The SaaS Trends Report
Introduction
If you’re looking for SaaS data, you’ve come to the right place. This report is our most comprehensive to date — encapsulating an entire year’s worth of SaaS trends.
Inside, you’ll find the data you’ve come to love in Vendr’s quarterly reports such as top products, ACV trends, and our SaaS leaderboard. However, you’ll also find fresh insights. Curious the best month to get a discount? Or the percent of spend that Vendr users devote to specific categories? Look no further — our 2023 year-in-review delivers.
Vendr was founded on the principle that software buyers and sellers deserve equal access to information. With equal access comes better and faster decision-making for software buyers and healthier customers for software sellers — a true win-win. This report is one of my favorite things we deliver each quarter, because it embodies that principle. I hope our 2023 report helps you determine where to invest, ensure fair pricing, and set your strategy for the year ahead.
Mapping Software Budgets by Category
Across all company sizes in our data set, companies allocate the majority of software budgets to IT Infrastructure, Sales, Data Analytics & Management, and Security & Compliance.
Why this matters
Where are companies spending their budgets? We receive this question more than almost any other at Vendr — and for good reason. Knowing where other companies are spending can help determine where you may be over- and under-investing.
Key insights
- Productivity, Vertical Industries, Dev Ops, and Human Resources have the most consistent percent of spend, regardless of company size.
- The percent that companies spend on Design and Content Tools, Marketing and Advertising, Finance and Accounting, and Commerce and Retail declines as company size increases.
In 2023, we saw three major changes in customers’ approach to buying SaaS. First, payment terms became a major priority to preserve cashflow. In some cases, customers accepted higher rates for better payment terms. Next, we saw an increase in customers shopping competition for new purchases and renewals. Finally, we saw an increase in customers avoiding multi-year agreements to offer as much flexibility as possible.
– Amanda Taitel, Principal SaaS Consultant
The best months to buy, sell, and save on SaaS—sales peak in winter, and purchases take longest during summer.
Why this matters
When you’re making a big purchase, it’s important to understand how long it will take, when you’re most likely to get a discount, and what seasonal trends are in play.
Key insights
- In 2023, January had the most renewals, but it was also the month that renewals took the longest. If you’re renewing in January, start early.
- December was the hottest month for net new purchases, which is a frequent YoY trend, because it’s when companies learn if they have money left in their budgets.
- Looking to buy net new during summer? Add some extra time into your buying cycle. June, July, and August tied for the longest buying cycles in 2023.
In 2023, the dominant negotiation trends focused on maintaining rates on descopes, reducing uplifts, and securing longer-term contracts for less flexible products. Given the tighter budgets most organizations faced, it was crucial to reference past rates, account for budget limits, and formulate clear future plans with suppliers.
– Tyler Garwood, Senior SaaS Consultant
2023 Average Contract Value (ACV) Trends
ACV dipped in Q2, indicating that buyers exercised caution. However, the trend reversed in Q3, with both net new purchases and renewals reaching year-highs in Q4.
Why this matters
Tracking ACV helps us identify shifts in pricing strategies from suppliers and purchasing strategies from buyers.
Key insights
- ACV for net new purchases increased 32% YoY, while the YoY for renewal ACV dropped 11%.
- Blended ACV for net new purchases and renewals averaged $87k in 2023, representing a 4% decrease from 2022’s blended ACV.
- The highest ACVs occurred among the IT Infrastructure, Data Analytics, and Customer Support categories.
- The lowest ACVs occurred in Design and Content tools, Human Resources, and Collaboration and Communication.
Suppliers displaying the Vendr Verified badge are exclusive members of our invite-only program. These suppliers provide leading software solutions with proven customer satisfaction and low attrition rates. They commit to a purchasing experience that is quick, equitable, and transparent. This commitment is why each Vendr Verified purchase comes with our Great Price and Satisfaction Guarantees.
Top Suppliers by Average Contract Value (ACV)
In 2023, the leading suppliers predominantly recorded an Average Contract Value ranging from $20,000 to $60,000, with over two-thirds of these top suppliers falling within this bracket.
Why this matters
Average Contract Value tells us where the industry's pricing is moving. Buyers and sellers can assess the position of specific suppliers compared to competitors and alternatives. Additionally, this analysis reveals trends in the popularity of different products relative to ACV.
Key insights
- Of the top suppliers on Vendr’s platform, Datadog, NetSuite , and Looker had the highest ACVs.
- Avalara, Figma, and 1Password had the lowest ACVs of the top suppliers.
Top Categories by Average Contract Value (ACV)
Ranking ACV by category for the leading 2023 categories.
Why this matters
Buyers and sellers can assess ACV by category to help determine what they should expect to spend when investing in top categories.
Key insights
- Companies are spending the most on the cloud, ERP, and APM.
