It’s no secret that executives today are tightening their wallets, but they’re still spending on one thing: SaaS.
We know firsthand that companies always buy the tools they need to succeed. In times of economic uncertainty – alongside new products and emerging categories – it’s really important to know where and how to invest in SaaS.
At Vendr, our north star is data.
Whether you’re a software buyer, product, investor, or enthusiast, understanding quantitative insights is the best way to improve decision-making and better understand the market.
We’ve processed billions in software spend across tens of thousands of deals and thousands of products.
Today, we will explore all the insights we gathered from Q1 2023 to assist you in making more informed, data-driven decisions when making your next SaaS purchases.
Looking to talk more about SaaS trends? I’m sharing Vendr’s industry-leading data every week on LinkedIn. Join the conversation!
SaaS market snapshot
Top-purchased software categories
In Q1 2023, Vendr processed 2,900+ transactions, including new purchases, renewals and upgrades.
In Q1, Vendr customers bought more than 900 different products, with CRM – specifically Salesforce – emerging as the clear leader with the most deals and highest average contract value.
The top ten most purchased products fell into three mission-critical categories during this period.
The SaaS Leaderboard
The top-purchased products through Vendr in Q1 2023, organized by category.
Salesforce leads the CRM software market, owning 69% of CRM transactions through Vendr. Salesforce's cloud-based CRM is scalable and flexible, making it popular across all company sizes.
Salesforce's range of CRM products, including Sales, Service, Marketing, and Commerce Cloud, are market leaders in their respective Vendr categories. With over 5,000 apps on its AppExchange marketplace, Salesforce will likely stay on top of the most purchased products list throughout 2023.
The stickiest products are able to control their prices. You don't wake up one day and cancel your CRM, design platform, or engineering stack. Critical infrastructure warrants higher prices.
Top products by ACV
Higher transaction volume correlates with a higher negotiated price: companies who excel at closing deals tend to command a higher average contract value.
This is most true of Salesforce, which not only occupies the top spot by deal count but far outperforms the rest of the pack in terms of average deal size. Where only a handful of the top-purchased SaaS tools make it past the $250,000 mark, Salesforce’s average negotiated price is a true outlier compared to other products at $854,679.
Other popular and high-value products include Zoom, Slack, NetSuite, and GitHub, which all had a similar number of deals and an average negotiated price ranging from $50,000 to $250,000.
Meanwhile, suppliers like Figma, Carta, and 1Password had lower average prices ranging from $20,000 to $49,999 and are still climbing the ranks in total transactions.
Businesses put their money where their mouths were in Q1. Sales, cybersecurity, design and communications were top priorities for companies. This reflects that they value mission-critical SaaS.
Smaller SaaS players hold their ground against top products
Only 13% of Vendr purchases are attributed to 10 top products, while 900+ diverse products contribute to the majority of sales.
In the first three months of 2023, Vendr analyzed almost 3,000 transactions and found that popular products like Salesforce, Slack, and DocuSign only accounted for a small slice of all purchases. Although these products are popular, 87% of Vendr transactions were for other products in our catalog.
Most transactions at Vendr involve one of nearly 1,000 different products, showing that customers prefer to choose from a wide variety of options instead of just a few big names. With Vendr's data-driven SaaS marketplace and recommendations, customers can find the best-fit product for their needs beyond just the market leaders.
The long tail of SaaS is really long, with almost 1,000 different products purchased on Vendr in Q1.
Top newly purchased products
In 2022, 8 out of 10 executives listed new-business building as one of their top five priorities for 2023.
These SaaS companies offer products purchased most often for the first time — as opposed to renewals.
In 2022, 8 out of 10 executives listed building new business as one of their top five priorities for 2023 — according to a late-2022 McKinsey report.
Unsurprisingly, products that help companies increase their bottom line and make sales more competitive are here to stay.
What’s driving these increases?
Drata, founded in 2020, was a Vendr top new purchase in Q1 2023. Vendr data shows a 15x increase in Drata purchases over the previous 12 months.
In 2023, companies need to prioritize security and compliance to protect their customers' data and privacy. With more cyber threats and data breaches happening, businesses must have security measures in place and follow the rules and laws related to data protection.
“Compliance is an essential piece of maintaining the trust of customers for any business. Drata is here to help companies of all sizes along their compliance journey and serve as the trust layer between them and those they do business with.”
Salesloft, founded in Atlanta in 2011 and acquired by private equity firm Vista Equity at the close of 2021, topped the list of new purchases for Q1 of 2023. Vendr data shows 20x growth in total purchases of Salesloft over the previous 12 months.
One of three market-leading sales engagement platforms – Outreach and Groove are their biggest competitors – Salesloft uses automated sales outreach cadences, in-depth reporting, analytics capabilities, and AI-powered conversation intelligence to help sales leaders achieve revenue goals.
