The importance of governance in SaaS: Ensuring success and compliance

SaaS sprawl across industries has rapidly expanded over the last few years, with SaaS being one of the top 5 expenses of every organization. Spendflo’s comprehensive State of SaaS Buying 2023 report reveals that large organizations use as many as 350+ SaaS applications across departments.

In this scenario, SaaS governance becomes non-negotiable, as any modification to the tools and related components may snowball into a drastic change. Often, it translates into unsavory outcomes for the organization. 

Effective governance of the deployed tools allows business and IT decision-makers to mitigate the complexities of SaaS, whether it's scaling operations, adopting new technologies, or accommodating changes in compliance regulations. 

In this blog post, we will explore what governance models you should adopt. We'll also explore some SaaS governance best practices for a beneficial framework. 

What is SaaS governance? 

SaaS governance refers to the policies, processes, and controls implemented to manage SaaS applications effectively. One key objective of this mechanism is to control and monitor the overall management of SaaS solutions. 

It also evaluates related aspects such as data security, compliance, and user access to ensure they consistently align with organizational objectives and regulatory requirements.

What is the importance of governance in SaaS? 

For CFOs overseeing SaaS operations, governance acts as the guiding framework for establishing policies. Here are some fundamental principles of SaaS governance:

• Cost management: Effective governance allows organizations to optimize the cost of SaaS subscriptions, identifying redundant or underutilized applications. This significantly cuts down unnecessary expenditure, leading to cost savings and up to 3X ROI.

• Risk mitigation: SaaS governance policies and control measures mitigate various security risks, including data loss, downtime, vendor lock-in, and integration challenges. It establishes protocols to manage and mitigate these risks proactively.

• Operational efficiency: Well-structured governance streamlines SaaS usage, clarifying roles, access controls, and workflows. It ensures that SaaS applications align with business objectives and workflows seamlessly.

• Strategic decision making: Governance provides insights into SaaS usage patterns, enabling informed decisions regarding application adoption, migration, or decommissioning. It supports strategic planning by aligning future investments in tools with organizational goals.

Steps to SaaS governance 

For SaaS governance, these steps are non-negotiable:

1. Assess & strategize

Before implementing SaaS governance, evaluate the organization's current usage of SaaS applications. This involves: 

• Creating an inventory of all existing SaaS tools
• Understanding their reliability, most-used functionalities, and active user base 
• Setting clear objectives for SaaS usage aligned with the company's overall strategy

For instance, if the objective is to enhance collaboration, the strategy might involve evaluating the efficiency of all the collaboration tools and identifying any gaps in their functionality or security.

2. Policy creation & implementation

Once the assessment is complete, the next step is to create comprehensive governance policies. These policies should cover various aspects, such as:

• Data security
• Access controls
• Compliance requirements
• Vendor management
• Acceptable use

For instance, a company may establish a policy specifying that all project management data stored on SaaS platforms must adhere to specific encryption standards. Implementation involves:

• Educating teams on encryption requirements
• Selecting the compliant tools
• Real-time monitoring to ensure adherence
• Fortifying data security during usage

3. Enforce controls & optimization

This step involves implementing mechanisms and tools to monitor SaaS usage regularly. It includes: 

• Tracking user activities
• Regulate access permissions
• Prompt data handling practices

Optimization, on the other hand, involves continuously evaluating the effectiveness and efficiency of SaaS applications. This might incorporate the following: 

• Identifying underutilized tools or redundant subscriptions 
• Optimizing costs by renegotiating SaaS contracts 
• Finding alternative solutions if needed

4. Iterate & improve

SaaS governance is an ongoing process that requires continuous refinement. Regular feedback from users and stakeholders is invaluable in identifying areas for improvement or emerging needs. 

This feedback loop helps refine governance practices to align with evolving business requirements, technological advancements, and changing regulatory landscapes.

SaaS governance models

Let's dive into the various SaaS governance models and their unique characteristics:

1. Centralized governance

Unified governance entails a single authority or team managing all aspects of SaaS applications across the organization. It establishes uniform policies, standards, and procedures for SaaS usage. 

In general, this model ensures consistency, facilitates easier enforcement of security measures, and streamlines decision-making processes. However, it may lead to a lack of flexibility that doesn't adapt well to specific team requirements or evolving technologies. 

2. Federated governance

In contrast to centralized governance, federated governance decentralizes responsibilities. It allows individual departments or business units to manage their SaaS applications independently within established overarching guidelines. 

