How Unused Licenses Are Costing Your Company

According to data from database company Statista, spending on enterprise software has the highest growth rate within the tech industry and is projected to grow even further this year. The company predicts that by 2022 IT spending on enterprise software worldwide will top $570 billion.

Within the enterprise software market, software as a service is emerging as the fastest growing segment, with SaaS backup and SaaS protection solutions in high demand. Today, SaaS accounts for one third of the entire enterprise software market, offering lower total ownership costs and easier implementation over traditional models.

However, with the benefits of SaaS also come costs. In 2020, a medium-sized company spent $8,580 on SaaS per employee. And Gartner predicts that SaaS spending will grow by 40% over the next two years.

As more and more businesses shift from on-premises software to the cloud, spending on SaaS, along with SaaS backup and SaaS protection solutions, is accounting for a larger percentage of IT budgets. And unfortunately, a large portion of this spending is wasted.

According to the 2020 SaaS trends report, the average company wastes more than $135,000 annually on unused, underused, or duplicate SaaS tools. A portion of this waste comes from unused software licenses.

Software licenses aren’t cheap. On average, Microsoft 365 and Google Workspace business and enterprise licenses cost $10-$30/user/month. However, 38% of these licenses go unused over the course of an average 30-day period.

Let’s take a look at how unused licenses are costing companies.

Unused Apps

One of the main reasons companies are wasting money on unused licenses is simply because employees aren’t using all of the applications at their disposal. Whether that’s because the software isn’t necessary for completing their job or because companies offer employees a number of solutions that overlap, reports indicate that each computer in every office around the world has nearly $260 of unnecessary, unwanted or unused software.

IT software and services company 1E compiled a list of the top ten wasted enterprise apps. The list includes popular applications from the Adobe suite like Indesign, Dreamweaver, Illustrator, and Photoshop. The list suggests that while many organizations require certain software tools

for specific projects, few employees require them on a daily basis and some employees might not need licenses to access these tools at all.

As a result, 1E found that companies generated approximately $34 billion in yearly licensing waste. That’s because 30% of applications go completely unused, and an additional 8% are used less than once a month. The report indicates that more than $2 million could be saved annually if companies stopped wasting money on unused licenses.

Employee Turnover

According to the U.S. Bureau of Statistics, the average turnover rate in the U.S. is between 12% and 15% annually. For the average mid-sized company with 300 employees, that amounts to approximately 40 employees leaving every year.

Oftentimes, these departing employees leave behind valuable data that must be retained. However, SaaS providers may delete user content for inactive accounts. That means companies are forced to continue paying for unused licenses to retain that data. According to research, that means companies are paying between $20-$30/user/month to retain data from SaaS solutions like Microsoft 365 and Google Workspace

Now let’s do the math. With 40 employees leaving every year, if companies want to retain the data of departing employees for at least one year, they’d have to shell out more than $14,000 in unused licenses annually.