Q1 '24



Share of spend for new software purchases is rapidly decreasing

When it comes to software spending, renewals have always accounted for a much larger slice of the pie. And often for good reason – familiarity, cost-effectiveness, minimal disruption.

Despite this, companies have continued to procure new applications, either to replace previously used tools, or to simply enhance their SaaS stack. But the share of spending for these new tools is declining. Rapidly.

In Q4 of 2023, new software purchases accounted for just 11% of total SaaS spend, a significant drop from the 20% reported in Q4 of the previous year.

By the end of this quarter, we project that the number could fall to as low as 8%. Meaning that as much as 92% of the average organization’s SaaS budget will be reserved entirely for renewals.

It’s clear that organizations are ultimately becoming increasingly cautious – and ultimately less frivolous – when it comes to the procurement of new tools.

Renewals take 50% longer to negotiate than new purchases

Renewals may be dominating the average organization’s SaaS budget, but it’s not just the cost that organizations need to factor in. It’s also time.

According to our data, renewals often take 50% longer to negotiate than new purchases, with the latter taking an average of 25 days, compared to the 37 days it takes for companies to renew their applications. Counterintuitive though it may seem, there’s a logical reason – when it comes to buying new software, much of the initial research is done informally before initiating any sort of purchase request.

For renewals, however, the process is often more reactive, with stakeholders only starting the requirements gathering process once they realize the renewal deadline is approaching.

According to our Global Head of Purchasing, Nick Riley, another major issue that companies often have to contend with is delayed vendor response times.

What is interesting, though, is that the total time to negotiate contracts end-to-end is almost entirely independent of the size of the deal. Which ultimately means that tackling the long tail is just as valuable in terms of opportunity cost as tackling the more strategic, key contracts.

What's trending in SaaS?

Most popular new purchases

New software purchases may be declining on the whole, but there’s still been a surge in popularity for certain tools across our user base, including customer support tools, HR platforms, and DevOps applications.

In fact, the fastest growing SaaS categories across our user base include customer support tools, HR platforms, and DevOps applications.

One of the main reasons these tools are in such high demand is because of their AI capabilities.

As companies look for ways to boost efficiency and productivity, they’re naturally gravitating towards those that can automate and streamline certain tasks. For customer service teams, this includes utilizing tools such as Zendesk, Klaus and Intercom, which offer chatbot functionality and can automatically resolve customer queries.

Similarly, for DevOps teams, there’s a huge benefit to using software such as GitHub, JetBrains and Dagster, which offer the likes of code completion, while also being able to fix bugs – both resource-intensive tasks.

What's trending in SaaS?

Most popular renewals

When it comes to the most popular software renewals, product categories such as sales engagement, recruitment, and mobile device management that are topping the charts.

While this indicates that companies are still very much hot on the tools that enable growth and support their go-to-market strategies, what’s really making the likes of Outreach and Gong all the more lucrative is their AI functionality, with users now able to access features such as automatic meeting summaries and sentiment analysis.

Another type of software that’s seen a recent surge in renewals is recruitment platforms such as LinkedIn, Greenhouse and Personio, indicating that amidst the continuous news of layoffs, hiring quite clearly remains a top priority for many organizations.

The software category that’s seen the highest jump in renewals, however, is the mobile device management sector, with providers such as Jamf and Kandji experiencing record growth. This tells us that security remains paramount to the majority of companies, which comes as little surprise following increased security concerns off the back of the recent Microsoft hack and the 2023 LastPass hack.

Rising SaaS vendors

Customer service platforms are certainly having their moment.

Of all the SaaS solutions used across our customer base, it is AI customer service software, Intercom, customer service provider, Zendesk, and customer communication and engagement platform, Aircall, that have seen the highest uptake between Q4, 2023 and Q1, 2024.

Falling SaaS vendors

What goes up, must come down. Or so they say.

Unfortunately, since last quarter, the tools that have seen the biggest decline in usage across our customer base include go-to-market software provider, ZoomInfo, video communication platform, Zoom, and cloud data solution, Snowflake.

Given the vital role that video communication platforms play within the average organization, it’s certainly surprising to see market-leader Zoom feature so prominently on this list.

What’s perhaps more interesting is that we’re seeing an increasing number of customers switch to the likes of Microsoft Teams, which is substantially more affordable – highlighting the very real impact that rising software prices are having on companies and their decisions around optimizing their SaaS stacks.

Q1 Vendor Hero: Intercom

With the share of spend for AI software having more than tripled in 2023, it comes as little surprise that tools of this kind are rising in popularity. And with a 4.5 star rating on G2, based on almost 3,000 user reviews, it’s also clear why Intercom in particular has become an increasingly sought-after platform.

Q1 Category Spotlight: Customer Support

Back in 2020, McKinsey predicted that AI technologies had the potential to deliver up to $1 trillion of additional value each year, with customer support tools expected to account for a significant portion.

Well, given the data, it seems as though the company may have just been onto something.

Not only do all three of our rising vendors belong to this very software category, but customer support platforms in general now account for 7% of total SaaS spend within the average organization, making it the 5th largest category in terms of spending.

As with any tool though, prices are rarely set in stone and there are almost always opportunities to drive down the cost.

Our data indicates that the average discount provided by vendors in this space is 19%, meaning that you could be saving almost a fifth of the list price with the right leverage and negotiation strategy, often substantially more.

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