Office 365: are you spending too much?

Without proactive management of SaaS applications, organisations face rising fees and increased exposure to compliance risks, says Matt Fisher

Enterprise software spending is estimated to increase to $351bn worldwide this year according to Gartner.

Cloud is one technology driving the boom in software spending, with adoption only set to increase as vendors demonstrate the possible financial reward and as users appreciate the operational freedom that ubiquitous software availability on multiple devices brings.

The continued and accelerated adoption of cloud services presents organisations with both massive potential and increased risk. While cost savings can be achieved from lower infrastructure, maintenance and resources, the benefit to the balance sheet will only be seen if services are managed properly.

Without proactive management, organisations may find themselves facing rising fees and increased exposure to compliance risks. The ease of use that is driving SaaS applications adoption is simultaneously propelling overspend through the over-provisioning of user accounts, duplication of on-premises licenses and excessive account entitlement.

Office 365: benefits vs. financial risk

The most used SaaS application in the world, Microsoft Office 365, exemplifies how cloud software must balance the benefits against financial risk.

For IT administrators, the lower hardware and maintenance costs are certainly attractive, while the "always on" access to files and mail benefits the user. But these advantages come at a cost.

Office 365 users pay on average 80 per cent more over the product's lifetime

Microsoft previously admitted that Office 365 users pay on average 80 per cent more over the product's lifetime, compared to a perpetual license. And with 85 million users, Microsoft is earning hundreds of millions each month from Office 365.

With estimates suggesting that enterprises typically waste at least 30 per cent of their cloud spend, billions appears to be lost each year in unnecessary spending.

Too many IT and finance leaders don't have the necessary visibility to understand, manage and control their Office 365 users, usage and spend. Without a consolidated view of Microsoft Office usage across on-premises, the cloud and mobile, budget is being misspent on unnecessary subscription plans, unused accounts and duplicating on-premises licenses.

As a result, making cost-efficient decisions undoubtedly becomes a struggle, especially for contract renewal.

Five must-dos when investing in SaaS applications

Organisations must proactively manage SaaS applications, if they are to avoid non-optimised provisioning and the subsequent financial burden. Here are five must-dos for organisations increasing their investment in SaaS applications:

1. Apply IT governance to SaaS
Most organisations have a good handle on procurement and provisioning governance for on-premises applications. However, with SaaS vendors making it easy to launch new platforms and consume its services, more teams are self-selecting solutions and bypassing IT when signing-up for them. This is creating a 'disruption gap' - whereby IT doesn't have visibility into the full enterprise software usage.

Returning to centralised IT control isn't the answer. Instead, IT leaders must support and enable business units to procure software efficiently, while maintaining centralised visibility.

2. Identify who's using what
Organisations need a single, integrated view of all their SaaS applications that shows users, usage and cost. Unfortunately, the administration portals that SaaS vendors provide will show you how many subscriptions have been bought, but not how - or even if - they're being used.

Without usage information, IT teams cannot optimise its SaaS spend. And for applications, such as Office 365, which simultaneously maintain cloud and on-premises models, integrating all this information is critical. As the number of SaaS vendors that organisations use rises, manually tracking all their usage across multiple portals becomes onerous.

3. Shift the primary focus from compliance to cost optimisation
While compliance concerns aren't fully mitigated in the cloud, they are partially lessened. So, as SaaS adoption increases, IT leaders - especially software asset managers - can focus on cost containment. Software asset management (SAM) solutions can provide the clear user and usage visibility that enables effective spend control.

4. Watch out for when ‘free' really isn't
Organisations must watch out for SaaS offerings that appear "free", but actually demand expensive corporate subscriptions. For example, some organisations have received communications from popular cloud-based storage vendor, Box, stating that a certain number of employees have created user accounts using their corporate email addresses. As its business plans cost between $5 and $15 per month - unlike the free individual license - the organisations must pay the enterprise subscription for each user.

5. Understand ‘compliance' in a SaaS world
SaaS applications are typically licensed on a subscription or usage basis, unlike the perpetual-license model common with on-premises software. This has led to a misconception that it is impossible to be out of compliance with SaaS.

Tracking user logins mitigates a good deal of compliance risk, but a few challenges remain:
• Authorised user violations that stem from client-side software components, including applets, plug-ins and agents
• Unauthorised use that stems from license constraints on shared logins, geography and admin credentials.

Ultimately, identifying where and how SaaS applications are being used on the business's entire IT environment will prove crucial to ensure that IT teams aren't lumped with paying for unused or unnecessary services.

SAM solutions empower organisations to manage their SaaS investments and ensure they are delivering on the ROI promises made by vendors and service providers.

Matt Fisher is VP at Snow Software