Report: Most businesses purchase the wrong software

Nearly 3 in 5 companies regret at least one of their software purchases from the last 12 to 18 months, according to a survey of 3,400 businesses by software marketplace Capterra. Nearly one-quarter were unhappy with multiple purchases. 

Over 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, the report found. 

More than one-third of companies ran up against higher-than-expected cost, while slightly fewer were frustrated with difficulties onboarding and training new users. Poor alignment between vendor sales and implementation teams was cited by nearly half of respondents as a pain point. 

Software remains one of the largest categories of IT spending, which is expected to grow 8% in 2024, reaching $5.1 trillion, according to analyst firm Gartner. Software will account for 20% of that spending, increasing 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 found. 

The adoption of new software products, including emerging generative AI tools, coupled with vendor price hikes, are two significant drivers of accelerated spending. Unanticipated onboarding costs and the shift from on-prem licensing to usage-based fee structures can exacerbate buyer remorse. 

Another complicating factor is hidden costs. 

“Bait-and-switch pricing is also sadly common in the software space, with vendors burying important costs in their terms and conditions,” researchers said. “If businesses aren’t experienced software buyers, and they don’t understand what the total cost of ownership with software really entails, that’s going to lead to disappointment.” 

Procurement experience isn’t 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 a procurement team of IT and business stakeholders also reduced the chances of a bad buy. 

More than two-thirds of companies that deployed only non-IT staff were unhappy with software purchases and 61% that gave IT sole buying responsibility had bad outcomes. Only 54% of respondents with cross-functional teams suffered the same fate. 

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

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