Smaller suppliers make up 87% of 2023 Q1 SaaS sales

Smaller suppliers make up 87% of 2023 Q1 SaaS Sales

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Could it be that companies are finally starting to see the value of moving away from their incumbent suppliers?

Investing and prioritising digital transformation still remains important, despite global disruption and economic impact creating a need for tighter belts.

Reflecting on the first quarter of 2023, Vendr explores how companies have been buying SaaS, along with predictions for future purchasing patterns.

According to their findings, here are some of the top SaaS products by category:

  • CRM
  • Cybersecurity
  • Project management
  • Application performance monitoring
  • Digital analytics
‘Businesses put their money where their mouths were in Q1. Sales, cybersecurity, design and communications were top priorities for companies. This reflects that they value mission-critical SaaS’ – Ryan Neu, CEO, Vendr

It turns out that as much as 86.6% of Q1 sales were comprised of smaller SaaS vendors. Meanwhile, popular products like Salesforce, Slack and DocuSign made up the remaining 13.4%. Clearly, digital tools are of high interest and represent an area of significant investment. As more companies make the shift in their digital transformation journey, the demand for such products and data only enhances the need for innovation, to help drive effective decision-making.

SaaS pricing trends

Global spending on AI is on the up, predicted to reach a staggering $557bn mark next year.

So, why exactly are companies investing so heavily in AI? Firstly, it continues to help companies improve efficiency and productivity, shaping their operating models as they adopt a more digital structure. Such tools can streamline operations and drive growth, helping companies better manage both their SaaS and their spending.

‘Unsurprisingly, products that help companies increase their bottom line and make sales more competitive are here to stay’ – Vendr
External influences

Inflation and the collapse of Silicon Valley Bank are just some of the critical economic disruptions that occurred over the last 12 months.

The average contract value of SaaS purchases has continued to increase each year, despite interest rates rising at an unprecedented rate. It appears that companies are lapping up smaller SaaS suppliers as a means of combatting large outgoings with incumbents as they continue to seek savings throughout business operations.

As predicted, 2023 will see bigger, more popular offerings increase their prices, which provides more opportunities for smaller solutions to increase their market share and assert their value.

For instance, according to Vendr, average contract values for Q1 in 2022 were $101,412. In comparison, the same figures for Q1 2023 reached $137,072. This represents the latest in an ongoing trend of price rises, with this figure rising considerably from $98,516 in Q1 2021, and $80,916 in Q1 2020.

What’s next for SaaS?

The digital and SaaS revolutions continue. Predictions clearly demonstrate that spending will only continue to increase, as companies seek new ways to reduce costs and generate more value-creation activities. However, with numerous conflicting external factors, SaaS pricing is uncertain, as is its ongoing influence on purchasing behaviour and patterns. To combat this, teams can use data to conduct better decision-making, and use dedicated tools to focus on customer retention and data security.

Key takeaways

Vendr tails its findings with six key factors influencing SaaS purchasing, which procurement teams and buyers can focus on:

  • Streamlining SaaS usage
  • Focusing spending
  • Implementing cost-reduction strategies
  • Enhancing integration
  • Reducing redundancy
  • Simplifying procurement

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