The number of SaaS (Software as a Service) applications in use in the enterprise has exploded over the past 20 years, fueling concerns among CIOs and IT leaders about how to best manage application costs and usage. Okta’s recent research revealed that large companies have on average 129 applications, and those are just the applications that are integrated with Okta. Netskope’s research shows a staggering 1,071 cloud services in the average company. The successful sales and marketing efforts of SaaS vendors who have found buyers at the individual or departmental level mean hundreds more applications for CIOs to deal with.

For most IT teams, that’s simply too many applications to manage, and most companies still rely on manual tools, spreadsheets, and surveys to get ready for each application’s renewal cycle or true-up. That renewal scramble is an ongoing and real problem–consuming weeks of valuable time that could be better spent on driving business value.

That’s why CIOs are talking about application rightsizing more and more. That term refers to the balanced approach of reducing application spend while increasing business value from those applications. Rightsizing extends beyond typical discovery efforts—that focus more on tracking software licenses and logins—and focus on how key features in those applications are being engaged with in ways that benefit the company.

This article explains why CIOs are making a move toward application rightsizing, details the data they must collect to make accurate decisions on increasing or decreasing license purchases, and illustrates application rightsizing in action.

Why Rightsize?

Application rightsizing serves a wide variety of business priorities common to enterprise CIOs. It allows them to understand current license usage so they can reclaim and reprovision their existing licenses during subscriptions or renewal cycles. This allows them to adjust licenses by tier for specific users, teams or locations. In doing so, they reduce the total costs of their applications, an effort that can be further reduced by consolidating redundant applications to a smaller, curated set that provide the same functionality.

As business partners to the various internal constituencies they serve, CIOs are also thinking beyond cost containment. In the course of rightsizing, they are also evaluating application engagement and productivity across teams in ways that prove the business value of their software investments.

The Information Necessary To Rightsize Effectively

To properly rightsize applications, CIOs and their teams need to gather a wide variety of information:

• Application contracts, pricing, and renewal timing
• Purchased and provisioned application licenses by feature tier
• Application login data
• Application spend data
• Application user engagement data

Traditionally, that information is painstakingly gathered via manual audit, but CIOs know that data on employees, licenses, and usage levels is constantly changing, so they’re seeking out solutions that automate its collection.

To make accurate decisions about the need to decrease or increase application licenses, CIOs must also understand how employees actually use applications, right down to the feature level. Login activity is not enough. Real-time engagement data completes the application usage picture, and it must be gathered continuously.

Application Rightsizing In Action

Armed with real-time information on everything from license data to feature usage, CIOs can begin to change their software investments based on actual business need and value. In doing so, they are finding that they can reduce their application costs from 20% to 50% or more while understanding and improving collaboration across teams.

This is best illustrated by an example of a company preparing for an application’s renewal cycle. The automated discovery of the contract, login, location, and usage information shows the organization that it has 6,200 contracted and 5,843 provisioned licenses for an application (this could be Salesforce, ServiceNow, Box, or any of a wide variety of popular applications) at an annual cost of over $1.2 million.

Analytics driven from real-time usage data of that application shows the organization’s CIO that only 4,046 users are actively engaged with it, based on insights into the actual feature usage. That presents an opportunity to rightsize its investment in that application to 4,500 total licenses which includes headroom for usage spikes or future growth. Reviewing application engagement further reveals that a significant number of those users are only using features provided at levels lower than their provisioned license tier, which allows those users’ licenses to be downgraded with no negative user consequence. Rightsizing the number of licenses alone delivers $400K in cost savings. Adjusting some users’ license tiers based on actual usage, a decision that can only be accurately made using application engagement data, delivers over $100K in additional savings

In this example, application rightsizing delivered upwards of $500K or 40% reduced annual costs without sacrificing any features or benefits for the organization. If the same organization put advanced, automated rightsizing rules in place (which can exclude certain teams or executives as necessary) it could further reclaim unused licenses every week or month, delivering ongoing incremental savings across applications.

Summary

Application rightsizing is a process that IT teams can apply continuously to understand the usage of all their SaaS applications, balance the usage levels with their costs, reclaiming licenses where unused, or expand license tiers where needed by other users, leading to lower application costs and a better ROI on SaaS applications.