According to Gartner, the software-as-a-service (SaaS) market makes up more than 50% of the overall software market. We also found that ~40% of organizations use 50 SaaS tools, whereas ~5% use 250+ tools! Also, IBM's Cost of a Data Breach Report 2023 highlights that data breaches cost organizations an average of $4.45 million. Investing in SaaS management now will save millions of dollars down the line. Pricing models are complex and opaque. User-based pricing, usage-based pricing, etc. make it difficult to predict spends before the invoice is sent. In addition, buying behavior has changed—employees evaluate, shortlist, and buy SaaS tools with their own credit cards without IT/procurement oversight. This decentralized buying causes shadow IT, which adds to the problem of SaaS sprawl.

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In this blog post, we will explore:

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• What causes SaaS sprawl?
• How SaaS sprawl impacts your business
• Best practices to manage SaaS sprawl

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SaaS Sprawl by the Numbers: 2025 Statistics

• The average enterprise now uses about 106 different SaaS tools, down from 112, reflecting a modest consolidation trend.
• Up to 53% of SaaS licenses go unused, costing organizations an estimated $21 million annually in waste.
• Shadow IT remains rampant: 75% of employees are expected to adopt or modify technology without IT oversight by 2027, up from 41% in 2022.
• Over 30–40% of IT spending in large organizations is attributed to Shadow IT.
• 55% of employees admit to using SaaS applications without security or IT’s involvement.
• 15% of employees regularly use unsanctioned generative AI tools on corporate devices, introducing new risks.
• More than half (58%) of organizations are now deploying AI tools for identity and access management to help combat Shadow IT. 

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SaaS Sprawl vs. Shadow IT vs. App Sprawl: What’s the Difference?

Here’s a side-by-side look at how these terms relate and differ:

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What causes SaaS sprawl?

The growth of SaaS sprawl comes from multiple overlapping factors. Here are key drivers in 2025:

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Decentralized SaaS procurement that lacks visibility and control

When different teams buy tools independently to address immediate needs, it leads to duplicated licenses, overlapping features, and blind spots. Without visibility into all subscriptions, IT can’t enforce standards.

Rapid expansion of the SaaS market

Because almost every category now offers a SaaS option, teams feel free to test new tools. In fact, 2025 research shows that adoption pressures push organizations to try multiple tools at once. This experimentation often outpaces evaluation of whether existing tools already cover those needs.

Bring Your Own Device (BYOD) policies

Employees using personal devices for work can bypass IT oversight, making it harder to track which SaaS apps are installed or used. That blurs the line between personal and business tool use and encourages uncontrolled growth.

Organizational culture and lack of governance

In workplaces where teams aren’t held accountable for SaaS procurement, the pressure to move fast often outweighs governance. Without clear policies or incentives to consolidate, silos form and tools multiply.

The Rise of Shadow AI

A new wrinkle in 2025: employees are bringing generative AI tools into workflows without IT approval. This creates a parallel track of unmanaged apps that feed data into models and produce outputs nobody is overseeing. 

Risks include

• Data leakage: Employees may paste or upload sensitive data into AI models that store inputs, train on them, or retain them outside enterprise control.
  
• Compliance violations: Untracked AI tools might not follow data residency, audit, or privacy requirements.
  
• Unmanaged AI tools: They create hidden dependencies and shadow workflows that bypass IT controls.
  
• Integration chaos: AI tools may generate outputs or data that don’t align with existing SaaS systems, creating mismatches, silos, or broken pipelines.
  

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7 Business Impacts of SaaS Sprawl (Cost, Security, Productivity)

SaaS sprawl doesn’t just clutter your tech stack, it creates real business risks that affect cost control, productivity, and security. Here’s how it shows up across organizations in 2025:

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1. Rising and hidden software costs

When teams purchase tools independently, it’s common to see overlap in functionality or multiple departments paying for the same software. Over time, this results in wasted licenses, unclaimed credits, and unclear ownership.

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According to BetterCloud, the average organization wastes over 50% of SaaS licenses due to poor visibility and governance. Finance leaders report that tracking these costs manually is almost impossible, which is why 63% are investing in automated spend tracking to regain visibility.

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2. Operational complexity and inefficiency

Procurement and IT teams often juggle hundreds of renewals, vendor contracts, and usage reports. Each application has its own renewal cycle, owner, and billing model, which makes coordination messy.

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The result: renewal deadlines are missed, duplicate subscriptions go unnoticed, and departments end up negotiating separately with the same vendors. Managing these scattered workflows drains time and creates friction between finance, procurement, and IT.

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3. Productivity loss from tool overload

Employees today toggle between dozens of tools just to complete basic tasks. Constant context switching across interfaces eats into focus and performance.

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A Gartner survey found that workers spend up to 9% of their day switching between SaaS applications. That’s nearly half a workday every week lost to navigating logins, dashboards, and notifications.

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Instead of empowering teams, unchecked SaaS growth often leads to digital fatigue and slower decision-making.

