SSO Tax Guide: The Hidden Drawbacks

‍The SSO tax is a reality that businesses must navigate. While some consider it unnecessary, others consider it a worthwhile investment for SSO tools' value. Understanding the SSO tax and its potential drawbacks is crucial as technology evolves. Here's what you need to know and how to address it.

Many organizations are increasingly adopting single sign-on (SSO) because of its convenience and security. However, these benefits come with hidden costs that catch the teams off-guard. These additional fees, which are added on top of the normal software subscriptions, can put pressure on the IT budgets and make the financial forecast more difficult.

What's more frustrating is that these costs often feel unjustified, especially when security should be a priority, not a luxury.

In this guide, we'll explore the hidden drawbacks of the SSO Tax, explain how it impacts your IT strategy, and look for actionable ways to escape or mitigate these costs.

What Is SSO Tax?

‍What exactly is SSO Tax? It refers to the additional costs associated with implementing SSO for your applications, especially if you opt for SaaS solutions or self-hosted applications. Many vendors offer SSO capabilities as an add-on, requiring organizations to pay extra for this functionality. This can include licensing, integration, and ongoing maintenance costs, adding to your overall budget.

For example, your inventory management software has a basic monthly subscription that costs $50. However, adding SSO functionality comes with an extra charge of $20 per month. This means your monthly expense would increase to $70 to access the convenience of SSO.

After a year, this additional $20 per month for SSO adds up to $240 to your overall software costs. Incorporating this extra expense into your budget is crucial, as it may impact your other financial decisions and spending priorities within your business.

Why Do Some Vendors Charge Extra for SSO?

Create a similar image with header “Why Do Some Vendors Charge Extra for SSO?”

Some vendors charge extra for single sign-on (SSO) because they perceive it as an advanced feature that caters primarily to larger organizations with complex needs. SSO was associated with enterprises requiring identity management and enhanced security measures. As a result, vendors often bundle SSO functionality with their higher-tier pricing plans, treating it as a premium add-on.

This pricing strategy reflects several factors:

1. Resource Allocation: Developing and maintaining SSO capabilities involves significant technological and support investments. Vendors may allocate more resources to build robust SSO solutions, which they justify by charging a premium.
2. Target Market: Vendors targeting larger enterprises tailor their offerings to meet the specific requirements of these organizations. For them, SSO is seen as a necessary feature, while smaller businesses may not have the same level of demand or need, leading to a differentiation in pricing.
3. Complex Integrations: Implementing SSO requires complex integrations with various applications and systems. Vendors might charge extra to account for the potential costs associated with these integrations, which can vary significantly based on the organization's existing infrastructure.
4. Perceived Value: Vendors may believe organizations are willing to pay more for enhanced security and user experience. By positioning SSO as a premium feature, they aim to capitalize on the increasing demand for secure access management.
5. Market Competition: Vendors may use pricing strategies to differentiate their offerings in a competitive market. Bundling SSO with higher-tier plans can create a perception of exclusivity, appealing to organizations that prioritize advanced features.

By treating SSO as a premium add-on, vendor aligns their pricing with this advanced feature's complexity and resource requirements, catering primarily to larger organizations while leaving smaller businesses to navigate the additional costs.

Is the SSO Tax Justifiable Based on Vendor Costs?

Create a similar image with text “Is the SSO Tax Justifiable Based on Vendor Costs?”

Whether the SSO Tax is justified often hinges on the perspective of different stakeholders, particularly IT teams and business owners. From a vendor’s viewpoint, the SSO Tax is necessary to cover the costs of developing, maintaining, and supporting SSO integrations.

However, IT teams and other departments frequently challenge this justification. Many argue that the additional charges are disproportionate, especially with numerous accessible SSO solutions available today. Given the emphasis on user experience and security in modern software applications, SSO should be a standard feature rather than an add-on.

Furthermore, IT teams often feel pressured to justify every expense when evaluating budget constraints. If the cost of SSO does not align with its perceived value—like improved productivity and reduced password management issues—these teams may resist adopting it. On the business side, decision-makers increasingly seek cost-effective solutions that don’t compromise essential functionalities like SSO.

