FinOps targets SaaS as software audit costs spike

Dive Brief:

• CIOs are leaning on IT asset management teams to help rein in SaaS spending and avoid costly vendor audits as software migrates to cloud, according to Flexera. The software company surveyed 503 technology professionals during the first half of the year for its annual State of ITAM report.
• Nearly one-third of enterprise software asset managers partnered with their organization’s FinOps team, compared to just one-quarter last year. SAM professionals were also more likely to confer directly with a company’s CIO or CTO, the survey found.
• The consequences of licensing oversights can be severe. The number of organizations that paid $10 million or more on software vendor audits over the last three years nearly doubled since 2023, surpassing 1 in 10 organizations. Over the same period, 22% of respondents spent at least $5 million on audits.

Dive Insight:

Enterprises are adjusting as vendors shift core software products to cloud, reconfigure pricing, revamp bundling options and make tiny contractual changes that can have pricey consequences.

More than one-third of respondents acknowledge difficulty in optimizing software consumption, as SaaS spending waste increased for 2 in 5 organizations, up from 31% last year. SaaS contract complexity emerged as a top pain point for over one-third of respondents, too.

“Some of these vendor licensing terms are so freakin’ complicated,” Brian Adler, senior director of cloud market strategy at Flexera, told CIO Dive.

Tech leaders are turning to FinOps cloud consumption and cost control practices to optimize SaaS spending, inviting software asset managers to work with cloud teams, Adler said.

“The SAM folks are getting a seat at the cloud center of excellence table because we’re seeing more and more software in cloud,” Adler said.

Nearly three-quarters of organizations have a central cloud management team and most — 88% — include an IT or software asset manager, Flexera found. Coordination with FinOps teams is catching up, according to Adler.

“All of the pieces are in place, but they are not quite connected,” Adler said.

SAM professionals have made headway toward cutting costs through several strategies noted in the report. In addition to downsizing SKUs and reducing maintenance spending on unused software, enterprises are learning they can transfer some on-prem licenses to cloud.

Unexpected bonuses often hide in the fine print, according to Adler. “More and more software licenses are cloud friendly and portable,” he said. “They give you the ability to leverage existing licenses and, all of a sudden, an investment you’ve got in on-prem software moves to cloud.”

IT and software asset managers may be too busy responding to vendor audits to focus on proactive optimization measures.

Half of organizations reported at least one Microsoft audit in the past three years and audits by IBM and Oracle increased slightly year over year, according to the survey. Responding to audits was the most common activity for nearly three-quarters of ITAM teams, an eight percentage point jump since last year.