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4. Security and compliance vulnerabilities

Every new tool expands your organization’s attack surface. When SaaS apps are adopted without IT’s involvement, they may skip essential security reviews like data encryption, access control, or SOC 2 compliance.

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According to Cloudeagle, 51% of companies have faced a ransomware attack targeting SaaS data, and over half of those incidents successfully encrypted enterprise files. Shadow IT and unmanaged renewals make it harder to identify where sensitive data is stored or shared, putting your organization at risk of breaches and fines.

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5. Data silos and fragmented visibility

Each team managing its own set of SaaS tools creates isolated data pockets. These silos prevent leaders from getting a unified view of performance, usage, and ROI.

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For CFOs and CPOs, fragmented data makes it nearly impossible to answer basic questions like:

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• How much are we really spending on SaaS?
  
• Which vendors are redundant?
  
• What licenses are underutilized?
  
  

Without unified visibility, strategic spend management turns into guesswork.

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6. Integration and scalability challenges

As organizations grow, so does the need for connected systems. But when you’re dealing with 100+ SaaS tools, many of which don’t integrate, data synchronization becomes a nightmare.

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Disconnected workflows lead to duplicated effort, inconsistent reporting, and delayed processes. Over time, this technical debt slows down your ability to scale efficiently. IT teams then spend more time maintaining integrations than improving core systems.

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7. The growing risk of Shadow AI

The newest and fastest-growing contributor to SaaS sprawl is Shadow AI, when employees use unapproved generative AI tools for daily tasks. While these tools promise efficiency, they introduce major security and compliance risks.

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Key concerns include:

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• Data leakage: Sensitive business data entered into AI tools can be retained or exposed outside your control.
  
• Compliance violations: Many generative AI models don’t meet enterprise data protection standards.
  
• Unmanaged AI adoption: Tools like ChatGPT, Jasper, and others are often used without visibility into who’s using them or how.
  
• Integration chaos: Unverified AI tools may produce data that doesn’t align with your approved systems, leading to reporting errors and security gaps.

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Challenges and Risks

SaaS sprawl introduces financial, operational, and security risks that can quietly drain resources and weaken control. Here’s a look at the biggest challenges organizations face, and how to solve them.

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Rising SaaS Costs

Challenge: Decentralized purchasing and overlapping tools often lead to duplicate licenses and wasted spend. Without a single source of truth for SaaS usage, budgeting becomes unreliable and cost tracking inconsistent.

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Solution: Centralize all SaaS procurement through a single platform. Visibility into renewals, usage, and ownership helps finance teams identify redundancies, reclaim unused licenses, and forecast spending with accuracy.

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Wasted Spend and Budget Inefficiency

Challenge: Many organizations continue paying for apps that no longer serve active users or duplicate the functionality of other tools. This silent leakage eats into budgets over time.

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Solution: Automate license management and spend tracking. Regular audits and usage reports help identify underused tools so teams can reallocate or cancel them before renewals.

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Data Silos and Fragmented Collaboration

Challenge: Different departments using different tools create data silos that block information flow. This makes collaboration harder and prevents leaders from making informed decisions based on complete data.

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Solution: Adopt integrated SaaS management that connects systems and creates shared visibility. Unified dashboards allow teams to work from the same data, improving communication and decision-making.

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Operational Inefficiencies

Challenge: Multiple apps with overlapping functions increase administrative work for IT and employees. Managing renewals, access rights, and updates across dozens of tools wastes valuable time.

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Solution: Use workflow automation to consolidate renewals, approvals, and vendor communication. Centralized orchestration reduces manual effort and ensures every tool serves a clear purpose.

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Security and Compliance Risks

Challenge: Every unapproved or unmanaged app expands the attack surface. Shadow IT and poorly integrated tools can lead to data leaks, breaches, or compliance violations.

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Solution: Implement centralized access control and compliance checks for all SaaS tools. Regularly review permissions, enforce approval workflows, and ensure all vendors meet security standards like SOC 2 or ISO 27001.

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Insecure Integrations

Challenge: Apps that connect without IT oversight can create vulnerabilities across systems. One weak link can expose sensitive data or disrupt operations.

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Solution: Vet all third-party tools before integration. Use a managed procurement process that ensures every connection follows approved security protocols and audit requirements.

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Shadow AI and Unmanaged Generative Tools

Challenge: Employees increasingly use generative AI tools without IT approval, creating new security blind spots. These tools can store or expose sensitive data and operate outside compliance frameworks.

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Solution: Introduce AI usage policies and monitor new tool adoption. Identify and secure any AI-based apps before they connect to company systems, and educate teams on safe, compliant AI use.

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How SaaS Management Platforms (SMPs) Solve SaaS Sprawl

SaaS sprawl has quietly become one of the biggest hidden expenses for modern businesses.

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According to BetterCloud, the average company now uses over 130 SaaS applications, and IT teams expect that number to keep rising every year. The result? Duplicated tools, shadow IT, and wasted budgets on unused licenses.

