From short-term contracts, and app consolidation to the impact of ChatGPT – latest SaaS trends business leaders must know

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SaaS apps

Innovative technology investments are reshaping the business world, and the Software-as-a-Service (SaaS) sector is at the forefront. Witnessing a remarkable surge, SaaS portfolio sizes have reached an all-time high in 2023, with an average of 371 SaaS apps per portfolio, reveals a study by Productiv. This 32% growth over the past two years signifies a monumental shift towards cloud-based solutions by businesses.

The findings of the Productiv’s 2023 State of SaaS report have been summarized here.

SaaS Governance on the Rise

The era of Shadow IT is gradually receding as companies focus on enhancing SaaS governance and cost optimization. While the overall percentage of shadow IT has decreased from 59% to 51% in 2023, SaaS sprawl continues as employees increasingly purchase more apps to boost productivity. However, the reduction in shadow IT reveals a positive trend as organizations aim for better control and oversight.

Evernote, the popular note-taking and task management app, retains its position as the most prevalent shadow IT app in both 2022 and 2023.

Joining the ranks is Canva, the self-service design tool, which has experienced a significant surge in popularity, becoming the third most widely used shadow IT app in 2023.

Meanwhile, ChatGPT, the cutting-edge language model developed by OpenAI, has taken the business world by storm, swiftly gaining adoption and revolutionizing communication and productivity.

Strategic software spend initiatives by CFOs – short term contracts on the rise

With a macroeconomic push to reduce overheads, Chief Financial Officers (CFOs) are spearheading strategic initiatives to enhance software spend oversight. Companies, on average, spend approximately $9,643 per employee on SaaS.

Surprisingly, small and medium-sized businesses (SMBs) outspend mid-market organizations by 11%, while enterprises spend 34% less. Volume discounting, enterprise-wide licensing agreements, and efficiency of scale with consumption-based SaaS apps contribute to this inverse relationship between company size and SaaS spend per employee.

A paradigm shift in contract durations is underway, with an increasing preference for shorter-term commitments.

In 2023, one-year contracts accounted for 85% of all agreements, up from 79% in 2020. Conversely, contracts with 3-year or longer terms are dwindling, indicating a desire for more flexibility and agility in business arrangements.

Consolidation of SaaS applications

Companies have made progress in consolidating SaaS apps across key categories, reducing app redundancy by 11% from 2022 to 2023. However, further opportunities for consolidation remain, compared to 2021 levels.

While SaaS sprawl experienced a significant surge between 2021 and 2022, with a 48% increase in app numbers across 14 key categories, 2023 witnessed an 11% decrease as organizations focused on identifying and merging duplicate applications. Notably, the Security & Compliance and Identity & Access Management categories were least impacted by consolidation efforts.

Most used SaaS applications

In a positive development, the utilization of SaaS licenses has improved, with the average usage percentage rising from 45% to 47% in 2023. This trend spans across all business segments, with mid-market companies experiencing the largest absolute growth of 6 points, reaching 49% usage. SMBs boast the highest levels of average license usage at 50%, demonstrating their effective utilization of SaaS resources.

Departments across organizations have embraced SaaS apps with fervor, with an average of 87 apps being utilized per department in 2023—a notable 27% increase.

Among the top-ranking apps across departments, “The Quad,” comprising Salesforce, LinkedIn, Atlassian Cloud, and DocuSign, has consistently held its dominance. However, Lucidchart, the digital collaboration platform, has emerged victorious in 2023, maintaining its lead over the similar tool, Miro.

Powering Productivity: SaaS apps and team proliferation

The proliferation of SaaS apps continues unabated, with engineering teams taking the lead, utilizing an average of 108 apps per team. The IT & Security department has witnessed the largest percentage growth in app numbers, with a 33% increase driven by point solution tools and ROI optimization apps.

Meanwhile, Customer Success departments have experienced the second-highest percentage growth, reflecting the heightened focus on customer retention.

In the dynamic world of SaaS, these trends shed light on the ongoing transformation of business operations, guiding organizations toward strategic decision-making and optimizing their software utilization. Embracing the SaaS revolution is key to staying ahead in today’s rapidly evolving tech landscape.

Source: Productiv

Read next: IBM acquires SaaS-based PrestoDB provider Ahana; becomes member of the Presto foundation

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