Dive brief:
- Nearly 3 in 5 companies regret at least one of their software purchases in the past 12 to 18 months, according to a survey of 3,400 companies by software marketplace Capterra. Almost a quarter were unhappy with multiple purchases.
- Buyer’s remorse can be costly. More than half of respondents said they took a significant financial hit from the misstep, and 2 in 5 felt a bad software purchase reduced their competitiveness, according to the report.
- More than a third of companies faced a higher than expected cost, while slightly fewer were frustrated with difficulties in onboarding and training new users. Nearly half of respondents cited poor alignment between vendor sales and implementation teams as a problem.
Diving knowledge:
Relying on technology to drive revenue and innovation means regularly updating, improving and adding to your business software suite. It can also lead to mismatched purchases.
Despite the hiring risks, companies aren’t slowing down.
Software remains one of the largest categories of IT spending, expected to grow 8% to $5.1 trillion by 2024, according to analyst firm Gartner. Software will account for 20% of that spending, growing nearly 14% year over year to more than $1 trillion.
Nearly two-thirds of U.S. businesses plan to spend more on software next year than in 2023, Capterra found.
Adoption of new software products, including emerging generative AI tools, along with increased vendor pricing are two important factors in accelerating spending. Unforeseen onboarding costs and the shift from on-premises licenses to usage-based fee structures can add to buyer’s remorse.
“The shift to SaaS pricing has an influence here,” Brian Westfall, associate principal analyst at Capterra said “Software is no longer a set-and-forget purchase, but something that even the smallest businesses must constantly budget for.”
Another complicating factor is hidden costs.
“Bait-and-switch pricing is also unfortunately common in the software space, with vendors burying significant costs in their terms and conditions,” Westfall said. “If companies aren’t experienced software buyers and don’t understand what the total cost of software ownership really entails, that will lead to disappointment.”
Recruitment experience is not the only mitigating factor. The survey found that companies that complete purchases in three months or less had fewer disappointments than those that take longer.
Convening an IT procurement team and business stakeholders also reduced the chances of a bad purchase.
More than two-thirds of companies that deployed only non-IT staff were dissatisfied with software purchases, and 61% that gave sole responsibility for IT purchasing had poor results. Only 54% of respondents with cross-functional teams suffered the same fate.
The report found that companies that relied heavily on suppliers’ social media posts and unmediated search results had some of the worst results.
“These sources may tell buyers which sellers are promoting their product most effectively or may be devoting the most resources to search engine optimization, but not necessarily which tool is best for their needs,” he said. the report
