New Data on How COVID-19 Will Impact B2B Tech Spending

March 20th, 2020

The COVID-19 pandemic continues to have a tragic impact on our community. The most important areas of focus right now are slowing the spread of the virus and saving lives. As companies around the world look at how they can cut spending to weather a downturn, technology will be one area of scrutiny. But how much cutting are organizations going to do, and how long will it last?

To shed some light on the current mindset of businesses, we asked our community of software buyers and users how they expect the current COVID-19 crisis to impact their organizations’ software spending in the short and long term. As of March 19th, we’ve gathered over 1,600 responses and found a mix of expectations to either maintain current spending, increase spending, reduce spending, and some folks who weren’t sure yet:

How software buyers expect covid-18 to affect their spending, no change 26%, spending more 40%, 18% spending less, 15% unsure
Data collected from 1688 respondents from 3/18-3/19 by email survey to TrustRadius database of software buyers and users

How Software Buyers Are Responding to COVID-19 

In industries where remote work is possible, many companies in the U.S. and around the world have instituted work-from-home policies across the board. We found that 75% of TrustRadius site visitors have transitioned to working remotely in response to the COVID-19 crisis. 

Many companies in the tech industry are also bracing themselves for a broader economic decline. 18% anticipate that their companies will be spending less on software—a surprisingly low figure given the disruption to personal and professional lives that coronavirus has caused already.  

The fact that 66% of respondents expect unchanged or increased spending is more positive than many in the tech industry would expect. (This could of course change as the economic impact of the pandemic is better understood.) 

40% of organizations potentially spending more on software can also be an opportunity for ideally placed vendors to solidify themselves within the longer-term business trends caused by the immediate crisis. 

Digging Deeper to Understand Why 

After gathering this initial data, we asked each group of responders further questions to help understand how their organizations are responding to COVID-19 and its effects. Those results are below:

Unchanged Spenders- “We were already prepared for remote”

26% of respondents expected no spending change. Of those individuals, 53% said this was because they already have the infrastructure to go remote. In most cases, that infrastructure existed because the respondents were already remote, to begin with, or had colleagues that were remote. 

Why 26% of respondents don't expect software spend change *53% already prepared for remote*, 16% not expecting impact on business, 16% no impact on software usage, other 15%
Data collected from 1688 respondents from 3/18-3/19 by email survey to TrustRadius database of software buyers and users

These responses indicate that companies that already support flexible work environments are experiencing less dramatic transitions due to COVID-19. These companies may be more likely to add additional licenses to the remote tools they already use. If you provide software that facilitates remote workers or teams, there may be opportunities for you to expand your support for existing customers’ organizations. 

Roughly a third of respondents expecting no change explained that COVID-19 either wasn’t impacting their business model in the short or long term (16%) or wasn’t changing the scope and types of software they were using (16%). 

Increased Spenders- “We needed remote tech yesterday”

40% of respondents said that they expect their organization to increase their software spend, focusing predominantly on supporting their transitioning workforce. 

There is a caveat to this statistic: respondents who said they expected increased spend were more likely to be junior-level employees. 60% of these respondents were entry-level, analysts, consultants, or managers, while 40% were senior managers, directors, VPs founders, C-suite executives, or owners. That ratio flipped among respondents who expected reduced spend. In general, more junior respondents had more optimistic outlooks, while more senior folks (who are more likely to control budgets) were more cautious about future spending. 

Software buyers who plan to increase spending due to covid-19 *by job title*, managers will be increasing their spending the most, at over 20%, C-level execs will be increasing the least of all job titles, less than 5%
Data collected from 1688 respondents from 3/18-3/19 by email survey to TrustRadius database of software buyers and users.

That said, 40% of expected spenders identifying as more senior signals some real potential for additional spend in the near future. Across all job titles, the focus seems to be on taking their workforces remote—and quickly. 

When asked what tools they were going to purchase or increase spend on, respondents provided a laundry list of software types and products. The extensiveness of their lists indicates broader organizational shifts rather than piecemeal approaches to remote transitions. 

