SaaS Trends: 2023 Year-in-Review & 2024 Predictions
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SaaS Trends: 2023 Year-in-Review & 2024 Predictions
Vendr’s recently released “The SaaS Trends Report: 2023 Year-in-Review” offers a breakdown of the most significant trends in the software market to help SaaS buyers and sellers determine where to invest their resources in the new year. It also includes SaaS market predictions for 2024.
We reviewed the report and uncovered valuable insights for you, including top categories, ACV trends, and buying cycles.
You can view the full report here:
2023 Pricing Trends
Average Contract Value
During Q2 2023, ACV dipped as buyers exercised caution, but the trend reversed in Q3, with both net new purchases and renewals reaching year-highs in Q4.
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, a 4% decrease from 2022
The highest ACVs occurred in the IT Infrastructure, Data Analytics, and Customer Support categories, while Design and Content Tools, Human Resources, and Collaboration and Communication sported the lowest.
2023 New Sales ACV
2023 Renewal ACV
Buying Cycles
Buyers purchased SaaS 5% faster in 2023 than in 2022, with most suppliers’ buying cycles ranging from 41 to 55 days.
Seasonality
Winter months are the best time to buy, sell and save on SaaS. Purchases take longer in the Summer.
In 2023, January had the most renewals, but renewals took the longest. The advice is to renew early if your renewal date is in January.
December was the most popular month for net new purchases, a frequent YoY trend because companies learn if they have any leftover budget.
June, July, and August tied for the most prolonged buying cycles in 2023.
SaaS Market Snapshot
Top Purchased Categories
The top two categories in 2023 — Identity and Access Management and Cybersecurity — remained the same from 2022.
In 2022, Application Performance Monitoring made the Top 10 but fell out in 2023, replaced by data and analytics.
Version Control, IT Service Management, Cloud Security and Visual Design were new to the category listing in 2023.
The chart below shows the top categories based on the number of purchases made during 2023 on the Vendr platform.
Top Software Categories For 2023
Mapping Software Budgets by Category
Across all company sizes on the Vendr platform, most software budgets are allocated to IT Infrastructure, Sales, Data Analytics & Management, and Security & Compliance.
Productivity, Vertical Industries, Dev Ops, and Human Resources have a consistent percentage of spend, regardless of company size.
The percentage of companies spending on design and content tools, marketing and advertising, finance and accounting, and commerce and retail declines as company size increases.
Spend by Category
Machine Learning and Artificial Intelligence
Throughout 2023, there was a noticeable, though expected, increase in AI-specific companies, allowing buyers to improve customer experiences and streamline internal operations. However, AI’s impact on spending is challenging to measure as the tools are often embedded into products from non-AI categories.
The report uses Vendr’s Machine Learning and Artificial Intelligence subcategory to track the ACV. In 2023, the subcategory saw a 54% increase YoY.
AI and Machine Learning Subcategory ACV and Buying Cycle
CFO Predictions for 2024
Tighter software budgets are the new normal
Despite predictions of decreasing inflation and interest rates, organizations will keep budgets tight, with CFOs closely involved in deals.
Multi-year deals come due
In 2022, many companies prioritized growth at all costs. In 2024, multi-year deals signed in 2022 will be renewed, with many of these deals contracting as part of the renewal process.
Sales apps shine as a return to growth emerges
This year, companies explore how to return to growth profitably. However, most companies will rely on efficiency and SaaS-driven ROI rather than increased hiring.
2024 Vintage Apps
Companies founded in 2024 will introduce products designed and developed as AI-first.
About Bloom Equity Partners
We’re big fans of mission-critical enterprise software, technology and tech-enabled business service companies with a competitive moat and a loyal, diversified, and growing customer base. Whether the business is bootstrapped, VC-backed, or a division of a larger organization, Bloom is completely agnostic to the structure. We are actively seeking investment opportunities that fall within the criteria below. We welcome the opportunity to discuss potential investments with founders, operating executives and intermediaries.
Our Investment Criteria
Industry: Enterprise Software, Technology and Tech-Enabled Business Services
Geography: North America, Europe, Australia and New Zealand
Revenue: $5M - $50M (>70% recurring)
Growth: 5%+ annual revenue growth
Retention: >80% gross annual customer retention
Profitability: Positive EBITDA or near breakeven within twelve months
Investment Type: Operational control required
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