SMB Software Spending to Increase in 2023

Despite fears of a looming recession, a full three-quarters of small and midsize businesses (SMBs) in the U.S. plan on spending more on software in 2023 compared with 2022, according to a Capterra survey of more than 500 SMBs.

According to the report, businesses rate security as a top motivator and most important factor for software purchases, with more than half of companies surveyed purchasing IT architecture and security software in the year.

Security was deemed the most important factor when making software purchasing decisions, outstripping features and integration capabilities.

Brian Westfall, principal analyst at Capterra, said he found it surprising to learn that 75% of SMBs are increasing their software spend next year.

"With a recession looming in 2023, we've already seen businesses starting to cut back in other areas, like hiring," he said. "The fact that businesses aren't cutting back on software spend, and actually increasing it in a majority of cases, indicates that even the smallest businesses see software and technology as a necessary investment to weather the storm ahead."

Downtime, Learning Curves Are Barriers to SMB Software Purchases

Among the biggest purchase barriers for SMBs when it comes to software are concerns over downtime or a steep learning curve during implementation, cited by 45% of survey respondents.

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Internal project team disagreements and concern over return on investment (ROI) for software were also top concerns for small businesses.

"Time is money, and that's especially true for small businesses," Westfall said. "Many SMBs simply can't stomach the idea of having a long period of downtime getting a new system set up, customizing it, and training employees on how to use it."

He advises, however, that they're doing themselves no favors, pointing out that SMBs can miss out on major long-term gains through software because they're afraid of short-term disruption.

Separate SMB Software Needs From Wants

From Westfall's perspective, it's critically important that SMBs making software investment decisions separate software needs from software wants.

"Too often, we see SMBs invest in a huge suite they saw in an ad, only use a third of the functionality, then decide to replace it with something smaller and more affordable down the line," he said.

Westfall advises small business owners to read reviews from businesses in their size and industry to better understand if a specific product is a good fit for their unique situation.

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The survey also found that only 22% of purchasers involve people from departments outside IT in the software evaluation process, indicating SMBs are excluding important stakeholders who could offer valuable insight during the software purchasing process.

Those stakeholders, and that process, are going to vary from business to business and purchase to purchase, Westfall noted.

"In general, SMBs should aim for a small team of members with decision influence that can fully participate in the evaluation and purchase process," he said.

Those without decision influence, or those who drop in and out of the process, will only hinder progress.

"Don't forget to include end users," he added. "They're ultimately the ones that will determine if your investment sinks or swims."

With economic headwinds mounting and IT budgets coming under scrutiny, Westfall said those responsible for investing in software can get executive buy-in by focusing on resolving the company's pain points.

"There's something in your business that's not working as well as it should that software can fix," he said. "Quantifying the cost of that pain point, and getting people most affected by that pain point involved in the story you're trying to tell, is going to help you get executive buy-in."