Did you know that in 2018, the average cost per employee of SaaS subscriptions ($2,884) was higher than the cost of a new laptop ($1,299 for an Apple Macbook Pro)? And, as more companies move to run entirely on SaaS, the software vs. hardware spending gap is likely to widen. In this post we’ll take a look at how and why this shift is occurring and what it means for you and your business.
Keeping Your Head (And Business) In The Clouds
Over the last decade, business IT has changed significantly. Computing has become more distributed, portable, and personal. The hardware that your business IT runs on has become more commoditized. For example, many organizations have Bring-Your-Own-Device (BYOD) policies. Even when hardware is issued by the company, employees use their own phones and computers to access email and apps at home and on the go. IT spend continued to grow, but hardware advantages are minor now. The business leverage has shifted to software, and budgets have followed, often into software-as-a-service. This change in spending is both a cause and effect of a broader shift of business IT from hardware to software and an important indicator of the future. Now let’s dive into the numbers.
IT and SaaS Budgets Continue to Rise
A recent IT budget survey by Computer Economics found that 64 percent of organizations are increasing IT spending. According to the report, “IT organizations are encouraged by their experience with cloud computing thus far and are willing to supplement those efficiency gains with additional spending, especially for business transformation and the continued move to the cloud.”
According to Blissfully’s data, the average medium size company spends $20,000 a month on SaaS subscriptions, a $5,000 a month increase since Q1 2017. Based on our projections, SaaS spend across companies of all sizes will rise even more aggressively – increasing 118% by 2020.
SaaS Has Been Growing Every Year
According to Spiceworks, in 2015, companies were spending an average of 12% of their IT budget on cloud-based services. That number rose to 14% in 2016, 17% in 2017, and reached 21% in 2018. In the same time period, hardware went from 41% of the budget to 31% in 2018. While the ratio has shifted back slightly in 2019, the overall trend is unmistakable: modern IT is moving to the cloud.
How are IT Budgets Changing in 2019?
Most companies (89%) expect IT budgets to either grow or stay the same over the next 12 months.
The main spending priority in IT is cloud applications, which was cited by 80% of the organizations surveyed as a place they are increasing their spend.
Over the past four years, as overall SaaS spending has increased, the share of app spend by department has held relatively steady. This is an indication that SaaS growth isn’t relegated to one department or team. It’s everywhere. You may even see budgets shift away from IT and into other departments, despite being used for software tools.
Why It Matters
In the past, IT owned all technology decisions and had a limited amount of tools to manage and deploy. Today, the amount of tools is exploding and the ownership is being distributed across the organization. According to Blissfully’s 2019 SaaS Trends report, the typical 101-250 person company uses about 100 apps, which doesn’t sound too unmanageable. But, when you consider the SaaS Graph relationships, it gets much more complicated: the same sized company has an average of over 1000 app-to-employee relationships. The number of relationships get deeper and more complex as the organization grows: companies with 500-1,000 employees have an astounding 5,671 app-to-people relationships!
This is the new cloud-based IT business architecture. It’s flexible, it lets teams select, purchase, and activate their own tools without bureaucracy, and it’s getting more unmanageable every day, but it doesn’t have to be.
By taking a Collaborative IT approach, organizations can bring all of the key stakeholders into the process of SaaS management. Unlike in the command-and-control days, team leaders, finance, HR, operations, security and IT must all be involved in the process to ensure that each SaaS Graph relationship is valid and up-to-date.
While this approach may sound complex, it’s a cultural shift that feels natural to most organizations, and is much simpler to maintain in the long run. Each group has a vested interest in sharing responsibility for SaaS apps: whether it’s to gain access to the right apps, balance the budget, or ensure security and compliance. Gathering these teams around a single system of record can ensure that everyone’s getting what they need out of technology in a fast-growing organization.
Or for more information about IT trends and budget, read our Annual SaaS Trends Report.