Market Opportunity for MSPs to Address SaaS Sprawl

‘SaaS sprawl’ refers to the uncontrolled proliferation of Software-as-a-Service (SaaS) applications within an organization, often leading to inefficiencies, security risks, and increased costs.

As businesses increasingly adopt cloud-based solutions, the market opportunity for Managed Service Providers (MSPs) to address SaaS sprawl is significant.

Below is a concise analysis of this opportunity:

Market Opportunity

Enterprises use an average of 130-200 SaaS applications, with many adopted without IT oversight (shadow IT).

This leads to redundant tools, data silos, and compliance challenges. Unmanaged SaaS subscriptions can result in overspending, with estimates suggesting 30-50% of SaaS licenses go unused or underutilized, and unmonitored apps increase vulnerabilities, data breaches, and non-compliance with regulations like GDPR or HIPAA.

The market opportunity for MSPs to address SaaS sprawl is substantial, driven by the rapid growth of SaaS adoption, cost inefficiencies, and security concerns. The global SaaS management market is projected to grow from $2.7 billion in 2023 to $7.2 billion by 2028, at a CAGR of ~22%, driven by the need to manage SaaS sprawl.

By offering discovery, optimization, security, and governance services, MSPs can tap into a high-demand, high-margin market while strengthening client relationships. The key is to combine expertise, tools, and proactive education to position MSPs as essential partners in navigating the complexities of SaaS ecosystems.

Growing Problem of SaaS Sprawl

SaaS sprawl refers to the uncontrolled proliferation of Software-as-a-Service (SaaS) applications within an organization, often leading to inefficiencies, security risks, and increased costs. As businesses increasingly adopt cloud-based solutions, the market opportunity for Managed Service Providers (MSPs) to address SaaS sprawl is significant.

• Scale of the Issue: Enterprises use an average of 130-200 SaaS applications, with many adopted without IT oversight (shadow IT). This leads to redundant tools, data silos, and compliance challenges.
• Cost Implications: Unmanaged SaaS subscriptions can result in overspending, with estimates suggesting 30-50% of SaaS licenses go unused or underutilized.
• Security and Compliance Risks: Unmonitored apps increase vulnerabilities, data breaches, and non-compliance with regulations like GDPR or HIPAA.
• Market Size: The global SaaS management market is projected to grow from $2.7 billion in 2023 to $7.2 billion by 2028, at a CAGR of ~22%, driven by the need to manage SaaS sprawl.

Key Opportunities for MSPs

MSPs already provide IT infrastructure and cloud management services, making them well-suited to extend their offerings to SaaS optimization, and often have established relationships with clients, positioning them to guide businesses through SaaS governance and optimization.

Furthermore MSPs can leverage SaaS management platforms (e.g., BetterCloud, Zylo, Torii) to provide visibility, automation, and control over SaaS ecosystems.

Services Portfolio

• Offer tools to identify all SaaS applications in use, including shadow IT.
• Provide centralized dashboards for visibility into app usage, costs, and risks.
• Analyze usage data to eliminate redundant apps and unused licenses.
• Negotiate better vendor contracts or consolidate subscriptions.
• Potential savings: Businesses can reduce SaaS spending by 20-40% through optimization.
• Implement access controls, single sign-on (SSO), and multi-factor authentication (MFA).
• Ensure compliance with industry regulations by monitoring data flows and app permissions.
• Mitigate risks from unvetted apps, addressing the 80% of SaaS apps that are often unsanctioned.

Target Markets and Revenue Potential

MSPs can offer SaaS management as a standalone service or bundle it with existing IT offerings, creating recurring revenue streams, and cross-sell related services like cybersecurity, cloud migration, or IT consulting.

• SMBs: Small and medium-sized businesses often lack the resources to manage SaaS sprawl internally, making them prime candidates for MSP services.
• Enterprises: Large organizations with complex SaaS ecosystems need advanced management and compliance solutions.
• Verticals: Industries with strict compliance requirements (e.g., healthcare, finance, legal) are particularly lucrative due to their need for secure SaaS management.

Conclusion

The market opportunity for MSPs to address SaaS sprawl is substantial, driven by the rapid growth of SaaS adoption, cost inefficiencies, and security concerns. By offering discovery, optimization, security, and governance services, MSPs can tap into a high-demand, high-margin market while strengthening client relationships. The key is to combine expertise, tools, and proactive education to position MSPs as essential partners in navigating the complexities of SaaS ecosystems.

Featured Vendor: Jumpcloud

As they describe here Jumpcloud enables MSPs to address SaaS sprawl through its comprehensive SaaS Management solution, which provides visibility, control, and automation to tackle the challenges of unauthorized and unmanaged Software-as-a-Service (SaaS) applications.

JumpCloud’s SaaS Management feature uses the JumpCloud Go browser extension and API connectors to discover both sanctioned and unsanctioned SaaS applications across a client’s organization. This provides MSPs with a complete inventory of apps, including shadow IT (apps used without IT approval), which is a primary driver of SaaS sprawl.

JumpCloud provides a unified platform where MSPs can manage all SaaS applications from a single dashboard, simplifying the oversight of subscriptions, user access, and renewals. This reduces the complexity of juggling multiple tools and logins.