How much are you spending on monthly software?
Software as a service is incredibly useful, but with so many possible services, and with so many potential accounts to pay for them under, it can be unclear what your company is actually sending money to every month. To learn more about organizing your software payments and how to save money on underused services, we spoke with Dave Baule, CEO of MISO3.
ABERMAN: I know as a business guy, and as an investor, I’ve done a lot of software as a service deals. It’s tremendous that a software service business could just keep sucking revenue out of a business every month. But that’s a huge problem for companies, right?
BAULE: Oh absolutely. And I noticed, both from my past companies, and companies of friends I’ve had, it’s growing at an alarming rate. The amount of services people are procuring, both in their commitments in telecom, especially now with the cloud growth and SaaS, these services are growing exponentially, and with very little controls.
ABERMAN: So, give me an example. I assume that you know these days, a lot of us consume software as a service. We don’t realize it when we’re using Facebook, Google and so forth. But in the enterprise, there is a host of technologies now that people, organizations, buy on a monthly basis, for core functions.
BAULE: Correct. I mean, SaaS licensing is probably one of the biggest. So today, SaaS licensing was probably about 170 billion dollars last year in spend. An average employee has 8 to 12 licenses. They’re renewing at a rate, and turn over 40 percent of the time, these licenses. So, the amount of the amount of waste in understanding when an employee leaves, that I cancel the service. Not just that I minimize the access to the service, that I actually take the license, and either cancel it, or put it back into my my pile so I can reallocate.
ABERMAN: So this is the corporate analogue of my credit card statement, with all these monthly things that are like, five, ten dollars. Like, when did I do that, and why can’t I stop it? And I’m forgetting until the next month.
BAULE: And that’s a great point, and I tell people: think about your personal life. I mean, we all have our Netflix and our Hulu, and we have our kids signed up, our spouse signed up. But the difference there, there are two primary differences. One, you typically know who bought the service. In a company, you may not. The second one is, you know, it’s your money. In a company, employees are pretty loose with their money. They’re not necessarily looking for it. And because of these services, there’s really no controls, no one’s responsible. I think I heard on an average of 1000 employees, there’s 90 owners of services. Well, who’s responsible for keeping track of that?
ABERMAN: The answer is no one.
BAULE: Until we built this platform. So, MISO really came in as a point of saying, how do I keep you informed, and show you how to control your information? So, there’s two ways of saving money. There’s events that tell you, hey, my service is coming up for renewal. I signed a two year deal. It’s coming up. It’s an opportunity to save. Now, this is a little different than a normal asset like, if you bought a fixed asset. With these service assets, there’s one window of time where I can actually save 10 percent, or 20 percent, by buying a year in advance from a monthly service, for example.
And then a lot of these services, like telecom, I mean, the price compression is dropping at 8 to 15 percent a year. So, at my last company, we did this big project, we brought everybody in, and we wanted to save some money. And we saved our ten thousand dollars a month by committing for another year. Everyone was all excited, but then I realized, we could have made that savings eight months ago. So, with that opportunity savings of ten thousand dollars, my mind is, I actually had a loss of 80 thousand, and I’m cheap. So it really bothered me. That was 80 thousand I could have used for better stuff for employees, for new technology. I mean, do something to actually help the business.
ABERMAN: So you’ve developed a software platform that basically helps businesses manage managing software.
BAULE: I get the irony, but it also provides alerts. There’s certain alerts that are persistent. So, an employee leaves, Sally leaves the company. Did I cancel the service Sally had? Now with all of the acquisitions, I’m closing offices or facilities. Do I still have services that I’m paying for at those locations? Our tool alerts are persistent. Hey guys, you can’t exist. Or, I replace a service. I have a new service to replace an old service. Did I ever remember to replace the old service on time? So, that time factor is a big deal. These services really have three characteristics, and that’s why businesses are bad with them. So, the first is, it has a term. It has a beginning and an ending.
Inside of that term, there’s some financial consequences. You’re paying it monthly, quarterly, annually, but the hardest part for a business is, at the end of the term, something actually occurs. It is either prices changing, the services canceling, or it’s auto renewing for a set period of time. So by doing nothing, something is actually happening. So no action, or no decision, is turning to a decision. And companies aren’t prepared for that. And that’s what’s occurring now, that the growth of the service business is actually outweighing some of the fixed cost businesses.
ABERMAN: I’ll tell you, I’m putting my old investor hat on, but this sounds interesting. I assume that you’re not finding many customers that aren’t interested in this.
BAULE: All companies are interested in savings. The funny thing I’m finding, I went out and spent a lot of time talking to CFOs and CIOs and CTOs. Everyone realized they probably don’t do a good job. No one knows what the financial cost of this is. I mean, is this a little problem, or is this termites eating out my foundation? And I will tell you, if you start looking at some of these numbers, I mean, these are numbers hitting the bottom line. If you’re trying to increase your EBITA by a couple of points, and you’re a finance guy, you should focus on this.
I tell these guys, you know what should do, you want to know if you’re part of the problem? Go bring the guy you think is responsible for tracking this, and ask them: can you give me all my recurring services that are coming up for renewal the next six months? Now you’re going to get one of two looks. One is, I got it boss. I’m on it. The second one is, you just gave somebody a really bad homework assignment. And if you get that second one, be prepared, it’s not gonna be pretty. The good news is, because you aren’t tracking it very well, there’s probably big savings for you. But now you’ve got to go through the process of trying to clean up those services, and then put them somewhere that tracks them on an ongoing basis.
ABERMAN: Before I let you go, just quickly. MISO3, awesome name. But I suspect it’s not Japanese soup.
BAULE: It is not. So, we really wanted to build a platform that was forward looking. Unlike accounting systems and expense management, which looks at what we did last month or quarter, we wanted to tell you: what decisions do you need to make in the next month, or the next three months, or a year? So, MISO is really designed to anticipate your needs. And the little joke I would have is that, you’re making it so. So, MISO means make it so.
ABERMAN: Make it so, corporate America, save some money on software by checking out David Baule, chief executive officer of MISO3. Thanks for joining us today.
BAULE: Thank you.