from the synergy of both disciplines to deliver optimum benefit across an increasingly complex technology environment. 
• Check that the consolidated functions are adequately staffed with skilled team members to work with key stakeholders to eliminate unproductive cost overruns. 

Strategic Planning Assumption 

By 2025, 50% of organizations will unify SAM and FinOps into a consolidated discipline delivering portfolio cost management and governance. 

Impacts and Recommendations 

Mandate SAM and FinOps to Optimize Cost and Value 

 
FinOps and SAM are kindred spirits; although founded from different eras of technology adoption, their disciplines share objectives. Both represent coordinated, continuous undertakings to realize value from evolving investments and expenditures. Their frameworks exploit many of the same cost-efficiency principles and capabilities, incorporating a combination of consumption, rightsizing, optimization and mitigation management fundamentals. 

Rightsize SaaS With SAM 

As the organization becomes dependent on each cloud service and its features, buyer bargaining power is eroded (see Predicts 2023: Inflation’s Permanent Impact on SaaS/Software Costs, Commercials and Business Practices). While procurement experts earnestly attempt to resolve these issues, they are often frustrated by their inability to limit cost increases at each contract renewal. 
 
Options to switch to an alternative may be limited and/or costly to execute (see Identify and Mitigate SaaS Switching Costs), while cost increases are most dramatic in monopolistic scenarios. Therefore, organizations require consumption management to offset or limit cost increases in advance of renewal, with estimates of unused applications ranging from 30% to 50%.² Execution requires a well-resourced, adept SAM team with the directive to manage consumption and eradicate waste. 
 

Confront CIPS Wastage With FinOps  

As a core contributor to the cloud center of excellence (CCOE), FinOps fills a key role in reducing waste and costs. In parallel with SAM processes, FinOps-driven optimization will minimize waste.³ For example: 

• Scale back or retire services provisioned without ongoing use cases that remain unutilized. 
• Scale down valid yet underutilized services, including; underutilized CPU, memory, storage, backup or bandwidth, triggering actions to rightsize and reprovision the relevant instances. 
• Deprovision services that served a useful term but have since remained running without any delivered value. Switch off or reassign services accordingly. 

Without effective SAM and FinOps disciplines, waste is inevitable, with the majority of applications and environments significantly underutilized. Meanwhile, unplanned consumption growth in CIPS environments can turn into toxic overconsumption if left unchecked, resulting in significant, ongoing unproductive costs. The combined SAM and FinOps functions must be tasked with eliminating growth of unnecessary costs as one of their key goals. 

Recommendations for Executive Leaders: 

• Establish budget risks by reviewing software and cloud cost escalation rates. 
• Create a mandate for investing in SAM and FinOps as key mechanisms to offset material risks of continually escalating costs. 
• Establish an expectation that both disciplines operate with a shared understanding of what assets and resources are used within each environment or platform. 
• Create authorization, empowerment and a culture that drives action and realization from SAM and FinOps optimization and mitigation recommendations executed throughout IT. 

SAM and FinOps Role in Delivering Business Value From Cloud Adoption 

Cloud services and software both deliver significant value to the organization and its customers, thus representing high-value business capabilities that necessitate management. Executive leaders seek to ensure they’re not only benefiting from rapid adoption, but also seeing broader benefits including understanding costs and leveraging robust processes, particularly in regulated industries. 

SAM plays a critical role in advancing cloud adoption and providing a platform for driving optimization maturity, laying the platform for forecasting future requirements and the resulting costs. Assessing consumption against projections while identifying underutilized licenses must be incorporated into the organization’s overall cloud strategy. Unlike predictable costs of preinvested assets, cloud services scale rapidly, requiring continuous management. SAM professionals have previously addressed virtual server sprawl and its impacts, however, unlike the virtual on-premises data center, cloud services are an unlimited, direct and immediate cost. Accordingly, continuous discipline is required to drive value (see Figure 3). 
 