What Are The Hidden Drawbacks of SSO TAX?

Implementing SSO can simplify access to applications and improve user experience, but the SSO Tax introduces several hidden drawbacks for IT teams that may not be immediately apparent. Here's a detailed look at these challenges:

1. Weakened Security: Organizations with limited budgets may not implement it

Implementing SSO is crucial, but being an expensive add-on, it might not be a better fit for every organization, as each has a different budget. For instance, smaller organizations may be forced to go without SSO, compromising their overall security posture. While SSO should be part of a broader security strategy, many companies sacrifice it to stay within their budget, exposing them to security risks such as:

• Phishing attacks: Without SSO, users often rely on multiple passwords for various applications. This increases the likelihood of falling victim to phishing attacks where compromised passwords can give unauthorized users access to sensitive data.
• Password fatigue: Managing multiple logins can lead to poor password practices, like reusing weak passwords across platforms. This increases the risk of unauthorized access to critical systems.
• Unauthorized access: When a user leaves, IT teams manually revoke access to multiple systems, increasing the chance of a security lapse. SSO simplifies this by providing a single point to manage access, but organizations are more exposed without it.

2. Vendors May Not Fully Invest in Enhancing Services

Some vendors charge extra for SSO but do not actively invest in improving the SSO experience. This results in:

• Suboptimal performance: Organizations may pay for SSO but encounter poor performance, such as frequent authentication failures or compatibility issues with other systems.
• Poor support: If vendors treat SSO as a secondary concern, their customer support may not prioritize resolving issues related to SSO integration or performance, leaving IT teams to deal with persistent problems on their own.
• Unjustified cost: Paying extra for SSO without significant benefits frustrates IT teams, especially when they find that the premium service doesn't deliver the expected results. This makes it harder to justify the cost internally.

3. Vendor Lock-In and Limited Flexibility

Implementing SSO often means choosing a specific vendor for the solution, which can lead to long-term consequences:

• Vendor dependency: Once an SSO solution is integrated into your organization's workflow, switching to a different provider can be complicated and costly as you have to pay a tax there, too. IT teams may become locked into a vendor's ecosystem, limiting their flexibility to explore more affordable or better-performing alternatives.
• Migration costs: Similarly, now that you've paid the SSO tax and committed to the system, switching vendors can become a complicated and costly process. Migrating to a new provider often involves additional expenses, potential disruptions to operations, and increased security risks as IT teams work to transfer user data and reconfigure access controls in the new system.

The SSO Tax may offer convenience and security, but the hidden drawbacks—especially for IT teams—can create significant challenges. From increased security risks and operational overhead to vendor lock-in and budgetary constraints, these factors require careful consideration before deciding whether to adopt an SSO solution.

How To Escape Hidden SSO Tax?

Avoiding the hidden SSO tax requires strategic planning. Another effective way to escape the hidden SSO Tax is to leverage a password manager combined with your IDP, such as Entra, Okta, etc. This will allow you to avail yourself of all the benefits of SSO without having to pay any hidden cost per user.

Also, you can look for alternative vendors that offer SSO at a reasonable price or less than competitors. However, your journey doesn't end here. To reap the full benefits of SSO, you need to use it along with a reliable access management solution like Zluri.

Also Read: If you want to know more about saving costs for SSO, go through SSO Best Practices.

Frequently Asked Questions (FAQs)

1. Does SSO Tax vary based on the size of the organization?

Yes, it can vary based on the size and complexity of the organization. Larger organizations often have more extensive needs for SSO due to their larger user base and diverse applications, leading to potentially higher costs. In contrast, smaller organizations may find that the additional costs for SSO features are more burdensome relative to their overall budget, making it important to carefully consider whether the benefits justify the expense.

2. Can SSO Tax affect our long-term IT strategy?

Yes, it can impact your long-term IT strategy by influencing budget allocation and vendor decisions. Paying extra for SSO features can limit your flexibility in choosing other tools or software, as the added cost may reduce available resources for other projects. Over time, these costs can accumulate, affecting how you plan for future upgrades or new software integrations.