Companies spending too much on SaaS could cost them more than just money
Walk into most organizations today and ask what they’re spending on SaaS. Odds are, no one can give you a confident answer. Not because they don’t want to, it’s because no one actually knows.
Ask a different question: who owns SaaS spend in your company? You’ll likely hear three things: “Finance handles it,” “That’s IT’s job,” or “Honestly, it depends.”
And therein lies the real problem. While companies are dropping anywhere from $9,000 to $17,000 per employee annually on software, most organizations have zero clue what they’re actually buying.
The explosion of software tools across every function, only exacerbated by AI, has quietly created a gap between what companies think they’re managing and what they’re actually managing. And that gap is getting more expensive by the month.
SaaS sprawl is worse than you think
Here’s how it happens: your marketing team signs up for Canva Pro, your sales team gets Calendly, design jumps on Figma, and engineering grabs another GitHub license. Meanwhile, IT is already paying for Adobe Creative Suite, Microsoft has calendar functionality, you’ve got design tools in your existing stack, and there’s a company-wide GitHub Enterprise account sitting unused.
This isn’t just wasteful spending. It’s what we call SaaS sprawl, and it’s quietly bleeding companies dry. Recent data shows organizations use an average of 112 SaaS applications, with large enterprises using up to 447 different tools. And I think this is actually underrepresented. When every department acts like its own startup, you end up with a technology Frankenstein that nobody can control or understand.
When you factor in that companies waste 30-50% of their SaaS budgets on unused licenses, and missed renewal dates can cost upwards of $200,000 per instance, it’s hard to understand why so many are not addressing this problem head on. When there’s no centralized intake or contract visibility, things slip through. You renew tools no one’s using. You pay above market rates because you don’t benchmark. You get hit with surprise auto-renewals.
The AI acceleration problem
And, just when some companies thought they had SaaS sprawl under control, AI came along and hit the gas pedal. We’re seeing the late 2010s SaaS explosion all over again, but this time it’s powered by artificial intelligence.
We’re in the middle of a perfect storm. Leadership wants teams to be AI-enabled, to experiment, to learn. They’re actively encouraging employees to test new tools and find ways to work more efficiently. Meanwhile, IT teams are desperately trying to control the sprawl that’s already spiraling out of control.
Guess who wins? The credit card.
Employees are swiping corporate cards to try the latest AI writing tool, testing out OpenAI subscriptions, or spinning up Zapier automations without any security review or budget coordination. Each purchase seems small and reasonable. A $20 monthly subscription here, a $50 annual plan there. But multiply that across every department, every team, every curious employee, and you’ve got a massive problem.
The conflicting stories are everywhere. Leaders preach innovation and experimentation while finance teams watch budgets explode. IT departments create approval processes while employees find workarounds. Everyone wants to be AI-first, but nobody wants to be the one who says no to the next breakthrough tool.
Shadow IT: The innovation myth
Here’s where things get interesting. Some people claim Shadow IT and now Shadow AI drives innovation. They’re wrong. Anyone claiming Shadow IT drives innovation isn’t actually fostering an innovative environment.
When 40% of IT spending happens outside formal oversight, that’s not innovation. That’s broken processes. Your procurement workflows are failing to meet company needs quickly enough, so people are going rogue.
Sure, it looks like innovation on the surface. Employees find new tools, solve problems quickly, and move fast. But here’s what’s really happening: you’re diverting time, money, and focus from actual innovation and R&D investments that could drive the company forward.
Real innovation happens when teams can explore new ideas without bypassing controls. If the only way to get work done is to go around IT or procurement, that’s not agility, it’s dysfunction. And it’s expensive.
The security nightmare we’re all ignoring
It’s not just pure budget that is the problem, Shadow IT and AI and SaaS Sprawl are all creating security holes that many are simply not addressing. Every unauthorized app is a potential entry point for bad actors. IBM found that one in three data breaches involved Shadow IT, with the average breach costing around $4.9 million.