Ephemeral cloud systems are subject to consumption spikes where costs may rapidly erode expected benefits; accordingly, anomaly detection and management are fundamental to protecting business value. The key is being able to tell the difference between bad growth, creating unnecessary cost and good growth that delivers business value. Therein lies the role of FinOps in underpinning value. For example, alerts for consumption growth trigger investigation to validate authentic spikes in consumption, finding that the spike was driven by onboarding a large new client, supporting validation of valuable use rather than unproductive use. 

Detailed usage data collection and reporting and effective use of analytics depend on asset life cycle management processes, interpreting data and executing the actions they inform. For example, by implementing effective provisioning and metering processes, SAM can align the licensable functionality of an application to appropriate use cases, reducing the likelihood of inflated costs. 

Recommendations for Executive Leaders: 

• Sponsor the governance mandate for software and cloud services management, with clear roles and responsibilities across consolidated SAM and FinOps teams. 
• Verify that SAM and FinOps teams have the skills, resources and processes needed to manage cloud service consumption. 

Conclusion 

In conclusion, the integration of SAM and FinOps is essential for organizations to navigate the complexities of software and cloud governance. By leveraging the synergies between these disciplines, organizations can achieve enhanced visibility, cost optimization, and value maximization across their technology portfolios. With the right resources and strategic direction, SAM and FinOps will continue to play pivotal roles in driving business value and ensuring cost containment in an ever-evolving technological landscape. 

Attributions and Disclaimers: 

¹Gartner, “Target Software and Cloud Costs by Uniting Software Asset Management and FinOps” by analysts Stephen White, Yoann Bianic, Stewart Buchanan, 6 April 2023.   

²Unused application rates from Flexera’s October 2022 survey data: desktop, 38%; data center, 34%; SaaS, 33%. According to Nexthink 49% of all software is unused, and according to Zylo, 40% of software licenses are wasted. 

³Reducing Waste Opportunities, FinOps Foundation, and State of ITAM Report, Flexera, which reports that 33% of integration-as-a-service/platform-as-a-service spending is underutilized or wasted. 

³Licensing Oracle Software in the Cloud Computing Environment, Oracle, and Microsoft Product Terms for Azure Services, Microsoft. 

Disclaimer:  
These graphics were published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Snow Software. 

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.   

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.   

The post How To Target Software and Cloud Costs by Uniting Software Asset Management and FinOps: Insights from Gartner® appeared first on Snow Software.

This blog explores our understanding of the key findings, recommendations and other sections from the Gartner^® Market Guide for Software Asset Management Tools¹, to help organizations select the right SAM tools to support their businesses. 

Key findings

• The plethora of legacy perpetual licenses and the accelerated adoption of SaaS and ephemeral infrastructure have left sourcing, procurement, and vendor management leaders struggling to select a single SAM tool or a collection of specialized point solutions.
• Organizations that see SAM tools as a “silver bullet” don’t truly understand the complexity of SAM as a combination of tooling, highly skilled resources and effective processes. These organizations thus continue to struggle to obtain accurate and actionable data out of SAM tools.
• Economic headwinds and the need for strategic cost optimizations have placed cost governance as a priority for SPVM leaders. However, siloed functions and SAM tools delivering partial information hinders achieving cost governance, putting SAM teams and their tools at risk of being sidelined.

Recommendations

To overcome the challenges associated with SAM tools and optimize their usage, sourcing, procurement, and vendor management leaders must consider the following recommendations: 

• Collaborate with cross-functional stakeholders to develop a clear set of measurable use cases for SAM tooling. Assess your strategic priorities as well as current and future ISV licensing requirements to determine whether a platform, stand-alone tool or point solution addresses your needs.
• Mandate as part of the RFP process that SAM tool vendors provide demonstrable examples or a POC using your sample data to validate their marketing claims of what their tools can deliver. Where gaps exist, seek out external expertise in the form of SAM managed service providers to augment tooling and staff.
• Form strategic relationships with FinOps teams, leveraging both a combined framework to standardize on governance and complementary tool functionality to form a complete, trustworthy view of where waste can be eliminated within your organization.
   

