How Much Software Spend Are You Actually Wasting?

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Most technology leaders suspect they’re overspending on software. Few know by how much.

The answer, according to multiple industry studies, is somewhere between 25% and 35% of total SaaS spend — wasted on licenses nobody uses, tools that duplicate each other, and renewals that auto-execute without review.

The Three Categories of SaaS Waste

Software waste doesn’t come from one place. It accumulates across three distinct categories, each with its own root cause and remediation path.

1. Shelfware: Licenses Without Users

The most straightforward category. These are seats you’re paying for that either have no assigned user or haven’t been accessed in 90+ days.

Common examples:

  • Departed employees whose licenses were never deprovisioned
  • Pilot programs that ended but whose contracts renewed
  • Enterprise agreements sized for projected headcount that never materialized

Industry data from Gartner and Zylo consistently puts shelfware at 25% of total SaaS spend for mid-market organizations.

2. Tool Overlap: Redundant Capabilities

This is harder to detect because the tools themselves are being used — just by different teams solving the same problem independently.

We regularly see organizations running three or more project management platforms, two or three diagramming tools, and multiple BI solutions. Each team chose what worked for them. Nobody had visibility into what was already available.

The overlap rate across a typical mid-market software portfolio is 30% or higher when measured by functional capability rather than product name.

3. Shadow IT: Ungoverned Procurement

Shadow IT isn’t inherently malicious — it’s a symptom of procurement processes that can’t keep up with how teams actually buy software. When a team needs a tool next week and the procurement cycle takes six, they put it on a corporate card and move on.

Productiv and Zylo both estimate that 40% of SaaS applications in a typical enterprise were procured outside formal IT channels.

What Makes This Problem Persistent

SaaS waste isn’t a one-time cleanup problem. It’s structural. Three dynamics keep it in place:

  • Decentralized purchasing — department leads buy what they need without cross-referencing existing tools
  • Annual auto-renewals — contracts renew 30–60 days before expiration with no usage review
  • No single source of truth — finance sees invoices, IT sees provisioning, but nobody sees the full picture

Where to Start

You don’t need a six-month audit to get clarity. A focused assessment of your top 50 SaaS vendors by spend — cross-referenced against usage data and contract terms — will surface the majority of recoverable waste.

The key inputs:

  1. Accounts payable data for the last 12 months (vendor, amount, renewal date)
  2. SSO/IdP logs for user-level access frequency
  3. Contract terms for your top 20 vendors (commit levels, renewal windows, termination clauses)

With these three data sources, you can build a clear picture of where money is being lost and what’s recoverable within the current contract cycle.

The Bottom Line

The typical mid-market organization with $5M–$20M in annual SaaS spend has $1.2M–$6M in identifiable waste. Not theoretical savings — actual line items that can be eliminated or renegotiated within existing contract windows.

The organizations that address this systematically don’t just save money. They gain the visibility and governance infrastructure needed to make better technology decisions going forward — including knowing where AI investments will actually pay off.