The tech landscape is undergoing a seismic shift, leaving Chief Information Officers (CIOs) scrambling to maintain control amidst an exploding number of software vendors. In the past decade, the number of software-as-a-service (SaaS) subscriptions used by businesses has skyrocketed, creating a complex web of vendors and potential pitfalls.
Katrina Agusti, CIO of workwear giant Carhartt, exemplifies the struggle. Her company's SaaS subscriptions have ballooned from 20 a decade ago to a staggering 121 this year, far outpacing the growth of her IT department. "You just can't keep pace," she confesses, highlighting the need to delegate administrative tasks to business units, despite concerns about potential inefficiencies and duplicate services.
Fueling this vendor explosion are several factors. Firstly, the market is flooded with specialized tools catering to specific needs, enticing organizations to diversify their software arsenal. Stephen White, analyst at Gartner, explains the two-pronged approach: "Organizations typically have a few key vendors for core functionalities, but increasingly rely on a long tail of specialized providers for niche services." While consolidation efforts have been attempted, the benefits of reduced vendor dependence and access to cutting-edge AI solutions often outweigh the initial challenges.
Software companies are capitalizing on this trend, actively targeting end users within organizations. Priya Saiprasad, general partner at venture capital firm Touring Capital, observes: "Our portfolio companies are increasingly bypassing CIOs and directly engaging with business users. When critical mass is reached within a department, the company might then approach IT for an enterprise-wide license."
This end-user driven approach, however, raises concerns for certain CIOs. Marc Kermisch, Chief Digital and Information Officer at CNH Industrial, expresses his frustration: "Software bought with a credit card by anyone in the company drives me crazy. Suddenly, I'm facing tens of thousands of dollars spent with a vendor I wasn't even aware of." This echoes the dreaded specter of "shadow IT," where employees circumvent the IT department to acquire unauthorized solutions.
While the full-blown shadow IT phenomenon hasn't resurfaced since the initial app store boom, the rise of a tech-savvy workforce necessitates stricter controls. Moderna, a pharmaceutical company heavily reliant on software during the COVID-19 vaccine development, serves as a cautionary tale. "The need for speed often led business units to bypass proper tech reviews and sign licenses independently," confesses Brad Miller, Moderna's CIO. This resulted in a surge in subscriptions, eventually forcing a reduction from 257 vendors in 2023 to 200 in 2024 through cost and value assessments.
The future of software management seems to lie in a delicate balance. While empowering business units with the right tools can expedite innovation, robust governance frameworks are crucial to ensure cost-effectiveness, data security, and vendor accountability. Striking the right balance between agility and control will be the defining challenge for CIOs in the years to come.