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The Growing Cost of SaaS Sprawl

When every department buys its own tools, visibility disappears. Finance teams can’t track renewals, procurement struggles with contract chaos, and IT has no single source of truth for access and compliance. This lack of control leads to:

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• Duplicate subscriptions for similar tools
  
• Unmonitored renewals that auto-charge without review
  
• Underused licenses eating up SaaS spend
  
• Shadow IT increasing security risks

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The SaaS Sprawl Solution: Centralization and Automation

A SaaS Management Platform (SMP) is designed to stop this problem at the source. It gives you one place to discover, track, and manage every SaaS subscription across your organization. Here’s how it helps:

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1. Unified SaaS Visibility: SMPs automatically identify all active subscriptions, including shadow IT. With real-time dashboards, finance and IT teams finally see the full SaaS landscape.
   
2. License Optimization: These platforms monitor usage and help right-size licenses, freeing budget from underused tools and reallocating spend to what teams actually use.
   
3. Renewal Management: SMPs send smart alerts ahead of renewal dates, helping procurement teams review contracts, renegotiate pricing, or cancel wasteful tools on time.
   
4. Automate SaaS Governance: With automated workflows, SMPs manage approvals, permissions, and compliance policies. This means no more manual tracking or risky off-cycle purchases.
   
5. Benchmarking and Spend Intelligence: The best SaaS management tools offer pricing benchmarks and vendor analytics, helping you negotiate smarter and buy better.

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4-Step Framework to Stop SaaS Sprawl

SaaS sprawl doesn’t happen overnight, it builds up quietly as teams add tools to solve short-term problems. Without a plan to track, assess, and retire unused apps, costs spiral, and governance breaks down.

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Here’s a simple, 4-step SaaS sprawl mitigation framework to bring your ecosystem back under control.

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1. Discover

You can’t fix what you can’t see. Start by discovering every SaaS application in use across your organization including shadow IT.

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A SaaS management platform automatically uncovers all subscriptions, usage data, and ownership details in one place. This visibility helps finance, IT, and procurement teams finally work from the same source of truth.

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Best practice: Use Spendflo’s discovery engine to identify duplicate tools, unmanaged renewals, and unapproved apps. Centralized visibility is the first step toward better SaaS governance.

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2. Assess

Once you have the full picture, evaluate which tools actually deliver value. This stage is about distinguishing the essentials from the excess.

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• Audit license usage and renewal cycles.
• Measure utilization versus cost.
• Gather user feedback to understand tool preferences.

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3. Consolidate

After assessment, consolidate overlapping tools to streamline operations and reduce costs.

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This SaaS consolidation strategy focuses on merging similar applications, removing duplicates, and negotiating enterprise-level contracts for the ones that remain.

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Pro tip: Build a centralized system of record that tracks every app’s cost, function, owner, and renewal terms. Tools like Spendflo automate this tracking, freeing teams from spreadsheet chaos.

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4. Govern

Governance isn’t a one-time project, it’s an ongoing process. Automating governance ensures your SaaS environment stays optimized as your company grows.

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• Implement automated approval workflows.
• Set rules for vendor onboarding and renewals.
• Use AI-driven alerts to track policy breaches or contract risks.

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Manage SaaS sprawl with Spendflo

Spendflo can save you up to 30% on your SaaS stack by automating procurement, identifying shadow IT, rightsizing license usage, and tracking user sentiment. Our expert buying team also negotiates the best price for your SaaS contracts based on benchmark pricing data and years of experience. Some clients have seen a 2X ROI with three urgent procurements within a week of onboarding. Others have reduced costs by 80% by migrating their existing technology vendors to more cost-efficient SaaS alternatives.

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To know more, get a free saving analysis today!

FAQs

What is SaaS sprawl?

SaaS sprawl happens when an organization uses too many software-as-a-service (SaaS) tools without centralized visibility or control. Over time, different teams purchase their own subscriptions, leading to duplicate tools, unused licenses, and hidden costs. This lack of oversight makes it difficult for finance, procurement, and IT teams to track spending, ensure compliance, or align software investments with business goals. A SaaS management platform helps stop SaaS sprawl by discovering all active subscriptions, consolidating redundant tools, and automating governance across the organization.

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What is the Rule of 40 in SaaS?

The Rule of 40 is a financial benchmark used to evaluate the health and efficiency of a SaaS business. It states that a company’s combined growth rate and profit margin should equal or exceed 40%. For example, if a SaaS company grows revenue by 30% annually and maintains a 10% profit margin, it meets the Rule of 40. This metric helps investors and executives balance growth with profitability, ensuring that scaling operations doesn’t come at the cost of sustainable financial performance.

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What is the Rule of 72 in SaaS?

The Rule of 72 is a quick way to estimate how long it will take for a SaaS company or any investment to double its revenue or return at a given growth rate. You divide 72 by the annual growth rate to get the approximate number of years needed to double. For instance, if a SaaS company grows at 24% per year, it will double in about three years (72 ÷ 24 = 3). Finance leaders often use this rule to forecast growth targets and assess the long-term impact of pricing, retention, or acquisition strategies.

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