IT and Business Insights for SMB Solution Providers

SaaS Sprawl: Challenge and Opportunity for MSPs

By taking control of SaaS management, MSPs can boost their value to business clients and increase recurring revenue. By Ben Spector

SaaS usage is at an all-time high and growing. Even small companies can have hundreds of legitimate cloud software licenses, not to mention those considered “shadow IT,” deployed by individual departments and “rogue” employees.

The resulting SaaS sprawl can be a challenge for managed services provider (MSP) businesses like yours that are engaging with SMBs that have fully embraced the cloud app culture. I know this firsthand, having run a successful MSP for nearly a decade before selling it in 2020. In my experience, administrative tasks, such as managing accounts, user identities, and policy assignments, or even ensuring appropriate security or integration measures, inevitably fall to MSPs—even if you’re not providing the licenses.

Just as every dark cloud has a silver lining, however, so does SaaS sprawl. With the right tactics and tools, you can take control of SaaS management, boosting your value to business clients and increasing your recurring revenue. Here are six important steps:

1. Stop the SaaS search before it starts

Obviously, the best way to manage SaaS sprawl is to stop it before it starts—or at least before it gets out of hand. In an ideal world, you would prevent this by anticipating clients’ needs and addressing them completely with proven solutions that you trust and work well together.

In the real world, users’ wants and needs are unlimited. Therefore, you must proactively reach out to line-of-business (LOB) or functional leaders (e.g., HR, finance, marketing, etc.) to understand their requirements and communicate that IT is a partner, not a police force. Lobby these leaders on how you can help them find and vet solutions that meet their functional needs and integrate with other applications they’re using.

Pro Tip: Don’t issue a one-and-done memo about your cooperative stance; it will come across as disingenuous. Instead, engage in ongoing discussion with LOB and functional leaders. Put a meeting on the calendar so the check-ins happen and trusted relationships develop over time.

2. Open lines of communication with users

It’s not just department leaders with whom you need to be concerned. One of the primary reasons for SaaS sprawl is that individual users are signing up for apps on their own without checking in with IT. Typically, they’re not sourcing SaaS to be defiant; they’re simply faced with a work problem and seeking a solution. The fact that their first step isn’t to call IT for help is the bigger issue. I’m not saying the IT department is unresponsive (though they could be), but that they need to communicate better with their user community.

As an MSP, you can help your clients’ IT departments open lines of communication by setting up formal—yet simple—procedures for employees to share their tech challenges and needs. If the process is easy enough and employees feel heard, they’re more likely to come to IT before trying to solve issues themselves.

You can solicit input simply by providing a web form or email address that routes requests to IT. It’s key that feedback doesn’t disappear into a black hole, so if your clients’ IT teams can’t address needs quickly, advise them to set up an autoreply with an estimated timeline.

Pro Tip: Set up a forward to send user requests to your team, too. Knowing what users need can help you identify upsell and cross-sell opportunities. Don’t leave them on the table.

3. Set SaaS selection policies

As noted, creating a dialogue with leaders and users will go a long way to changing the perceived power imbalance between IT and everyone else when sourcing SaaS. But it’s also a good idea to set some app selection policies.

To maintain the “friendly IT provider” stance, set rules that aren’t rigid but encourage compliance. For example, allow users to suggest apps for IT review before downloading for use. Explain that this will enable IT to ensure that there isn’t an existing license for the same software title or a similar one already in use elsewhere in the company. If the app is not duplicative, advance notification allows IT to research the solution and competitive alternatives as well as assess costs and risks before licensing the app.

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