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Think about all the vendors your company pays for.
How many do you think there are? Out of those, how many do you think it actually uses?
Spendesk examined this question in over 5,000 small- to medium-sized enterprises (SMEs) in the U.K., France, Germany, and Spain. The results were surprising.
The study found that the average SME has 800 suppliers. That’s nine times the average SME headcount.
What’s more, SMEs are only using about a quarter of them.
These stats are, at first glance, staggering. What could possibly cause SMEs to pay for so many services — and then not use them?
But letting spending get away from you is easier than it sounds — especially when companies are pressured to move quickly and keep up with the latest and greatest.
This blog will examine this phenomenon and how it applies specifically to software — which fell into the top spending category in the study.
The Ugly Truth of IT Sprawl
Of course, software is necessary for the modern business. However, many SMEs end up overspending on software they don’t need — thus contributing to this trend of overbuying and underutilizing suppliers. When this happens with software, it’s called IT sprawl. It can create security vulnerabilities, hamper productivity, and proverbially flush money down the toilet.
Most IT architectures decentralize over time. It happens naturally as teams adapt to meet new needs. Some solutions fall out of use as processes change; other solutions arise to meet new needs. It wouldn’t be realistic for IT to conduct full-scale analyses every time a small IT change is requested.
However, some factors exacerbate architecture’s natural tendency to sprawl. These include:
- Shadow IT: Shadow IT refers to technology or software used within an organization without explicit approval from IT. While it usually arises from good intentions, it ultimately increases the number of unsupported systems and applications in the architecture.
According to a 2024 JumpCloud study, 84% of SME IT professionals are worried about shadow IT. - Lack of IT asset management: Without proper IT asset management, teams can lose track of the tools they have and acquire new ones they don’t need. This creates duplication and complexity in the environment.
- Fast growth: When it comes to growth, fast usually foregoes neat. A fast-growing team can’t afford to bring things to a halt every time a decision needs to be made: IT teams are pushed to act quickly. The result can be a scattered rather than intentional approach to tool acquisition and management.
- Vendor lock-in: Vendors with narrow solutions can limit flexibility and increase complexity as an SME’s stack grows. The problem is only exacerbated when these existing solutions don’t integrate well with new ones.
- Mergers and acquisitions: In an M&A, companies often inherit a diverse set of IT systems and infrastructure. Integrating these systems can be complex and may contribute to IT sprawl if not managed strategically.
The Risks of IT Sprawl
IT sprawl can detract from efficiency, security, and overall business performance. Some key risks of IT sprawl include:
- Security vulnerabilities: IT sprawl can create gaps in visibility. These become blind spots that are unmonitored, underprotected, and vulnerable to attack.
- Management inefficiencies: The more tools your team has to manage, the harder they’ll have to work to do so. Often, IT teams in sprawled environments spend too much time on tedious tasks like manual integrations and not enough time on strategic initiatives.
- Lower productivity: These inefficiencies can translate to clunky workflows, which slow down processes and hamper productivity.
- Higher costs: Duplicate IT resources and scattered infrastructure can raise IT spending, including maintenance and support costs.
- Compliance risks: Nonstandard IT practices may lead to violations of industry regulations and data protection laws, exposing the organization to legal and financial risks.
How Can SMEs Combat IT Sprawl?
Paying for 800 vendors and only using a quarter of them is not a pretty picture. How can you avoid the endless doom spending?
- Pare down where you can. If you’re anything like the SMEs in this study, you’re likely paying for at least a few suppliers that you don’t use. Consider conducting an audit to pare down where you can. This will make sure you’re working with an orderly and intentional architecture moving forward.
- Invest in asset management. Asset management is critical to preventing sprawl: it ensures that all IT resources are tracked, maintained, and utilized efficiently. An asset management tool will help you keep everything in your environment visible and accounted for as you change and grow.
- Focus on making smart, intentional, and controlled purchasing decisions. When new needs arise, consider what you already have in your stack. Can you solve the problem without adopting a new tool? If not, will the new tools you’re considering integrate seamlessly with your current ones? This process is easiest when you have an asset management tool so you can see exactly what you have in your architecture.
Tap Into More SME Data
Learning from your peers can help with planning and staying competitive. JumpCloud conducted a study of over 600 U.S. and U.K. SMEs to learn more about the challenges they face, how they’re approaching them, and what they see for the future. Download the free report for more SME IT data.
