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How CIOs can tackle subscription sprawl and costs
As subscription models expand, hidden costs and risks grow with them. IT leaders need stronger visibility and accountability to keep subscription sprawl under control.
Executive Summary
- Subscription sprawl is driving up costs. SaaS growth and AI-based pricing are creating budget unpredictability and stronger vendor lock-in.
- Risk goes beyond spend. Shadow IT, redundant tools and embedded platforms weaken security, governance and architectural flexibility.
- Make SaaS management strategic. Centralize visibility, track usage and renewals, and negotiate contracts tied to business value to shift to proactive portfolio management.
As subscription ecosystems become more complex, subscription management is becoming an IT imperative. Subscription-based pricing models originally provided organizations with predictability and flexibility, allowing them to anticipate subscription costs at regular intervals and pause, modify or end services at any point without hassle.
However, the rise of subscription models for everything from productivity tools to security services has created more problems than solutions for CIOs
IT budgets for third-party services grew by about 6% a year from 2019 through 2024, according to Boston Consulting Group, spurred by Software-as-a-Service (SaaS) spend. As IT operations shift to cloud-based software, subscription-based pricing models for enterprise software, cloud services, and even infrastructure continue to rise, along with enterprise subscription costs. This leaves organizations with rising costs, overlapping tools and opaque usage models, as well as subscription vendors with growing pricing power and monopolies.
Subscription sprawl – the unmanaged growth of subscriptions across an organization without IT oversight – can quickly get out of control, erode IT budgets and limit strategic agility and adaptability.
Why subscription costs keep rising
Subscription pricing models are now the norm across digital software and services as companies shift from perpetual licenses and one-time purchases to Software-as-a-Service (SaaS) and other service-based offerings, such as Platform-as-a-Service and Infrastructure-as-a-Service, and the 'as-a-service' market is only growing. The global subscription economy is expected to exceed $1.5 trillion by 2033, according to Grand View Research.
"Vendors moved from one-time licenses to recurring services, which gives them predictable revenue and ongoing pricing power," said Uri Haramati, founder and CEO at Torii. "Instead of competing once for a sale, they now monetize scale, usage and dependency over time, making annual increases and add-on fees the norm rather than the exception."
Once software is integrated into operations and embedded in workflows, organizations can become reliant on its capabilities. It can be hard to suddenly stop using a tool without a strategic transition plan, which gives vendors significant pricing power and control.
Vendors can take greater control of subscription software and raise prices by implementing tactics such as bundling multiple tools or services, forced upgrades and feature gating to block users from full access unless they pay more.
Some vendors implement usage-based or consumption pricing, where companies pay based on how much a product is used, leading to unpredictable costs across pay cycles, especially for organizations that are not monitoring the usage of subscription-based tools.
AI has also allowed vendors to create more dynamic pricing. "It's no longer just about how many subscriptions exist in the stack," said Michael Mansard, principal director of subscription strategy at Zuora. "It's about how unpredictable pricing has become. Traditional SaaS was often easier to forecast because the vast majority of the time it was seat-based and relatively consistent month to month. AI is fundamentally different, driving an explosion of new pricing metrics and hybrid models as vendors move beyond seat-based monetization toward work and outcomes."
The hidden risks of subscription sprawl
Subscription and SaaS sprawl can create a messy, unorganized and inefficient subscription strategy for enterprises. Without a proper subscription monitoring system, subscription sprawl exposes hidden risks to the organization and its bottom line.
"For CIOs, the risk shows up in three ways at once," said Haramati. "Costs become unpredictable as renewals pile up and unused licenses quietly persist. Security weakens as apps live outside single sign-on (SSO), access reviews, and offboarding workflows. The operational complexity grows as IT is expected to govern systems it did not approve or even know existed."
Subscription sprawl can create unintended problems across the organization, including the following:
- Unpredictable costs. Subscription sprawl can cause budgets to grow without organizations taking notice. Vendor practices such as feature gating, usage-based pricing and user-based pricing can lead to a loss of cost predictability.
- Redundant tools. The more subscriptions that an organization has, the more likely it is that multiple tools have the same capabilities and offer the same services. These overlapping tools can increase costs and the risk of miscommunication across departments when different tools are used for the same workflows and processes.