Market definition and description

The report identifies SAM tools are products that automate support tasks required to produce and maintain compliance with independent software vendor (ISV) license use rights and improve organizations’ ability to optimize software risk and spend. SAM tools provide in-depth software asset analysis by decoding license entitlements, automate software consumption data collection, establish ISV effective license position (ELP), govern software assets, optimize value delivery, and share information with other tools and stakeholders. 

Key activities of a SAM tool 

The report outlines ten key activities that a SAM tool should possess, including: 

• Platform discovery 
• Entitlement discovery 
• Platform consumption identification 
• Entitlement identification 
• Normalization of consumption data 
• Normalization of entitlement data 
• Reconciliation 
• Governance 
• Optimization 
• Sharing software asset information 

Market direction  

The SAM tool market has diversified to cater to four distinct categories: traditional SAM tools, SAM tools for SAP, SAM tools for engineering and specialty software and SAM tools for SaaS. The market’s evolution has increased consumer choice, but also introduced confusion for organizations in selecting the right tools. Over the next 12 to 18 months, Gartner anticipates the following market changes:

• Continued demand for SAM tools, but tools will come under greater customer scrutiny and be required to provide demonstrable proof of their actual deliverables
• Strategic alliances with partners to develop robust generative AI capabilities
• Greater crossover between SAM tools and FinOps to deliver on greater cost transparency and governance
• Organizations turning to SAM tools for sustainability reporting, such as on greenhouse gasses consumed by running software and SaaS
• Less distinction between foundational capabilities of adjacent tools such as SaaS management platforms (SMPs)
• Increased interoperability between tools and data transformation capability
• Strong relationships with managed services providers (MSPs) to take on the implementation and running of tooling to address skills gaps
• Increased demands for SAM data from cross-functional teams, such as security or enterprise architecture

Market analysis 

The complexity of software licenses and evolving infrastructure pose challenges for SAM tools.  SAM tool vendors focus their resources and products on their ability in supporting larger software publishers, common license types and commonly utilized infrastructure. As the software portfolio broadens, it leads to gaps in addressing custom license types and specialized vendors, products, and infrastructure. The diversified SAM tools market has seen traditional SAM tool vendors take a platform approach, moving into adjacent offerings such as IaaS management, unified endpoint management, SaaS management, workflow/request management, IT service management, vulnerability management and hardware asset management.  

Traditional SAM tool vendors aim to strengthen their single platform offerings, broaden their scope and enter adjacent markets. SAM tools focusing on the niche areas and specialized software such as SAP, specialty and engineering applications and SaaS solutions are being embedded into this market. Despite how this market provides organizations with more choice than previously available, it has also heightened the confusion. The result is organizations not knowing which choice is best while struggling to find and deliver the ROI SAM tool vendors promise.  

Alignment of SAM and FinOps 

As organizations focus on cost optimization, SAM and FinOps functions must converge to bridge data gaps and optimize software spending. The convergence enables SAM teams to track software consumption in cloud environments, providing valuable insights for cost optimization.

Representative Vendors

Snow Software is proud to be recognized as one of the Representative Vendors in traditional SAM tools by Gartner. 

You can find other vendor profiles in the full Gartner report.  

Conclusion 

By following the recommendations and understanding the market dynamics, sourcing, procurement, and vendor management leaders can make informed decisions to ensure SAM tools align with their strategic goals, enhance data quality, and optimize software risk and spend. Embracing the convergence of SAM and FinOps functions will further aid in achieving cost optimization and driving value from software investments.

¹Gartner, “Market Guide for Software Asset Management Tools” by analysts Jaswant Kalay, Ciaran Hudson, and Yolanda Harris, 3 October 2023.   

