Cloud Computing Service Provider Evaluations: Cost-Benefit Analysis Uncertainty
The assumption that Software as a Service (SaaS) saves businesses money is not a universal truth, according to recent Gartner-related research. Instead, without proper SaaS management and optimization, organizations tend to overspend significantly on SaaS products.
Key points from Gartner's research and related industry findings reveal that organizations failing to centrally manage SaaS lifecycles are five times more likely to experience cyber incidents and data loss due to poor visibility into SaaS usage and configurations. Cost control is deteriorating, with many companies overspending on SaaS by at least 25% due to factors such as unused licenses and overlapping applications. Around 53% of SaaS licenses are unused or underused for extended periods, representing a substantial waste.
Proper SaaS management platforms (SMPs), as detailed in the 2025 Gartner Magic Quadrant for SMPs, emphasize the need for features that help businesses manage licenses, eliminate underutilized apps, consolidate redundant accounts and apps, forecast budgets, and optimize SaaS spending to truly realize cost savings. AI-powered solutions showcased in Gartner research claim up to 30% SaaS cost reduction through license optimization and rightsizing.
Despite these challenges, SaaS vendors, such as Salesforce.com, have been one of the most prominent success stories during and in the immediate aftermath of the global economic downturn. The emergence of SaaS has "re-energized" and "added choice" to the software market, according to Gartner. Gartner's research shows that the adoption of SaaS is still relatively low compared to traditional software licensing engagements, but predicts that SaaS will eventually be deployed in all enterprises at some level.
Salesforce.com is a notable example of a successful SaaS vendor. In its most recent financial quarter, the company reported a 24% year-on-year increase in sales, amounting to $377 million. Cloud-based software represented only 3.4% of global enterprise spending last year, compared to 2.8% in 2008, indicating a gradual shift towards SaaS adoption.
However, Gartner questions the impact that SaaS will have on the IT industry in the coming years, raising concerns about the potential for "bad habits" associated with proprietary application use, such as license over-subscription, being repeated by SaaS users. The EU commissioner previously stated that proprietary software is a waste of money, suggesting that the shift towards SaaS may not necessarily result in cost savings if proper management practices are not implemented.
In conclusion, while SaaS offers potential cost savings and operational benefits, these are not guaranteed unless organizations actively use advanced SaaS management and optimization tools as recommended by Gartner and leading industry reports. Without such control, the SaaS model often leads to overspending rather than saving money.
Organizations that deliberate on SaaS as a cost-saving measure without integrating SaaS management practices might encounter significant overspending, according to recent Gartner-linked research. Proper utilization of SaaS management platforms, as outlined in the 2025 Gartner Magic Quadrant for SaaS Management Platforms, can potentially reduce SaaS costs by up to 30%.
