SaaS growth brings new opportunities and new challenges
In recent months, there has been growing discussion among business and IT leaders around the rapid expansion of SaaS solutions. McKinsey’s recent report on the current state of SaaS notes that while the industry has experienced a slowdown, largely driven by economic factors such as rising interest rates and reduced IT spending by enterprises, it has seen a decade of rapid growth, with the market being valued at approximately $3 trillion in 2022.
Market momentum and complexity on the rise
This healthy growth brings an increased complexity of challenges for SaaS customers:
- An increase in the overall IT costs and overlap of IT solutions are leading to duplicated functionalities, resulting in the risk of paying multiple times for the same solutions.
- Lack of data consistency/completeness is a problem. If different processes are executed on different SaaS solutions that are not integrated, key data sets will not be shared. As a result, important data relevant to decision making might be missed. This is a huge risk if a company wants to adopt AI/GenAI solutions. For AI/GenAI solutions to be a success, it’s critical to have complete data sets.
- An increase in security and business continuity risks. Many of these solutions may not comply with the company’s security, data retention, and business continuity policies.
These are old problems that IT organizations have been managing. Businesses have always wanted solutions that address their immediate needs and are not willing to wait for multi-year transformation projects. With the growth of the SaaS market, business users now get immediate satisfaction – simply buy what’s needed and start using it right away. SaaS has effectively made IT solutions transactional. Adopting a new IT solution no longer needs engagement with an IT function; having an account on any SaaS provider will allow businesses to use any SaaS solution.
Why IT leaders must shift their role
The pace of technology vs. business readiness
As explained in Astro Teller’s graph below, we live in an age where technology moves much faster than a business’s ability to absorb it.
From cost center to innovation driver
Tomorrow’s successful businesses will be those that adopt IT technologies quickly and effectively. What this means is that IT leaders must acknowledge that their key role is to drive innovation, not to maintain the status quo. (To learn more, read Fearless innovation is the true force behind IT project transformation) IT leaders need to break away from the outdated perception, disconnected from business priorities, focused solely on managing a cost center. Instead, they must position IT as an enabler of transformation.
The business value of SaaS adoption
Five key benefits of SaaS for IT and business alignment
IT leaders need to acknowledge the power of SaaS solutions:
- SPEED: Expediting innovation/business transformation
- COST: Making IT a variable cost, reducing the risk to fix IT investment amortization and reducing IT support cost (SaaS does not need internal IT infra or application support)
- FOCUS: Buy and use what businesses need
- CSAT: Solutions will be bought and owned by business functions
- CURRENCY: SaaS solutions leverage more advanced IT technologies and constantly drive to eliminate technical debt. Any SaaS solution that uses outdated technology will fail in the market.
Positioning IT as a strategic business partner
Achieving these five points positions the IT function as a strategic partner in accelerating company revenue and profit, but it requires a fundamental transformation of the IT function.
Overcoming the challenges of decentralized SaaS adoption
Governance without bottlenecks
Forcing businesses to comply with a central architecture review board to approve all new SaaS solutions will be an uphill battle.
Ensuring secure and reliable data flows across systems
IT leaders need to focus on what matters most, which is managing their company’s data flow. The essence of any IT function is and will always be to guarantee data transfer from Application A to Application Z in a secure, timely, and reliable manner. IT leaders need to transform their organization to enable SaaS solutions adoption while guaranteeing company data flow.
Building clear onboarding and risk standards
IT leaders should define:
- Essential data flows
- Strategic: Drives revenue and improves profitability (direct costs)
- Critical: Supports operational efficiency (indirect costs)
- Establish clear protocols for onboarding SaaS solutions:
- Define clear onboarding protocols for SaaS solutions based on security, data integration, reliability, and availability standards, including data archiving principles (i.e. what to do with historical data when a SaaS solution is discontinued. It is good practice for essential data to always have history in the company data lake).
Aligning budget ownership with accountability
- Budget accountabilities and responsibilities:
- Businesses must be accountable for the cost, adoption, and success of SaaS business cases
- Businesses are subject to penalties if they implement a solution that deviates from company agreed standards
- Businesses must review and approve the risk assessment, onboarding process, and continuity plan of any SaaS solution before adoption
Evolving IT operations for a SaaS-driven future
- Strategic evolution toward a SaaS-optimized model
To support business agility and accelerate transformation, IT must evolve from a traditional, fully owned infrastructure to an operating model that embraces SaaS at its core. This transition can be approached in two phases:
- Phase 1: Hybrid enablement
Introduce a balanced model where select solutions remain internally managed, while others are delivered via SaaS. This provides the flexibility to modernize without disrupting mission-critical operations.
- Phase 2: SaaS-first operating model
Progress toward a fully SaaS-enabled environment, where agility, scalability, and continuous innovation are built into the foundation of IT. This model significantly reduces operational overhead and enables IT to act as a strategic enabler of business outcomes.
At every stage, IT’s fundamental mandate remains unchanged: to ensure secure, seamless, and reliable data flow across the enterprise, supporting both operational efficiency and strategic growth.
How Digitate enables autonomous SaaS operations
Any IT organization that embraces a transition of this nature will position their company to be successful. These IT organizations, by leveraging SaaS Gen AI/AI solutions, are designed to manage IT operations. Choosing the right Gen AI/AI solution for operations will expedite the IT transformation process.
ignio, Digitate’s SaaS-based platform built on an agentic architecture, leverages AI to transform IT and business operations, changing how enterprises work.
To learn more, feel free to connect with me or the Digitate team.
