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Too many subscriptions? Many of us are feeling this way, and so are companies: In a downturn, cutting unnecessary expenses is more important than ever. Is this why SaaS management solutions have become ubiquitous? Let’s explore. — Anna
Fighting SaaS sprawl
“SaaS sprawl is a natural consequence of the SaaS revolution,” TechCrunch contributors Mark Settle and Tomer Y. Avni wrote in a guest column last November. Paying for and managing myriad SaaS subscriptions may be natural, but it is still a headache for companies, which likely explains why solutions helping them manage this pain point are quite popular among investors.
Just this week, British SaaS management company Cledara announced a $20 million Series A round of funding, TechCrunch’s Paul Sawers reported. This follows earlier pre-seed and seed rounds, bringing the startup’s total funding to date to some $24 million.
As weird as it feels to write this, $20 million is no longer a ton of money in our strange little world. But Cledara’s Series A round was closed in a downturn. And it’s the SaaS management category as a whole that VCs are betting on: Several Cledara competitors have also raised noteworthy amounts of venture capital over the last couple of years.
Some of the largest rounds raised by SaaS management companies to date include Vendr’s $60 million Series A, Zylo’s $22.5 million Series B and BetterCloud’s $75 million Series F. There’s even been an M&A, with SailPoint acquiring Intello in February 2021. Cash influx hasn’t stopped since then: This April, TechCrunch reported that Beamy had raised $9 million to “help enterprises detect and manage their SaaS apps.”
Not all these companies do exactly the same thing for the same audience. Cacheflow, for instance, wants to make the SaaS buying process more flexible. Cledara’s targets include startups and scaleups. Meanwhile, Beamy is going after large, traditional enterprises, whose concerns include security and compliance. Some take the security focus even further, such as AppOmni, which raised $70 million to “find and secure vulnerabilities in SaaS app stacks.”
A security focus is a timely selling point for SaaS management solutions, as cyberattacks are on the rise. But there are other factors that have created tailwinds for the meta SaaS category, and the need to control costs is chief among them.
Keeping SaaS in check
Investor interest in meta SaaS isn’t new. In early March 2020, VC firm Emergent Ventures flagged the category as one of the opportunities within an otherwise “crowded” SaaS market. One of the firm’s arguments was that “businesses need tools to manage provisioning, access control, data and costs” related to the increasing number of SaaS tools they use.
What was an emerging need before COVID-19 is proving to be even more necessary in the post-pandemic era. According to an analysis from SaaS management platform Productiv based on data from its clients, “SaaS adoption skyrocketed with remote work, up 62% in the first year of COVID [and] another 28% in the second year.”
A lot of these SaaS tools have been adapted bottom-up by individual users or teams, leaving financial departments to deal with what they increasingly perceive as a problem.
One of the key concerns is that no company wants to be wasting money during a downturn. A related concern is that this very same downturn is leading SaaS companies to charge more and become less generous with their freemium tiers. Among other things, this has made usage-based pricing more attractive to buyers who want to make sure they are not paying for shelfware.
There’s a lot that SaaS clients can do to reduce their SaaS spend, and quite a lot that SaaS management companies can do to help, Vendr CEO Ryan Neu noted in a guest post.
In this context of cost-cutting, it seems paradoxical that some companies are also emphasizing SaaS discovery, especially when it is their main focus. However, it does seem to make more sense as a feature. For instance, the recently launched Cledara Discover tool suggests popular options for each category Cledara users are looking into, and we are curious to see how it will fare. Perhaps managing SaaS sprawl and needing more tools are not mutually exclusive.
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