Software Spending Growth Will Accelerate by 40% in 2023, But it Doesn't Feel that Way
Software spending in 2024 should rise 12%, increasing from 9% last year according to Gartner. Overall spending will rise from $4.4t to $4.6t. Why doesn’t it feel that way?
Devices will be the only category to decline. CDW, a $20b distributor of software & hardware, announced earnings last week & their results echoed these. CDW has a significant government & education business.
- SMB revenues decreased 13%
- Education declined 9% with a 68% drop in hardware sales
- Government grew 13.5%
- Healthcare increased 8%
- Overall software grew 8%
The data sets are largely consistent : high single digit growth in most areas outside of hardware.
The hard part about this data is that in market, it doesn’t feel this way for most businesses. Software growth rates will increase 40% year over year, but many private companies & public companies have seen a contraction.
Many of these companies have been growing at 30-50% annually & their growth rates are asymptoting to a level closer to 12% annual growth.
To grow 40% annually in a market adding 12% spend means taking 28 percentage points from someone else. The market is zero sum. Competitive dynamics have changed with budget consolidation favoring suites over best-in-class solutions & cost-cutting rather than revenue growth products.
If Gartner is correct in their forecast, next year should see 13% annual growth. Software spending is accelerating, which means the market remains vibrant, just more competitive.