- Unused services. "Zombie" subscriptions – which the organization is still paying for but is not using – can fly under the radar in IT budgeting and quickly add up as they go unnoticed. "In many organizations, visibility and governance lag behind growth, so costs increase quietly month over month," says Haramati. "By the time teams see it, they are oftentimes already married to that higher level of spend, and it is hard to reverse quickly."
- Architecture restrictions. Specific vendors that provide core products embedded in the architecture can limit future decisions and impact architectural innovation and adaptability. Without a strategic transition plan, switching to alternative tools can negatively affect operations and increase organizational risk. Organizations may stick with the limited features vendors provide to keep the architecture consistent and reliable.
- Less negotiation power. Subscription sprawl can lead to disorganized subscription management, making renewals harder to negotiate and allowing vendors to raise prices, especially for core services with time-sensitive renewals.
"In many organizations, ownership of subscriptions is fragmented across IT, finance and other business teams, which makes governance difficult. CIOs and other leaders can see increased spending, but they can't track it," said Alex Yakubovich, CEO and co-founder at Levelpath. "This profusion of SaaS products inevitably creates confusion, which in turn creates risk in the form of unexpected overages, unmonitored renewals and unnecessary duplication of subscriptions. When employees purchase subscriptions outside the official procurement process, they also introduce security, privacy and compliance risks."
What CIOs need to track more closely
To gain control over subscription sprawl, CIOs need to create a subscription monitoring strategy to centralize subscription management.
CIOs and other stakeholders should have a comprehensive view of the subscription-based tools that the organization is using, including how many users are using the tools and how often, and the role they play in operations and workflows.
CIOs should keep track of key subscription metrics such as:
- Actual usage versus purchased capacity.
- Renewal dates, auto-renew clauses and other renewal terms.
- Contract terms, flexibility and adaptability.
- Department-level ownership and access to subscriptions.
- Shadow IT and unsanctioned tool and SaaS adoption.
- Cost-to-value alignment for business goals and impact.
"CIOs should take a closer look at the number of applications or tools that are involved in a single business process," said Niranjan Vijayaragavan, chief technology and chief product officer at Nintex. "Are there opportunities to streamline the number of applications needed to complete the process end-to-end? They can also look at the number of users per application to gauge which applications are the most impactful as part of the process, as well as how much productivity is improving in relation to each SaaS tool and the associated spend."
Tracking these metrics can give CIOs a better understanding of how effectively tools are being used across the organization and how much the organization is paying for them. "The best CIOs see SaaS management as an ongoing practice rather than a one-time cleanup effort," said Haramati. "This effort begins with centralizing visibility across applications, usage and spending. Without a continuously updated source of truth, every other control is reactive and incomplete."
Strategic actions CIOs should take now
Once CIOs know what to measure, they can use that data to take strategic actions to help control subscription sprawl. CIOs can take strategic action to minimize impact and optimize IT costs, such as:
- Centralize subscription management, including clear points of ownership to help improve monitoring and accountability.
- Implement SaaS management and software asset management (SAM) to create transparency.
- Tie renewals and additional costs, such as locked features or upgrades, to measurable, impactful business outcomes.
- Push back on bundled pricing and negotiate modular contracts that fit business goals while still aligning with IT budgets.
- Begin new contracts with exit strategies already built out to improve agility and make it easier and quicker to end contracts when services are no longer needed.
Long-term implications for IT strategy
Subscription sprawl has implications far beyond unpredictable, uncontrollable costs. It can have long-term implications on how IT operations evolve and an organization's IT strategy.
CIOs need to be proactive and aware of the long-term implications of subscription sprawl for IT strategies to better mitigate them.
Long-term subscription sprawl can significantly impact how organizations approach future architecture decisions. When subscription-based tools are core parts of workflows or operations, renewal costs and contract constraints can influence future architecture decisions, making architecture and operations inflexible and preventing adaptability.
As subscription ecosystems become more complex, subscription management is becoming a more strategic business function rather than an administrative one. CIOs need to prioritize FinOps and IT financial management to optimize costs and identify gaps in the organization's subscription management strategy.
CIOs also need to ensure that cost discipline does not slow or block innovation. Looking at metrics such as cost-to-value alignment can help CIOs understand where the right balance lies between saving costs and enabling continued innovation and experimentation.
CIOs need to shift their mindset from tool adoption to portfolio optimization to strategically manage subscription sprawl and its long-term implications.
Alison Roller is a freelance writer with experience in tech, HR and marketing.
