What is Maverick Spend and How to Reduce it

No company's SaaS landscape is perfect. What happens when employee needs aren't met? When tool gaps, workflow inefficiencies, or budget constraints start to rub your staff the wrong way?

Enter "Maverick SaaS Spend" - the phenomenon of employees expensing SaaS tools outside of the IT-approved tech stack. Despite the financial and security risks, they'll leave your carefully planned stack for good.

In this article, we'll look at what causes maverick SaaS spend so you can win back employee trust and get your tech stack back on track.

What Is Maverick SaaS Spend

Maverick spend, also known as rogue spend or tail spend, refers to uncontrolled and unpredictable purchasing of goods or services outside of an organization's established procurement processes and approved vendors. In the context of SaaS, it's when employees expense software tools that haven't been vetted and approved by IT.

What causes maverick spend

Maverick spend is caused by factors such as frustration with limited approved tools, slow procurement processes, lack of flexibility for team-specific needs, insufficient training on approved tools, and the perception that going rogue is easier than navigating official channels.

There are various reasons why employees might resort to maverick SaaS spend:

1. Limited or outdated approved tools list: 

When employees feel the officially sanctioned software doesn't meet their needs, they're tempted to seek out alternatives. If the procurement process for adding new tools is too cumbersome or opaque, going rogue seems easier.

2. Cumbersome procurement processes 

Employees often need solutions now to do their jobs effectively. If the official channels for requesting and approving new software are too slow-moving, they may circumvent the process entirely in the name of expedience. 

3. Lack of flexibility: 

Different departments and roles have unique requirements that a one-size-fits-all tech stack may not address. Without some discretionary budget or ability to choose tools, teams will find workarounds.

4. Insufficient training and support: 

Even the best software will be abandoned if employees don't understand how to harness it. When people aren't given adequate onboarding, ongoing enablement, and support, they'll conclude it's not the right tool for the job.

5.Rogue culture: 

If employees have successfully expensed SaaS in the past without repercussions, a cultural norm develops. Managers may even encourage this behavior, believing it's better to seek tilted forgiveness than slow-walked permission.

How to calculate your maverick spend costs

To calculate maverick spend costs, audit expense reports for unapproved SaaS charges, categorize the spend by department and purpose, extrapolate the data to estimate total maverick spend, factor in the time cost of IT needing to vet and secure shadow IT, and compare maverick spend to your official SaaS budget.

To quantify the financial impact of maverick spend, take these steps:

1. Audit employee expenses: 

Work with your finance team to pull a representative sample of expense data, scanning for software charges from non-approved vendors. You may need to cross-reference your official tools inventory.

2. Categorize spend: 

Break down your maverick spend data into meaningful segments. Tabulate how much is coming from each department and the job functions the tools serve. Flag any purchases that overlap with existing tools in your stack.

3. Extrapolate data: 

Take your sample analyses and scale them up to arrive at a ballpark for overall maverick spend. Depending on your company size, industry benchmarks can help sanity check your estimates.

4. Factor IT costs: 

Don't just look at direct software costs. Consider the operational drag of IT needing to retroactively assess the security and compliance of rogue tools, set up proper access controls, and integrate data. Those hours add up.

5. Compare to budget: 

Put the rogue spend number in context by calculating it as a percentage of your sanctioned software budget. Is it a nominal 5%? A whopping 40%? This helps articulate the scope of the problem.

What types of maverick spend exist

Types of maverick spend include employees expending tools on corporate cards without approval, charging SaaS to personal cards and getting reimbursed, departments purchasing their own instances of approved tools, employees continuing to use sunset tools, and expense fraud through falsified SaaS receipts.

1.Unapproved corporate spend: 

The most blatant type of maverick spend is when employees use a company card to purchase new software without going through procurement. This is easier to catch but may make spend analysis noisy.

2.Reimbursed personal spend: 

More insidious is when people pay for tools themselves and then expense it after the fact, categorized opaquely. This type of spend may slip through the cracks since it's disbursed.

3.Rogue department licenses: 

Sometimes, maverick spend isn't a net new tool but rather a separate instance of one already in the stack. This fragments contract negotiations, user management, and data.

4. Zombie spend: 

Another form of maverick spend is when people keep using a tool even after the official relationship has ended. The licenses may be grandfathered in or informally renewed.

5.Fraudulent expenses: 

In rare cases, maverick spend may actually be expense fraud - either submitting doctored invoices for tools never purchased or for personal software passed off as a business expense. Strong expense reporting hygiene mitigates this.

Why Is It important to control maverick spend

Controlling maverick spend is crucial to avoid unbudgeted costs, security risks from unvetted tools, disjointed workflows and data silos, missed volume discount opportunities, wasted spend on redundant tools, and drain on IT resources to support unsanctioned tools.

Unchecked maverick spend can have serious consequences:

1. Unbudgeted costs: 

Every dollar of rogue software spend is one less dollar for strategic investments. These unplanned expenses add up and undermine predictable budgeting.

2. Security risks: 

Unapproved SaaS tools are a major vector for data breaches, compliance violations, and insider threats. Without IT oversight, sensitive company info could be exposed.

3.Siloed workflows: 

Maverick spend often leads to a balkanized tech stack where different departments use their own non-integrated tools. This fragments data and hinders collaboration.

4.Missed discounts: 

When spend is decentralized, you lose leverage in vendor negotiations. Bundling SaaS contracts yields substantial savings - something maverick spend undermines.

