“Cloud-first” is Risky for the Bottom Line – Business Apps (Part 2 of 3)

To continue from last week’s article on “cloud-first” challenges for IT leaders, we continue the conversation this week focused on the next greatest challenge to the bottom line – business-led application spending.

To begin with a statistic: Cisco recently reported that SaaS applications will account for 74% of the total cloud workload by 2020. That amount is projected to outpace the growth of the dollars spent on cloud infrastructure (“IaaS”) mentioned last week.

Let’s face it: we live in a business world of SaaS-a-holics; some of whom operate with a nasty SaaS-hangover from all the different kinds of cloud SaaS services being purchased today. Once end users fully embrace their password managers or a broadly integrated SSO solution like Okta or OneLogin, the pain of seamlessly accessing all these apps starts to become bearable. But that’s just accessing the apps.

What does this all mean for the bottom line of the business? It’s important to begin to answer that question by classifying the apps as enterprise versus team-level applications.

Cloud Business Applications
I’ve heard several IT and finance leaders refer to the Pareto principle (“The 80-20 rule”) referencing that 20% of the apps account for the 80% of the spending. They reference apps like Salesforce, AWS, ERPs HRIS and other “enterprise-wide applications”. As for the rest, we’re talking about department or team-level applications. But if you’re spending $10,000,000 a year on 100 cloud SaaS apps, and $2,000,000 (20%) is spent on 80 different team-level apps, how likely is it that organizations are waiting tens or hundreds of thousands of dollars on under-utilized or unused software? How do businesses or the teams within them manage these apps today?

Most business leaders tell me those apps just “fly under the radar.” Some have even described their credit card spending on SaaS products like some kind of “wild west”. Larger enterprises attack the challenge with people and processes. They create tight policies around credit card spending and pay to purchase solutions backed by whole teams of procurement professionals. Every dollar is policed.

For the other 90-95% of companies who don’t have these Fortune 500 procedures or resources, the “wild-west” means more risk to the bottom line.

Another Risk, the “IT Bias”
Speaking to the enterprise-wide applications, we often hear IT leaders saying, “I think we’re doing a pretty good job managing all the apps we have”.

Many IT execs genuinely do make good efforts for the enterprise-wide apps they specifically manage and oversee. The problem is the rest of the apps. CIO.com reported a Cisco study revealing CIOs thought they had an average of 51 cloud services running in their environment. In reality, Cisco found the average was 730 cloud services.

With so many benefits that cloud SaaS apps bring to the organization, this lack of visibility to the IT function makes it virtually impossible to optimize licenses and get the most from these services. These team-level apps are indisputably creating real risks and challenges for the bottom line at the modern enterprise.

Stay tuned for next week for the final post in this mini-series focusing on the three basic steps to mitigating risk to the bottom line with cloud infrastructure and cloud business apps. Last week, the first article was on risk to the bottom-line from cloud-based infrastructure.