September 15, 2023

Market Insights From our Worlds Leading SaaS Dataset

SaaS Insights

Leveraging our world-leading dataset on SaaS purchasing, usage, renewals, and churn we look at the health of the SaaS market, the purchasing differences between small and large organizations, new annual purchasing trends, and churn insights.

Cristina Vila

Market Insights From Cledara's World Leading SaaS Dataset**

At this year's SaaStr conference, Cledara’s Founder & CEO, Cristina Vila Vives, unveiled insights on "The State of SaaS”. Leveraging our world-leading dataset on SaaS purchasing, usage, renewals, and churn we look at the health of the SaaS market, the purchasing differences between small and large organizations, new annual purchasing trends, and churn insights. 

Read on for a wrap-up of the insights.

Unveiling the Cledara SaaS Index**

We’ve created the Cledara SaaS Index (CSI) to share insights into the health of the SaaS Market. The index gives us a view of spending momentum. How does Cledara SaaS Index work? When the index rises above 100, SaaS spending momentum is getting stronger, if it falls below 100, SaaS spending is weakening.

Cledara Index Shows SaaS Spending Resists Market Conditions**

Cledara began tracking the index in 2021 and, despite volatile market conditions, it has only dropped below 100 twice, showing a continued defiance of market conditions. In February 2022 and January 2023, the index dropped below 100, reflecting a slow-down in SaaS purchase. This pattern could indicate a seasonal tightening of budgets at the start of the year - valuable intel for your sales and marketing planning.

We also compared the Cledara SaaS Index to the NASDAQ 100 (QQQ) and the correlation is striking: when the NASDAQ rises and falls, SaaS spending tends to follow suit. This information is invaluable for predicting sales environments. When the NASDAQ is up, your sales team may find it easier to close deals. Conversely, a declining NASDAQ could signal the need for more aggressive sales tactics.

Large Companies Outperform SMBs as SaaS buyers**

We also used the Cledara SaaS Index to examine the spending behaviours of small and large companies over the past two years and found some interesting patterns.

Small and medium-sized businesses (SMBs) show aggressive spending when the market is favourable. They are quick to buy software and do so in significant quantities, making selling to this sector relatively easy during good times. However, these businesses are highly responsive to market changes. As soon as the market takes a downturn, SMBs reduce their spending just as rapidly as they increase it, proving to be quite sensitive to market fluctuations.

On the other hand, larger companies exhibit a different trend. While they do increase their software spend in a buoyant market, their purchasing behaviour remains relatively stable even when the market isn't doing well. They are slower to reduce spending, offering a level of consistency that SMBs do not.

The early signs for Q3 are that selling to SMBs is becoming easier again. We’ll be watching to see how their spending grows and reporting back with new insights.

Churn: Another Wave is Hitting SaaS Companies**

Our analysis doesn't stop at purchasing. We also delved into customer churn using an index that tracks this metric over time. A score above 100 indicates increased churn compared to the previous month, while a score below 100 signifies reduced churn. The data covers the period from 2022 to 2023 and reveals intriguing regional differences.

When the markets took a hit last year, US companies were quick to cut their spending, as indicated by the "green line" in our chart (see chart above). In contrast, European companies, represented by the "blue line," maintained a relatively flat spending pattern. However, this year brought another wave of churn, and surprisingly, European companies have started to reduce their spend more aggressively than their US counterparts.

Looking at Q3 data, this churn wave appears to be subsiding, with both lines starting to flatten. This is good news for customer success teams, as it suggests they'll likely face fewer challenges with client retention moving forward. Interestingly, the data also shows a cyclical trend in churn rates, typically peaking towards the end of Q2 and the beginning of Q3.

Annual Contracts are More Popular Than Ever**

One of the most noteworthy trends the Cledara SaaS Index has observed is that annual contracts are now at an all-time high, revealing a significant shift in customer preferences. The surge in annual contracts indicates that companies are looking for more stability in their software portfolios. Eager to lock in current prices and likely countering price increases from vendors, they are increasingly opting for longer-term commitments over month-to-month arrangements. 

This is good news for sales, customer success, and finance teams alike, as it offers increased financial stability and enables more effective long-term planning.



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Cristina Vila

Cristina is the Founder and CEO of Cledara, the platform that simplifies your relationship with software at work by helping you discover, buy, manage and cancel software apps. Cristina is an entrepreneur at heart, a dreamer and a doer and is listed by Forbes as one of the business leaders changing the world for the work she’s doing with Cledara.

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