March 21, 2023

Software Spend Slumps Despite Modest Annual YoY Growth

SaaS Insights

In February 2023, software spend decreased by 3.7%, despite a 21% yearly increase. Cledara found that IT and security software had the highest increase.

Richard Gargan

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**

Scaleups spend on software, Month-over-month. Source: Cledara

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:

Scaleups spend on software, by category, February 2023 vs February 2022. Source: Cledara

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.


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.



Subscribe to our newsletter

Receive the latest insights in your inbox

Richard Gargan

Richard is Cledara's in-house Content Lead. With a background in finance, he is responsible for the analysis of SaaS data to provide readers with insightful and informative analysis to help you optimize your software spend.

Share this post

Subscribe to our newsletter and stay informed on the latest SaaS insights

Explore more

Explore more

9 Best Spend Management Software Solutions for 2024

Discover the best spend management software for your needs, with this detailed rundown of the tools on the market.
Read more

The Top SaaS Tools for 2023 based on data from 1,000+ companies

According to Cledara’s world-leading data on software purchasing, these are the 20 top SaaS tools for 2023—by spend, by usage and by growth.
Read more

The Software Stack Guide for Startups

All you need to know to set your software stack for scale. Including insights from 400,000+ software purchases and renewals.
Read more

Market Insights From our Worlds Leading SaaS Dataset

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 more

Ramp vs Brex: A Comprehensive Analysis

Which is best for your business, Ramp vs Brex? Our ultimate rundown can help you decide.
Read more

SaaS Market Defies Turmoil

Cledara can reveal that overall spending on software by companies has increased by 25% over the past 12 months. Uncover more spending patterns in the software market, the evolving role of finance teams, and the top emerging software applications.
Read more

What is SaaS?

Software as a Service (SaaS) is a cloud computing model that allows users to access applications over the Internet. But there's far more to it - find out here.
Read more

The Great Flattening

Jason Lemkin, founder and CEO of Saastr, discusses the shifts and challenges in the SaaS market at Saastr Europa 2023. He reveals how the market is experiencing a 'flattening' with a slowdown in growth and tightening fundraising landscape.
Read more

Avoid $65m Cloud Bills with a Cloud Management Platform

Wondering if it's time to adopt a Cloud Management Platform? Here's everything you need to know before investing.
Read more

The Top SaaS Companies in 2023 According to Our Data

We dug into our data to see what we could learn about the 300 most successful SaaS companies in 2023.
Read more

State of AI in B2B

Discover the latest insights on AI adoption in the business world, as Cledara reveals the top 150 AI-powered SaaS products used by startups to improve efficiency and drive growth.
Read more

Q1 2023 SaaS Market Insights

Discover the latest insights into the Q1 2023 SaaS market, including the growth in software spend, top growing software categories, and the most popular new software applications in March.
Read more

The Future of SaaS - Five Predictions from Bessemer

Cledara is recognized as a top player in the fight against inefficiency and sprawl in the SaaS industry in Bessemer Venture Partners' State of the Cloud 2023 report.
Read more

3 Reasons Why SaaS Vendors Are Raising Prices and What You Can Do About It

Fight software price rises and stay proactive in managing your SaaS subscriptions to get the most bang for your buck.
Read more

What is SaaS Operations?

SaaS Operations (SaaSOps) is a new field that's quickly becoming essential for companies of all sizes.
Read more