This model grants substantial autonomy to departments while ensuring alignment with organizational objectives. It promotes agility and responsiveness to specific needs. Despite that, federated governance may present challenges in maintaining consistency and uniform security standards across the organization.

3. Hybrid governance

A hybrid governance model combines elements of both centralized and federated models. It offers a balanced approach by centralizing control for critical or sensitive applications while allowing flexibility for non-critical tools within departments. 

This model accommodates standardization for essential applications while providing some autonomy for specialized requirements. Hybrid governance seeks to strike a balance between uniformity and flexibility, catering to diverse organizational needs.

4. Ad hoc governance

Ad hoc governance lacks formalized structures and predefined processes for managing SaaS applications. It is characterized by spontaneous decision-making, where governance practices are improvised or implemented on a case-by-case basis. 

While this model provides flexibility, it can lead to inconsistencies, potential security vulnerabilities, and inefficiencies due to the absence of standardized policies and guidelines.

5. Governance-as-a-Service model

Governance-as-a-service (GaaS) is an emerging model that provides specialized services and solutions for SaaS governance. GaaS offerings include tools, frameworks, and expertise tailored to assist organizations in implementing and maintaining effective SaaS governance. 

These services may cover policy creation, compliance monitoring, security measures, and ongoing support. GaaS models often provide customizable solutions, catering to different governance needs across various industries and organizational sizes.

Best practices for SaaS governance audits 

Here are some SaaS governance best practices you must follow:

1. Adherence to industry standards and legal requirements

Review and validate SaaS applications against industry standards and relevant legal frameworks. Ensure compliance with regulations such as GDPR, HIPAA, or industry-specific standards, depending on the nature of the data.

2. Encryption, access controls, and data handling

Analyze the encryption methods used in SaaS applications for storing and transmitting data. Review the access controls, ensuring that sensitive data is accessible only by authorized personnel. Also, evaluate data handling practices to prevent unauthorized access or data breaches.

3. User permissions and authentication

Make sure that user access permissions are aligned with roles and responsibilities. Evaluate authentication protocols, including multi-factor authentication, to enhance security and prevent unauthorized access.

4. Software development, testing, and deployment

Assess the software development lifecycle of SaaS applications, including testing procedures and deployment practices. Ensure adherence to secure coding practices and robust testing methods to minimize vulnerabilities.

5. Third-party vendor security and compliance

Routinely take stock of the security measures and vendor compliance standards while procuring SaaS solutions. Ensure they align with the organization's governance policies and meet security expectations.

6. Disaster recovery plans

To address service interruptions or data breaches, review disaster recovery plans and continuity measures. Ensure robust backup mechanisms and recovery strategies to minimize downtime.

7. Licensing and subscription management

Validate proper licensing and subscription management practices. Enforce compliance with licensing agreements, avoid over or underutilization of subscriptions, and track renewals effectively.

8. Dynamic license management

Implement dynamic license management practices to optimize license utilization. Periodically check usage patterns, reallocating licenses as needed to maximize efficiency and minimize costs.

Recommended read: Best SaaS license management tools for tracking and cost savings

9. Offboarding procedures

Ensure swift and secure offboarding procedures for employees who leave the organization. Disable access to SaaS applications promptly to prevent unauthorized usage and maintain data security.

In summary, for an effective SaaS governance audit execution:

• Conduct a comprehensive review, employing automated tools and manual assessments where necessary.
• Engage cross-functional teams to gather insights from various departments.
• Document findings, including strengths, weaknesses, and areas for improvement.
• Develop a remediation plan for identified issues, prioritizing critical concerns.
• Regularly schedule audits to ensure continuous compliance and improvement.

Ensure SaaS governance with Spendflo 

Leading SaaS buying and optimization platform Spendflo's Dynamic License Management (DLM) transforms SaaS governance by automating license management, freeing IT and RevOps teams from manual de-provisioning tasks. 

Spendflo provides a spend and savings dashboard, procurement dashboard, and insights dashboard that empowers users to: 

• Set criteria for inactive licenses based on last usage, initiating management workflows.
• Instantly track active, inactive, and unassigned licenses across teams and users.
• Opt for automatic license downgrades or reclamation as per real-time usage and employee status.

With this dynamic license management, businesses can access Spendflo’s actionable recommendations based on feature-level usage to help optimize license utilization and navigate SaaS spending.

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