Most companies buy the wrong software, the report shows

Dive short:

  • Nearly three in five 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. Nearly a quarter were dissatisfied with multiple purchases.
  • Buyer’s remorse can be costly. More than half of respondents said they took a significant financial hit from this misstep and 2 in 5 felt a bad software purchase reduced their competitiveness, the report found.
  • More than a third of companies faced higher-than-expected costs, while slightly fewer companies became frustrated with the difficulties of onboarding and training new users. Poor alignment between vendor sales and implementation teams was cited as a pain point by almost half of respondents.

Diving insight:

Leaning on technology to drive revenue and innovation means regularly upgrading, improving and adding to the business software suite. It can also lead to misaligned purchases.

Despite purchasing risks, companies are not 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, rising nearly 14% year over year to over $1 trillion.

Nearly two-thirds of U.S. companies plan to spend more on software next year than in 2023, Capterra finds.

Adoption of new software products, including emerging generative AI tools, coupled with vendor price increases, are two key drivers of accelerated spending. Unexpected onboarding costs and the shift from on-premise licensing to usage-based pricing structures can increase buyer’s remorse.

“The shift to SaaS pricing does impact this,” said Brian Westfall, associate principal analyst at Capterra said. “Software is no longer a ‘set-it-and-forget-it’ purchase, but something that even the smallest companies need to budget for on an ongoing basis.”

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Another complicating factor is the hidden costs.

“Bait-and-switch pricing is unfortunately also common in the software world, with vendors burying important costs in their terms and conditions,” Westfall said. “If companies are not experienced software buyers and do not understand what the total cost of ownership of software really entails, it will lead to disappointment.”

Purchasing experience is not the only mitigating factor. The study found that companies that complete purchases in three months or less had fewer disappointments than those that took longer.

Convening a purchasing team of IT and business stakeholders also reduced the chance of a bad buy.

More than two-thirds of companies that hired only non-IT staff were dissatisfied with software purchases, and 61% that gave sole IT purchasing responsibility had poor results. Only 54% of respondents with cross-functional teams suffered the same fate.

Companies that relied heavily on suppliers’ social media posts and unmediated search results had some of the worst results, the report found.

“These sources can tell buyers which vendors will promote their product most effectively or can devote the most resources to search engine optimization, but not necessarily which is the best tool for their needs,” the report said.

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