Software-as-a-Service (SaaS) subscriptions have become an integral part of the modern enterprise; organizations with more than 1,000 employees use more than 150 SaaS apps on average, according to to BetterCloud. Fully managed apps are often a lighter burden for IT teams because they are completely cloud-based. But organizations are under increasing pressure to reduce their SaaS budgets as inflation and related economic stressors impact business results.
According to a recent questionnaire from Workato, 57% of IT teams have been instructed by the C-Suite to reduce their overall SaaS spend. A separate report from Vertice, a SaaS procurement and spend management platform, found that SaaS prices are growing 4x faster than market inflation; that customers are spending 53% more on licenses than five years ago; and that $1 of every $8 organizations spend is now spent on SaaS. (Take those numbers with a grain of salt, of course; Vertice has a product to sell.)
Given the widespread desire of enterprises everywhere to cut costs, particularly in software spending, it may come as no surprise that venture firms have been won over by startups such as Zylo, whose platform finds and manages SaaS spend for mostly business customers. Zylo announced today that it has raised $31.5 million in Series C funding led by Baird Capital’s Venture Team with participation from Spring Lake Equity Partners, Bessemer Venture Partners, Menlo Ventures, High Alpha and Coupa, an infusion that bringing the total amount the startup has raised to date to $64 million.
In an interview with londonbusinessblog.com via email, CEO Eric Christopher said the bulk of the new capital will be spent on product development and hiring. Zylo recently surpassed its previous growth record by nearly 30%, he noted, doubling the new number year-over-year and helping customers like Adobe, Atlassian, Coupa, DoorDash, Intuit, Slack, Salesforce and Yahoo! (full disclosure: londonbusinessblog.com’s parent company).
“Our investors recognize the significant opportunity ahead of us as a result of companies’ accelerated spending on SaaS subscriptions, costly renewals and lack of visibility across the enterprise,” said Christopher. “It is the right time to take advantage of these circumstances given the economic challenges heading into 2023.”
Zylo was incubated at the aforementioned High Alpha, an Indianapolis-based venture studio focused on creating enterprise cloud companies, and founded in 2016 by Christopher, Cory Wheeler, and Ben Pippenger. Christopher was previously the SVP of sales at Sprout Social, the social media management platform, while Wheeler was the purchasing director at Salesforce and Pippenger was the senior director of product management at Salesforce.
Fast forward to today, Zylo offers a platform that uses AI to analyze SaaS spend and usage in real time. It creates a registration system for SaaS in an organization and shows how a company’s portfolio, licenses and pricing compares to industry benchmarks.
Zylo is certainly not the only company doing this. In addition to Vertice, startups such as Beamy, Pleo, Unito, and Spendflo offer SaaS spend tracking software. (Verified market research predicts that the SaaS management market will be worth $716.52 billion by 2028.) Christopher doesn’t deny that there is an overlap between SaaS management vendors, but he argues that Zylo’s ease of use and comprehensiveness sets it apart from the crowd.
“Zylo helps CIOs and CFOs co-manage strategy around the most important and most widespread spend category: subscription software,” he added. “Zylo helps IT and finance leaders reign in the chaos of unknown and unmanaged software with extensive and ongoing discovery followed by operationalizing the most important business process related to SaaS: renewal management. We are driving cost avoidance and savings by reducing current and future operational costs while improving the employee experience with the SaaS applications they depend on.”
Christopher would not disclose exact sales figures. But he said Zylo — which has a full-time team of about 125 people, the majority of whom are based in Indianapolis — now manages more than 30 million SaaS licenses and $30 billion in SaaS spend.
The plan for the future is to invest primarily in talent and customer acquisition, Christopher said. He expects the downturn in the economy to be a tailwind as businesses face costly renewals after prioritizing new digital tools to keep their businesses afloat while much of the world shut down.
“With software budgets spread across so many departments, it’s not uncommon for more than one portion of the company to pay for the same software with limited discounts – or no discount at all,” said Christopher. “That’s why SaaS licensing is ripe for optimization. Instead of skimping on human capital, companies should first take a hard look at their SaaS spend, which is often redundant.”