SaaS tools and platforms sit at the core of enterprise technology aspirations, driving results with flexibility and agility. But their usage is not immune to the broader economic or business trends at play.
As last year wrapped up, more than two in five IT leaders took issue with employees who added new SaaS applications without keeping IT in the loop, according to Snow Software data. Limiting the amount of duplicate SaaS applications and identifying configuration issues were other top challenges for two in five IT leaders.
SaaS usage is expected to expand to operational systems as businesses continue to modernize processes and search for efficiency, visibility and cost optimization.
Enterprise customers and SaaS providers were cautious about a slowing economy and lower spending power as inflation reached record levels in 2022. The push and pull between the two actors were put on display during earnings calls and layoff announcements this past year.
Despite challenges, SaaS spending is not expected to stall, but enterprises will not be taking purchasing lightly. Vendors will feel the pressure to keep profits up in a saturated market.
Here are three trends that will shape enterprise SaaS use in 2023:
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An increased focus on SaaS asset management
In 2023, enterprises will work to improve SaaS governance. In addition to controlling application sprawl, an economic slowdown is creating an environment where businesses have to be diligent about spending, even if budgets are not at risk of being cut.
But taking action can be difficult, according to Stephen White, Gartner senior director analyst. IT leaders need to increase their visibility across their SaaS portfolio.
When analyzing the most challenging aspects of SaaS application management, IT leaders were most concerned about shadow IT, security, configuration issues and duplicate applications, according to Snow Software data.
“Visibility is a foundational element, coupled with understanding of subscription terms, interpretation and validation requiring expertise to establish viable paths to cost optimization,” according to White.
Businesses risk monetary loss if tech leaders fail to control the SaaS portfolio. More than one-third of desktop software spending and roughly one-third of annual investment in data center software, SaaS, IaaS and PaaS is wasted, according to a Flexera report.
The struggle to implement best governance practices will be a defining battleground for IT departments.
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The rise of premium tiers
As businesses think critically about their SaaS portfolios, vendors will feel pressure to keep profits up. John Annand, research director of infrastructure and operations at Info-Tech Research Group, expects SaaS vendors to splice out capabilities and add the tools to premium packages.
“SaaS offerings are going to fragment even further to capture more monthly or annual dollars from users,” Annand said in an email. “Instead of the all-the-features-you-can-eat single-price model, I suspect application developers will look to hide more and more advanced features behind additional subscription tiers.”
The combined effect of inflation, competitive labor markets and environmental sustainability requirements is expected to lead to 15% to 20% higher SaaS costs by 2025, according to Gartner projections. Major software providers, including Slack and Microsoft, increased product pricing in 2022.
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Moving operational systems to SaaS
SaaS usage has ballooned, powering many mission-critical workflows. In 2023, SaaS usage will expand to operational systems, according to Liz Herbert, VP principal analyst at Forrester.
“We expect that 2023 will be a year of further modernization especially of those laggard back-office and operational categories,” Herbert said in an email. Many clients had previously held off on moving operational systems to SaaS due to a combination of other priorities and lower maturity of the SaaS offerings in those spaces.
Areas such as customer relationship management software, HR and collaboration are heavily saturated with as-a-service offerings, but SaaS options in other areas like ERP, supply chain management and manufacturing have increased, according to Herbert.
“We see a lot of client projects focusing on modernizing old applications to new SaaS ones in these operational and back-office categories in particular,” Herbert said.
By 2025, 30% of organizations will rely solely on SaaS applications for their mission-critical workflows, according to Gartner predictions.
