Our Perspective on the Software Subscription Problem

A Personal Perspective

My path to this problem was unexpected. I spent most of my career building software products and serving as CTO at companies ranging from startups to Amazon. My focus was always on shipping great products, scaling systems, and hiring engineering talent. Financial management of software licenses? That was something for Finance to worry about.

Then I experienced the problem firsthand. At one company, while preparing for a board meeting, I discovered we were spending $3.2 million annually on engineering tools alone. The shocking part? My own team could only account for about half that spend. The rest was scattered across forgotten trials, auto-renewed contracts, and redundant tools different teams had independently selected.

As we dug deeper, the findings became more troubling. Legal had never reviewed terms for most of these click-through agreements. We found unlimited liability clauses, data residency violations, and auto-renewal terms that would make your general counsel lose sleep. One “free trial” had converted to a $50,000 annual contract without anyone noticing. Another tool was storing our customer data in jurisdictions that violated our privacy commitments.

The wake-up call came when we discovered a departed employee's personal credit card had been auto-charging $3,000 monthly for a “critical” system no one had accessed in eighteen months. The vendor had our source code, our customer data, and contract terms that essentially gave them ownership of our intellectual property. Our general counsel's exact words: “This is a ticking time bomb.”

I've personally directed and been a stakeholder in several internal projects to address this chaos. These initiatives often required pulling senior project managers off their delivery work to “herd the cats” – conducting detective work to match charges to services, hunting down the originators (often no longer with the company), debating whether to risk canceling something that might be critical, and contacting sales reps for the latest versions of contracts.

One such project at a previous company took four months and involved six team leads working part-time on the effort. Despite this significant investment of senior talent, we only managed to review about 60% of our subscriptions. The opportunity cost was clear – these were experienced people who should have been focused on product delivery, not vendor archaeology. Worse, by the time we finished, the problem had partially regenerated itself with new subscriptions added during the cleanup period.

This revelation led me to examine the issue more broadly. What I found was that the problem is surprisingly acute at midsize companies – those with 200-1,000 employees. Why? They're in a peculiar trap:

• Too big for informal control: Unlike startups where one person knows every subscription, midsize companies have distributed decision-making
• Too small for enterprise discipline: They lack the procurement departments and approval hierarchies of large corporations
• Growing too fast to pause: The pressure to scale quickly means “we'll clean this up later” becomes a permanent state
• Complex enough to hide waste: With multiple departments and budgets, redundancy and waste get buried in the overall growth

As one CFO told me, “We have the complexity of a large company with the processes of a startup.”

How We Got Here

The shift from perpetual licenses to Software-as-a-Service fundamentally changed software procurement. What once required capital approval and IT involvement now happens with a credit card and an email address.

This democratization has benefits – teams can quickly adopt tools they need. But it also created an accountability gap. When every department can subscribe to software, nobody owns the complete picture. The result is predictable: redundancy, underutilization, and spending that grows faster than the value it delivers.

Consider this: Software spending at most companies has grown 20-30% annually for the past five years. Has the value delivered grown proportionally? Rarely.

The Economics

Software spending averages $8,000-15,000 per employee annually at growth-stage companies. Our work typically reduces this by 25-35% without eliminating any essential capabilities. For a 500-person company, that translates to $1.5-2.5 million in annual savings.

But focusing solely on cost reduction misses the larger point. Simplification creates value beyond savings:

• Fewer vendors mean less contract management
• Consolidated tools mean better data and easier reporting
• Cleaner architecture enables faster decision-making

As one CTO told me, “The savings funded two new engineers, but the reduced complexity gave us back 20% of our team's time.”

Why This Matters Now

Three trends make this particularly relevant:

1. Economic Environment: Growth capital is expensive. Internal funding through optimization is increasingly attractive.
2. Portfolio Complexity: The average company added 30% more SaaS tools in the past two years. Integration and management overhead compounds with each addition.
3. Maturity of Solutions: Modern APIs and financial systems make comprehensive discovery feasible. What once required months of manual work now takes weeks.