Most of the expected expenditures are in predictable areas: 

  • 30% of spenders needed to purchase video & web conferencing software.
  • 23% were looking for everything necessary to take their workforce remote.
  • 15% were looking for remote security software (VPNs, firewalls, endpoint security, etc.).

Businesses need to get their remote workforces up and running ASAP. For vendors, this can translate to fast implementation, and fast sales cycles, if you’re in the right market and can support distributed workers. 

86% of respondents across seniority levels expect these purchases to endure beyond the immediate COVID-19 crisis. As organizations learn to support newly remote employees, these new tools have a good chance of being adopted long-term to allow employees to continue working remotely. 

Reduced Spenders- “Anything that isn’t strictly necessary”

18% of respondents predict reduced spending on technology. Many companies are understandably concerned about either the short term freeze on many businesses or the long-term economic implications of COVID-19.

The severity of expected cuts varies dramatically between companies, but there is a light at the end of the tunnel for vendors who are worried about being on the budgetary chopping block. Of 308 reduced spenders we surveyed, 70% expect to repurchase canceled products or return to prior spending levels over the long term.

Do software buyers expect to return to previous spend levels after covid-19? 69% say yes, 30% say no, 1% gave no response
Data collected from 1688 respondents from 3/18-3/19 by email survey to TrustRadius database of software buyers and users

When asked what kind of reduction they expect, most of the reduced spenders said they anticipate a freeze on all new spending, as well as mid-implementation projects (24% of reduced spenders). This means that they aren’t signing any new contracts, but aren’t planning on cutting existing contracts or subscriptions either. This group represents 4% of the total respondents of this survey.

Roughly 30% of reduced spenders are looking at more aggressive cuts, but the severity of their predictions can vary. Half of these respondents are looking at cutting anything and everything in a more substantial move to survive the next month or quarter. It’s clear that the mindset is already “do or die” for some businesses going forward. (This could depend on the industry—for example, companies in the travel or hospitality industries could be expecting the most severe impacts.) Other respondents seem to be taking less considerable measures, but are still expecting cuts across all non-mission critical software subscriptions. 

In terms of market-specific cuts, marketing tools are getting the brunt of the initial reductions. 10% of reductions are being targeted specifically at marketing tools like social media management, advertising spend in general, and content syndication tools. While this sample isn’t comprehensive of the entire marketing space, it suggests that marketing software vendors face the greatest immediate risk to their pipelines. The silver lining for these vendors is that they also have the highest rate of respondents expecting to repurchase under more stable economic conditions (84% expect reductions to be temporary). 

Unsure Spenders- “Spending TBD”

15% of respondents are unsure exactly how COVID-19 will impact their technology spend.

The main reasoning behind uncertainty for our respondents was the fact that it’s still early. For four in ten of the respondents who replied “unsure” (39%), it was too soon to know what the impacts were or they haven’t been informed by their leadership on what spending changes would be occurring. 

Top Reasons Buyers Are Unsure About Their Software Spend, 39% too early t o tell, 25% already have tech to go remote, 15% generally unsure, 21% other
Data collected from 1688 respondents from 3/18-3/19 by email survey to TrustRadius database of software buyers and users

Another quarter of unsure respondents (26%) said that they have existing infrastructure to go remote with. In their cases, the lack of confidence may come from uncertainty in the last-mile transition to a fully-remote organization. 

It’s also possible that this number will change the most over the next few weeks. As the COVID-19 situation continues to develop, and its effects spread wider and deeper into the economy, there will likely be lots of people transitioning into and out of the “unsure” category. 

Seeing The Good News 

Overall, these data points represent good news for many in the software industry. Traffic on the TrustRadius platform has increased in response to COVID-19, and certain software categories, in particular, are booming. To learn more about which products, categories, and comparisons have been impacted the most, check out our weekly updates here

Vendors will need to proceed with empathy, compassion, and understanding when approaching buyers during this time. That much remains true, regardless of the data presented here. However, you may find certain prospects to be more responsive than expected—particularly if you work with software that relates to a remote workforce.

To get real-time analysis of these trends before our next weekly blog update, attend our free, no-strings-attached webinar on Thursday, April 2 at 12:30pm CST

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