The graphics were published by Gartner, Inc. as part of a larger research document and should be evaluated in the context of the entire document. The Gartner document is available upon request from Snow Software. 

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.   

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.  

The post How to Choose a Software Asset Management Tool: Insights from the Gartner® Market Guide appeared first on Snow Software.

3 reasons behind SaaS price increases

The report delves into three key drivers behind the escalating SaaS prices, which are causing organizations to face budgetary challenges: 

• Vendors will link price increases to inflation: One of the primary reasons cited by SaaS vendors for price hikes is the impact of inflation. It is reasonable for vendors to adjust their prices in response to inflationary pressures. The research reveals that these uplifts often surpass standard inflationary indexes, with contracts sometimes increasing by as much as 30%. Despite high net margin rates, SaaS vendors are demonstrating intent to grow revenue at the rate of inflation, vendors are seeking to not only cover their increased costs but also are also applying inflation rate increases to enhance their profitability. As a result, organizations must scrutinize these justifications carefully. Leaders are recommended to respond to significant uplifts identified by the vendor as defensible through inflation rates and request detailed explanations from vendors regarding how inflation is genuinely impacting their costs. 
   
• Labor rate increases will be blamed for SaaS subscription cost increases: Demand for IT talent is at an all-time high. The ongoing IT talent shortage is significantly driving up labor rates and this constraint impacts the cost of hiring talent to develop the software, affecting both internal development costs and professional services provided to customers. Most IT service providers are reporting high attrition levels and are grappling with the challenge of attracting, hiring and retaining skilled IT professionals, resulting in higher operational expenses. Unfortunately, these increased labor costs are being transferred to customers in the form of higher subscriptions rates. 
   
• Environmental sustainability standards set by the vendor will allow them to charge a premium: The growing focus on environmental sustainability has become a significant CEO business priority, and according to the 2022 Gartner CEO and Senior Business Executive Survey, key stakeholders are exerting pressure on enterprises to adopt sustainable practices. Consequently, SaaS vendors are incorporating standardized environmental sustainability contractual clauses in their contracts. Vendors with leading sustainability commitments will be in a stronger position than their competitors when responding to solicitations that require vendors to meet certain sustainability criteria. Such a leading position means they can, and will in some cases, charge more, albeit their costs of executing environmentally sustainable business will most likely be below the line rather than explicitly disclosed to buyers.  

3 recommendations for negotiating SaaS contracts

To successfully navigate SaaS contract negotiations and mitigate the impact of price increases, leaders and practitioners are encouraged to adopt the following strategies: 

• Challenge inflation-driven uplifts: When faced with vendor-proposed uplifts linked to inflation, organizations must assertively insist on detailed explanations from vendors regarding how inflation is genuinely impacting their costs. Armed with this information, organizations can better assess the validity of the vendor’s claims and negotiate accordingly. 
   
• Analyze labor-related increases: Sourcing, procurement, and vendor management leaders are advised to closely investigate the vendor’s talent management strategies and attrition levels by analyzing quarterly and annual statements to learn about IT talent shortage impacts. Analyze proposed subscription uplifts against labor indexes such as the Employment Cost Index when the vendor is tying an increase to an increased cost of labor to set appropriate negotiation levels. 
   
• Evaluate environmental sustainability claims: Compare desired vendors against competitors with stronger commitments or a better track record to achieving environmental sustainability objectives. Verify vendors’ claims and require evidence during the request for proposal (RFP) process to minimize the risk of greenwashing. 

¹Gartner, Thought Leadership, “Predicts 2022: 3 Reasons Why SaaS Vendors Are Raising Prices and What You Can Do About It” by analysts: Hannah Decker, Quintin Casper, Melanie Alexander, Dawn Hubbard, Gunjan Gupta, Stephen White, 26 August 2022.  

Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.   

Gartner is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally and is used herein with permission. All rights reserved.   

The post 3 Recommendations to Safeguard Your SaaS Budget: Insights from the Gartner® Report appeared first on Snow Software.