What is SaaS Vendor Consolidation?

Vendor consolidation in SaaS involves reducing the number of SaaS tools by merging similar functionalities, eliminating duplicates, and selecting only truly strategic vendors. Instead of each of the five teams buying their favorite project management software, the organization selects one and moves everyone there. Financial resource management and security are considerations in scenarios of unmanaged SaaS growth or SaaS sprawl.

On average, modern SaaS businesses have to manage well over 250 SaaS subscriptions. The acquisition of specific subscriptions involved initiation by teams, without senior management’s direct input. Shadow IT activities are related to the finance department’s overall understanding of spending and usage data.

By doing so, they may address:

• Audit each department’s active subscription and compile a source of information.
• Identify duplication, such as different departments having different versions of their note-takers or digital signing tools for the same work.
• Selecting a sole vendor for the function involves discontinuing services from other providers.

The cessation of a redundant tool is associated with cost factors and various other operational impacts.

• IT resource allocation for maintenance and troubleshooting is linked to the quantity of connections.
• Security audits tend to be less difficult due to the factors mentioned previously.
• Data security aspects relate to the quantity of data stores managed by a single tool.

Typically, a consolidation initiative consists of the following four phases:

1. Audit – Get every detail about active subscriptions, cost, owner, and usage level of each. The finance and IT departments are jointly addressing this stage.
2. Categorize – Clustering the software packages the company uses functions (e.g., communication, analytics, HR) can help to find the most direct ones.
3. Negotiate – Go to the other vendors with the new number, showing you want to buy more from them and secure bundled terms.
4. Migrate – Retraining and moving to the new system at a specific time, with minimal or no ​‍​‌‍​‍‌disturbance.

The consolidation of workload with a single vendor includes considerations regarding how vendor interruptions or cost changes might influence operational activities. Balancing consolidation with a degree of vendor diversity is usually the safer long-term approach.

Ask​‍​‌‍​‍‌ a few questions before starting a project that can point you to whether SaaS consolidation makes sense or not:

• In your team, does anyone know for sure the exact number of SaaS tools the company currently pays for?
• Are there instances where different departments procure similar tools independently?

Factors may indicate a shift in vendor relationships concerning current SaaS providers:

• The total SaaS spend has grown much faster than the increase in the number of employees.
• The time required for security and compliance reviews is showing an upward trend.
• Responsibility for company-wide SaaS purchasing decisions is not formally assigned to a single person.

SaaS consolidation can last only if new SaaS sprawl doesn’t get in the way at the beginning, throughout the company. The way companies prevent that from happening is through procurement gates: a step of formal approval that any SaaS purchase must clear before a new contract is signed. Companies also conduct usage audits regularly (4 or 6 months after the last audit) to be more effective. This method can influence the stack’s size, potentially affecting the need for subsequent maintenance tasks.