- Companies are spending the least on e-sig tools, market and user research, and recruiting.
Perimeter 81
CircleCI
PagerDuty
Litmus
Kandji
SaaS Buying Cycles in 2023
Buyers purchased SaaS 5% faster in 2023 than in 2022.
Why this matters
Buying cycles help buyers and sellers predict how long it takes to procure software.
Key insights
- Despite ZoomInfo and Zendesk having near-identical ACVs, ZoomInfo boasts the shortest buying cycle, while Zendesk exhibits the longest buying cycle among Vendr's top suppliers.
- 1Password has the second-shortest buying cycle behind ZoomInfo. Both are also Vendr Verified sellers, reflecting the program’s commitment to fast and fair buying experiences.
- Most of Vendr's top suppliers have buying cycles ranging from 42 to 55 days.
Top Products by Quantity Purchased
Who was buying what in 2023? These are the top SaaS products by net new purchases and renewals, based on quantity. Plus, a look at the top products that were purchased for the first time on Vendr’s platform in 2023.
Why this matters
Comprehending the most frequently purchased products provides SaaS buyers with insights into the essential tools that companies depend on, and highlights emerging products to monitor.
Key insights
- 6Sense, Crowdstrike, Gong, and Okta made the Top 10 for New Purchases in 2022 and 2023.
- Salesforce, Slack, Linkedin, Docusign, Zoom, Carta and ZoomInfo topped the charts for both years in renewals.
Top-Purchased Categories
The top categories, purchased net new and renewed in 2023, broken down by quantity of transactions per category.
Why this matters
This chart shows which categories software buyers invested in most in 2023.
Key insights
- YoY, the top two categories remained the same, with Identity and Access Management and Cybersecurity topping the list in 2022 and 2023.
- YoY, 9 out of the top 10 categories were in the top 10 two years in a row. In 2022, Application Performance Monitoring made the Top 10. In 2023, that fell out of the Top 10 and Data Science and Analytics made the Top 10.
- Categories that weren’t among the top suppliers in 2022 but made the cut in 2023 include Version Control, IT Service Management, Cloud Security, and Visual Design.
The SaaS Leaderboard: 2023
The top-purchased products through Vendr in 2023, organized by category.
The top three suppliers in Vendr’s top-purchased categories by transaction volume in 2023.
Why this matters
The leaderboard showcases the highest achievers in key categories, noted for their consistent delivery of value, ability to attract and retain customers, and expansion of their market share.
Machine Learning & Artificial Intelligence
AI tools are here, both as co-pilots attached to existing products and as standalone applications.
Why this matters
AI’s impact on spend can be difficult to measure, since AI is typically embedded into products from non-AI categories. However, one way to track progression of AI is via our Machine Learning and Artificial Intelligence subcategory. This year, that subcategory saw a 54% increase YoY. Let’s dive in.
Throughout 2023, there was a noticeable, though expected, increase in AI-specific companies, allowing buyers to improve customer experiences and streamline internal operations. As we look forward to 2024, existing SaaS offerings are poised to continue integrating AI, adapting to the evolving needs of their customer. The question remains: who will shoulder the financial burden for these advancements?
– Ali Zolfaghari, SaaS Consultant
CFO Predictions for 2024
Tighter software budgets are the new normal.
Despite forecasts of decreasing inflation and interest rates, organizations will keep budgets tight, with CFOs still closely involved in deals.
Multi-year deals come due.
In 2022, many companies were still prioritizing growth at all costs. In 2024, multi-year deals signed in 2022 will come up for renewal, and sellers should expect many of these deals to downsize.
Sales apps shine as return to growth emerges.
This year, companies will question how they can profitably return to growth. However, most companies won’t want to do this through massive hiring sprees, and instead rely on efficiency and SaaS driving ROI.
2023 Vintage Apps.
Companies founded in 2023 will make a splash in 2024, designed and developed as AI-first products.
Best products win.
Products that are merely "nice-to-have" are falling by the wayside, while category leaders are set to thrive. The old adage "no one ever got fired for buying IBM" has evolved. Now, the surefire path lies in investing in the category leaders we spotlight today.
Final Thought
Vendr has worked with thousands of buyers across 30k+ SaaS deals to form the foundation of this report.
This data not only shapes our insights, but it’s also given us a deep understanding of the operational strategies of top-tier SaaS companies.
In challenging economic landscapes, the leading companies actively prioritize customers, fostering trust and loyalty. SaaS companies that win big in 2024 will undoubtedly be those with an unwavering focus on customer satisfaction.
We hope this report gives you a head start of determining where to invest your dollars this year. We’ll be back next quarter with a full recap of Q1 SaaS Trends. Until then, you can always reach me at ryan@vendr.com.