5.Wasted spend: 

Many rogue tools duplicate functionality you're already paying for with sanctioned software. This creates expensive and unnecessary overlap, with multiple subscriptions for the same job.

6.IT support drain: 

When something breaks with a maverick tool, IT still bears the support burden. Ditto needing to migrate data from an unapproved system to an approved one. This siphons IT bandwidth from proactive priorities.

How to reduce maverick spend in procurement

To reduce maverick spend, streamline SaaS approval processes, implement a self-service catalog of pre-approved tools, allow departments some discretionary SaaS budget, regularly solicit employee feedback on software needs, provide ample training on approved tools, and partner with finance to flag unapproved expenses.

To rein in rogue buying, take a proactive procurement approach:

1.Streamline approvals: 

Implement an e-procurement system or build workflows in your ticketing software to quickly triage new tool requests. Use automation to route to appropriate approvers. Set clear SLAs so employees know what to expect. 

2. Implement a self-service catalog of pre-approved tools: 

Make a list of go-to apps for functions like project management, file sharing, etc. This lets employees choose from pre-vetted options rather than a binary yes/no on their preferred tool.

3.Allow discretionary spend: 

Give managers an annual allotment to spend on unique software for their group. Having a release valve for departmental software needs reduces the pressure to go rogue. 

4.Gather feedback: 

Run quarterly surveys, conduct interviews, or use pulse polls to understand where employees feel the tech stack is falling short. This surfaces brewing trouble spots before they boil over.

5.Partner with finance: 

Work with your finance counterparts to build flagging logic into your expense reporting system. Automatically detect SaaS charges from unapproved vendors and route for additional approval. 

How to prevent maverick spend

Preventing maverick spend requires educating employees on the risks and costs of going rogue, working with finance to flag unapproved expenses, partnering with department heads to surface evolving needs, building flexibility into your tech stack, communicating the value of an approved tools list, and rewarding employees for suggesting adopted tools.

Stopping maverick spend before it starts requires cross-functional collaboration:

1. Educate employees: 

Make your SaaS policies crystal clear, explaining the "why" behind them. Quantify the wasted spend and data risks of maverick purchases. Secure executive sponsorship to underscore seriousness. 

2. Work with finance to flag unapproved SaaS expenses: 

As mentioned, partnering with finance to proactively flag rogue spend in expense audits nips it in the bud. Managers will be more cautious about approving maverick purchases if it triggers extra scrutiny.

3. Partner with department heads: 

Foster open lines of communication with different teams to understand their emerging software requirements. Position IT as a collaborative partner in evaluating and acquiring tools to meet their needs.

4. Build flexibility into your tech stack: 

Design your approved SaaS ecosystem to be adaptable to a range of needs. Focus on tools that are modular and extensible. Look for opportunities to consolidate point solutions into platforms.

How to track maverick spend

To track maverick spend, regularly analyze expense data for unapproved charges, conduct quarterly reviews with departments to uncover shadow IT, implement spend management software to flag maverick purchases, create an amnesty program to disclose rogue tools, monitor app usage data to spot underutilized or redundant tools, and require security and legal sign-off for all new SaaS contracts.

Keeping tabs on maverick spend is an ongoing process:

1. Regularly analyze expenses: 

Schedule a recurring audit of your expense data to spot unapproved SaaS spend. Depending on your scale, this may be monthly or quarterly. Look for patterns by department or expense submitter.

2. Conduct quarterly reviews with departments: 

Meet with department leads to proactively ask what unsanctioned tools may be percolating. Position it not as a witch-hunt but a chance to meet their needs through official channels. 

3. Implement spend management software:

Consider investing in dedicated spend management software like Spendflo that uses machine learning to instantly detect and flag unapproved SaaS purchases. This automation streamlines oversight.

4. Monitor app usage data: 

Maverick spend is often a response to insufficient or duplicative tools. By monitoring usage data, you can proactively sunset underperforming SaaS and replace it with solutions that meet needs.

5.Require sign-off: 

Bake compliance checks into your SaaS procurement process. Any new tools, whether employee-initiated or not, must pass security vetting and contract review. This prevents spending from going rogue in the first place.

Prevent Maverick Spend with Spendflo

At Spendflo, we understand the challenges of managing SaaS spend and preventing maverick purchases. Our powerful spend management platform is designed to give you complete visibility and control over your software expenses, empowering you to optimize your tech stack and enforce compliance.

• Automate SaaS discovery and tracking to uncover all maverick spend
• Streamline procurement workflows to make approved purchases easy
• Utilize AI-powered insights to continually optimize SaaS spend

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Frequently Asked Questions on Maverick Spend

1. What's the difference between maverick spend and shadow IT? 

While often used interchangeably, maverick spend typically refers to the financial side of unapproved purchases, while shadow IT focuses more on the security and compliance risks of rogue apps.

2. Who's responsible for preventing maverick spend?

Ultimately, it's a shared responsibility between IT, procurement, finance, and lines of business. IT owns vetting tools, procurement negotiates contracts, finance tracks expenses, and department heads communicate evolving needs.

3. Is all maverick spend bad?

Not necessarily. Some maverick spend may point to innovative tools that should be officially adopted. But most rogue purchases carry more risks than benefits, which is why it's important to proactively manage.

4. How much maverick spend is normal?

Maverick spend rates vary by industry and company size, but a general rule of thumb is that 20-30% of SaaS spend tends to be rogue in a typical organization. The goal should be to get that number below 10%.

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