When someone in engineering or marketing signs up for a random productivity tool using their work email, they’re potentially exposing company data. No security review, no IT approval, no encryption standards. Just click, sign up, and hope for the best.
The compliance risks are equally terrifying. Use a non-GDPR-compliant tool for EU customer data? That’s a potential fine. Healthcare company using a random file-sharing app? Hello, HIPAA violations. These types of risks are happening right now at companies that think they have things under control.
Where sprawl lives
Interestingly, SaaS sprawl doesn’t always come from obscure tools. It often comes from the biggest names in tech. At Tropic, we’ve found that some of the most common drivers of tool overlap and Shadow IT include:
- Zoom, Microsoft, Slack, Google – Multiple collaboration tools per organization
- Figma, Canva, Adobe – Design tool overlap with no license governance
- Salesforce, Calendly, DocuSign – Sales tools stacked on top of each other
- GitHub, JetBrains, Atlassian – Dev tools used inconsistently across teams
- Dropbox, Apple, Amazon, OpenAI – Personal subscriptions tied to work email
No one sets out to buy the same tool twice. But without visibility, it happens all the time. Every new vendor means more contracts to track, more renewals to manage, more security reviews to conduct, and more relationships to maintain. The administrative overhead alone can eat up significant resources.
When spreadsheets become expensive
A lot of finance and IT teams are still trying to manage all this complexity with spreadsheets. That’s like trying to navigate a modern city with a paper map from 1995. Even a 1% error rate on $50 million of spend can waste $500,000 annually.
Dig deeper and this isn’t just a tooling issue, it’s an ownership issue. Procurement or finance thinks IT is managing it. IT assumes finance has the numbers. Finance is tracking spend, but not usage. Legal might only get involved post-signature. So, things fall through the cracks.
Let’s talk ROI
Here’s something most people don’t talk about enough: every dollar saved on procurement and purchasing has an immediate impact on the bottom line. Unlike new sales revenue, a dollar saved can be pure profit.
Reducing SaaS spend by just 6% delivers the same profit lift as a 20% increase in top-line revenue. And that’s before you factor in the benefits of reduced risk, stronger compliance, and faster purchasing cycles.
We’ve seen companies recover hundreds of thousands—sometimes millions—just by tackling renewals earlier, consolidating tools, and validating usage.
What smart companies are doing instead
The fix isn’t shutting down software purchases. Not only is that impossible, but you’d have a disgruntled workforce on your hands. It is, however, about enabling them with structure. The companies that are winning aren’t locking down every software request. They’re treating software spend like the strategic lever it is.
Here’s what best-in-class companies are doing:
- Centralizing intake. Giving teams one place to request or renew software.
- Building a software inventory. Not just contracts, but owners, usage, and cost.
- Reviewing renewals 90–180 days out. Not two weeks before expiration. Get ahead of things to determine if you need other tools and create savings.
- Using benchmarking data. So, you don’t overpay for tools that should cost less.
- Measuring utilization. If you bought 500 seats and only used 320, ask why.
None of this slows people down. In fact, it makes it easier for teams to get what they need, faster because the path is clear, the data is ready, and approvals don’t sit in a black hole.
The time to act
Every month you wait is money walking out the door. Those auto-renewals are happening whether you’re paying attention or not. The unused licenses are accumulating. The security risks are multiplying.
But don’t fear. You don’t need to solve everything at once. Start with visibility. Figure out what you’re actually buying. Identify the obvious waste. Cancel the subscriptions nobody is using.
Software isn’t slowing down. And with AI in the mix, things are only getting more complex. This is your moment to get control, not by over-regulating, but by creating the visibility and structure your teams need to move fast, spend wisely, and innovate securely.
Your choice is simple: act now, or pay later. The meter is running either way. You don’t need 200 tools to move fast. You need the right 20 and a way to manage them well.
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