Without a doubt, small businesses (SMBs) have more choice than ever before when adopting new technologies, and many of those new tools, from accounting to customer relationship management (CRM), are streaming in as Software-as-a-Service (SaaS). While small firms may be notorious for their inability to invest in newer technologies, software doesn’t seem to be one of them, especially in the U.S.
This increase in choice and quality of B2B FinTech solutions is also, undoubtedly, a good thing. But there are drawbacks: According to Blissfully, a SaaS management tool for the enterprise, SMBs doubled their SaaS adoption rates after 2014 — and quadrupled them after 2015. Today, the average small business spends more than $15,000 on SaaS every month, according to the company’s Q3 2017 analysis.
The company dubbed this trend “SaaS Chaos,” but FinTech innovation slows down for no one. Ariel Diaz, founder and CEO of Blissfully, told PYMNTS the chaos breeds fatigue for the SMB community.
“SaaS fatigue creates all sorts of new challenges for small businesses,” he explained in an emailed interview. “First off is simply choosing the right tool.”
Even when the choice is made, however, entrepreneurs are then juggling loads of subscriptions and swaths of company money spent on those recurring bills.
“It’s been estimated that 15 to 20 percent of SaaS spending is wasted, known as ‘Dark MRR,’” explained Diaz. “This can happen due to a number of circumstances. In some cases, the billing owner for a given product has left the company, but since nobody else receives the billing emails, they don’t know how to track it down and update it.”
“In other cases, different departments may be paying for duplicative tools or even multiple subscriptions for the same product,” he continued, noting that one Blissfully client had been paying for four subscriptions for the same service.
There are also security risks associated with this influx of SaaS.
“Every time an employee comes, they’ll need access to the right tools, and when they leave, companies have to ensure they don’t have access to company information,” Diaz explained. “This fatigue on app selection and management creates all sorts of challenges for already overworked small business owners.”
SaaS fatigue is hardly a new phenomenon, and researchers have been warning about the many ways it can negatively affect the enterprise.
Last year, data from Harmon.ie found the average business professional now uses more than nine apps while at work (IT professionals use the most, an average of more than 10). The report also highlighted potential security risks and wasted spending. According to the survey, nearly half of respondents said they are using apps in the workplace that have not been specifically sanctioned by their companies’ IT departments.
As small firms and their employees continue to tack on more subscriptions, developers aren’t slowing down. Software developers saw a huge year in 2017 in terms of initial public offerings (IPOs), with data from Reuters finding more than a dozen B2B software companies going public last year. Average valuations range from $500 million to $4 billion, reports last year said, and while individual floats may not be high value, Malay Mail analysis found they account for most of the tech IPO market. Venture capitalists have remained a close ally of SaaS startups too.
APIs Add to the Exhaustion
FinTech shows no signs of slowing down the creation of new SaaS products for small firms, however. Diaz also noted that use of SaaS subscriptions will only continue to grow, with separate Blissfully research showing the average number of paid SaaS subscriptions per company approaching 20 between 2017 and 2018, and spend per company increasing too.
Fueling this expansion are APIs, which have made an explosive impact on the global financial services market in only the past year or so as banks and FinTechs share data, opening up worlds of potential for new tools and products geared toward small businesses.
“APIs have unlocked a lot of really powerful integration options for SaaS products and platforms,” said Diaz. “They’ve also added to the fatigue ... because there are so many ways to connect a set of apps — from third-party providers like Zapier, to data-centric products like Segment, to direct integrations between apps, to custom API integrations.”
That doesn’t mean APIs — or the increase in choice for enterprise SaaS tools overall — is a bad thing. Indeed, Diaz agreed that APIs have certainly helped to fuel innovation in this space, though he noted SMBs have to be strategic about their strategy for SaaS implementation.
“It’s not a question that the increase in APIs and integration options have helped small businesses,” he said. “The most important step for small businesses to leverage these integrations is to have a clear set of goals for what you want the integrations to accomplish.”
This includes addressing SaaS in a step-by-step manner. He offered the example of marketing automation and integration: start with “syncing all your relevant data across your CRM and email marketing platform, then you can narrow your options and work toward that goal,” said Diaz.
With open banking initiatives proliferating across the world, APIs will surely continue the SaaS boom; small businesses in particular will have to remain diligent on both the spend management and cybersecurity front should they want to ensure they are sailing smoothly, not drowning, in the SaaS flood.