Software Spend Slumps Despite Modest Annual YoY Growth

Businesses have increasingly turned to software to enhance their operations and stay competitive in the market. This trend has been reflected in the yearly increase in software spend, with a 21% year-over-year increase reported. However, in February 2023, software spend saw another month-over-month decrease of 3.7%, reflecting shifts in the market:

• In February 2023, software spend decreased by 3.7% from January 2023
• Software spend increased 21% year over year
• The IT and security category had the highest annual growth rate of 55%
• Sales, Design, and Marketing software all saw drops in spend over the last 12 months, with HR software dropping the most by 33%.

Software Spend Up Over February 2022….

… But Declined in February 2023 from January 2023

The Full Spend Picture**

In February, there was an overall month-over-month decrease in software spend across all levels of spend, with the top spenders and the second quartile of spenders experiencing the largest declines of 4.0% and 3.2%, respectively. The third quartile and the bottom quartile experienced smaller declines of 3.0% and 1.0%, respectively.

While the top quartile experienced the largest increase in software spend in January, it also saw the largest decline in February. The bottom quartile consistently had the lowest software spend, with the largest decline occurring in December.

Software Spend Categories**

We analyzed which software categories were growing and which were shrinking, and found that spending on sales and IT software grew the most:

Cledara's data shows that companies are investing more in IT and security, product development, and customer success versus a year earlier. 

The IT and Security category saw the highest increase of 75%, which shows that companies are investing more in securing their systems and data as cyber threats continue to rise. 

The Product category saw a 71% increase, indicating that companies are prioritizing their product development to stay competitive in the market.

The Customer Success category saw a 64% increase, reflecting the growing emphasis on customer satisfaction and retention. This is not surprising, given the increased amount of churn companies are seeing at the moment.

However, not all categories experienced an increase in software spend. The Sales category saw a decrease of 30%. It could mean that companies are struggling to generate sales, or may simply reflect cutting back on sales headcount and marketing expenses.

The HR category also saw a decrease of 33%, which makes sense in the context of cuts in headcount. The Finance and Analytics categories had lower increases of 30% and 27% respectively.

The decrease in software spend in Design (-13%) and Marketing (-1%) could mean that companies are prioritizing other areas of their business over marketing and design.

Richard Gargan, analyst for Cledara, said:

“As companies mature in their go-to-market during this economic cycle, they’re investing more in the core functions of finance, ops, success and product, while pulling back in sales, marketing, and design tools. As headcount growth stalls, we also notice a drop in HR software spend as fewer seats are required.” 

Top 10 New Software Applications for February 2023**

Here we show the top 10 new software applications for February 2023, based on the number of Cledara customers using them.

The most popular new software application for February 2023 is ChatGPT. ChatGPT is an artificial intelligence chatbot developed by OpenAI and launched in November 2022 and has been taking the world by storm.

The second most popular new software application is Billo, a cloud-based social selling platform, designed to help small to midsize eCommerce businesses connect with video creators to produce a variety of custom videos (such as unboxing, testimonials, how-to, etc).

Tailwind, ranked third on the list, is a social media management tool that allows businesses to schedule posts, track analytics, and engage with followers across multiple platforms.

CoPilot AI, ranked fourth, is a SaaS company that uses AI and social data to connect businesses with customers.

Snyk, ranked fifth, is a cloud native application security leader that enables developers to build software securely.

Akismet, ranked sixth, is a spam filtering tool that helps businesses prevent unwanted comments and messages on their websites.

Appogee HR, ranked seventh, is a human resources management tool that helps businesses manage employee data, track performance, and automate HR processes.

Calm, ranked eighth, is a meditation and mindfulness app that helps individuals manage stress and anxiety.

Dex, ranked ninth, is a personal CRM platform that reminds users to keep in touch.

Fetchify, ranked tenth, is a tool to enhance the accuracy of data collected from customers. It simplifies address lookup, email, phone & bank account validation.

Up Next**

Cledara continues to monitor software spend trends each month. Stay tuned for our next report on software spend for March 2023, coming out in April. Subscribe to our newsletter to be notified when we release this report.

Thinking about your software stack? Learn more about Cledara’s SaaS management platform, the one platform to manage all your software subscriptions that helps companies reduce software costs by up to 30% and save up to 20 hours a month on finance & software administration.

Methodology**

For software spend analysis, Cledara looked at a sample of 96 companies who have a 12-month history of spending on software vendors. 

For vendor winners analysis, we selected software vendors with over $20,000 in annual spend using Cledara and who had at least 5 Cledara customers in each of the preceding 12 months.