An overall market push toward mission-critical revenue tools, likely coupled with a tighter focus on new customer acquisition post-Vista buyout, propelled Salesloft to the top of the list for Q1.
1Password is proud to be working alongside Vendr to offer customers a unique, tailor-made purchasing experience.
Ensuring our customers have speed to insights that enable quick decision making is our top priority. We’re proud to offer a leading platform that provides easy, accessible, qualitative and quantitative analytics for businesses looking to be more data-driven.
Every company has competitors. In 2023, many companies are losing more business to the competition than they should be. Klue helps our customers close their competitive revenue gap by enabling their revenue teams with the insights they need to win.
LeanData’s Salesforce-native revenue orchestration platform is crucial in 2023 because it helps companies do more with less. We’re proud to help our customers continue driving revenue growth, even during these challenging times
The start of 2023 has seen a significant shift in buying behaviors, with a notable increase in purchases of AI-powered software in Q1 compared to the previous quarter. AI-powered software is increasingly being recognized as an essential tool for businesses to improve their efficiency and productivity.
As the leading AI models, OpenAI and ChatGPT have contributed significantly to this trend by offering powerful language models that can perform a range of tasks, from generating text to answering questions.
With the continued proliferation of AI-powered tools, businesses are recognizing the need to incorporate them into their operations to remain competitive. According to a recent study by Gartner, global spending on AI is expected to reach $557 billion by 2024, up from an estimated $363 billion in 2019.
Here at Vendr, 5% of Q1 purchases were AI-powered tools that have native GPT or other AI functionality, primarily in the revenue and data security categories. More interestingly, 36% of tools purchased in this period offer some form of AI feature—rising 4% from last quarter.
These trends raise an important question:
Will new entrants leverage AI in a disruptive innovation model or will AI be embedded in all products in more of a sustaining evolution?
Innovations like GPT-4 are likely to be integrated across the board. We’re already seeing signs of industry leaders taking the plunge:
The value of AI-powered SaaS tools is undeniable. As more companies realize this, we’re seeing an uptick in the number of AI features offered. The trend is positive for businesses looking to streamline their operations and drive growth.
What to expect next
Digital evolution continues
As we move into 2023 and beyond, the demand for cloud-based software solutions should grow significantly. Businesses will adopt AI-powered tools to automate processes and extract insights from large amounts of data, thus staying competitive and driving growth. This shift towards AI-powered solutions was accelerated by the introduction of ChatGPT, which has become a significant catalyst for the AI trend in both the SaaS market and consumer spaces.
As companies prioritize innovation and streamline operations, AI-powered tools will enable them to gain a competitive edge and stay ahead of the curve. AI will automate processes and help businesses extract valuable insights from vast data.
Therefore, businesses must adopt AI solutions to drive growth, remain competitive, and make data-driven decisions.
SaaS pricing uncertainty
We predict that big players may hike prices to offset declining shares of wallets and a challenging 2022, driving overall SaaS spending up. And, to complicate matters, federal interest rates have risen by four percentage points, impacting every aspect of procurement.
These economic pressures have contributed to the upward trend in SaaS prices, including a 23% hike in 2023. Businesses must carefully develop pricing strategies to offset these pressures while remaining competitive. It's a balancing act, but those who get it right will be well-positioned for success in the future.
Strong focus on customer retention and data security
As the SaaS market matures, vendors will focus on customer retention and expanding into new verticals to drive growth. We’ll likely see customer data-focused tools like Gong and 6sense top the new purchases list.
Similarly, companies will continue prioritizing data security and privacy to build customer trust and ensure compliance.
Conservative purchasing behavior
Companies are becoming more conservative in their purchasing decisions and favoring comprehensive suites over specialized tools. This shift affects product development, with larger companies opting to build, buy, and integrate solutions into existing suites.
Industry giants like Salesforce, our top SaaS leader, and Microsoft are already moving in this direction through their acquisitions and product expansion. This trend means that specialized point solutions may struggle to find footing, but there's ample opportunity for solutions that can integrate with existing suites.
SaaS businesses must prioritize data-driven decision-making as they move into 2023 and beyond.
After four years of working with thousands of SaaS buyers and sellers across 20,000+ deals, it’s obvious that the best SaaS businesses make decisions based on changing macro-trends. As economic challenges persist, companies must balance the realities of price hikes with the needs of their customers.
However, when we know that prices are going to go up, SaaS providers need to step up their game and prioritize building customer trust and loyalty.
Products that have built their worth on being both mission-critical and “sticky” are those that see success in deal counts and average contract value. On top of this, the steady rise of AI-powered tools and cutting-edge technologies make it essential for businesses to continue to invest in being best-in-class.
Vendr is here to help SaaS buyers leverage our expert insights on macro trends. We guide you in making data-driven decisions, adapting to new challenges, and building a tech stack that keeps you afloat in 2023 and beyond. We know what it takes to stay ahead in this ever-changing market, and we'll continue to help buyers and sellers with the transparency and fairness they deserve.