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

April 14th, 2020

*Updated on April 14, 2020

Three weeks ago we presented data indicating that many businesses were spending more on software in order to transition to remote operations. As of March 19th, 40% of buyers we surveyed also planned to continue increasing their software spending in the future. At the time, these results felt like a welcome change from the ominous sense of dread that many people were feeling.

Now, after three weeks of COVID-19 chaos, expectations have changed. 

How buyers expect covid-19 to impact software spend graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

As a part of our extended effort to provide the B2B tech community with up-to-date information, we re-surveyed our audience of software buyers and vendors on April 9th to check how their perspectives and expectations have changed over the last month. Here are those results: 

We found substantial variation in terms of what software areas are on the chopping block, which industries are most aggressively cutting costs, and which software categories are still experiencing growth. Below we’ll provide updated stats on the state of B2B software spending, broken down by company size, industry, and seniority.  

Which Types of Software Are Being Cut?

As of April 9, the number of software buyers planning to cut their spending has doubled. We know that today’s spending reductions are caused by two distinct influences. First, the immediate influence of COVID-19 and its impact on messaging, product direction, and brand positioning. And second, businesses are responding to the impending economic recession that many companies are already starting to feel. 

As a result, many of the buyers we surveyed are looking at cutting spending across multiple areas and departments: 

As if their efforts weren’t already an uphill battle in a recession economy, marketing departments are the most likely to see their software spend cut this quarter. 44% of buyers are reducing spending in marketing software. IT support technologies are also prime for spending cuts—36% of reducing buyers are looking at trimming their IT tech. 

These reductions can be partially attributed to COVID-realities. For many businesses, events-based marketing and office-based budgets are nonfactors for the foreseeable future. However, other cuts in spaces like project and task management tech (33%) are more indicative of organizations that are preparing themselves for an unpredictable future—clearly looking to trim any “non-essential” software spending in the process. 

Where Are Businesses Still Spending On Software?

Q2 growth in software spending will still be predominantly focused on finalizing the transition to the COVID-19 economy. This focus leads to rather predictable spending patterns focused around web conferencing, collaboration tools, and remote desktop tools. There’s also a smattering of investment in additional hardware, such as laptops, monitors, and headsets.

Where are businesses increasing software spending? graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

There also appears to be a shift towards supporting remote work over the long term. For instance, the rate of increased spending on security software (41%) nearly tripled in the last three weeks. This combined with trends in TrustRadius’s week-over-week traffic data suggests that the focus of future spending will shift away from how to transition to remote teams in the short term, in favor of how to sustain and secure remote work environments over the long term. 

There also appears to be a lot of value for businesses to maintain the ability to go and stay remote. Nearly 90% of increased spenders expect to still be using, and paying for, these tools two years from now. 

Companies expecting to continue paying for tools purchased during covid-19 chart
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Understanding Changes in Software Spending

When we asked our audience on April 9 how they anticipated their software spending to be impacted by COVID-19, we were surprised to see a significant change from last month: 

How buyers expect covid-19 to impact software spend graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Three weeks ago, 40% of respondents said that they expected their organization to increase their software spend. Here’s why: 

  • 30% 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.).

26% of survey respondents on March 19 expected no change to their spending behavior as a result of COVID-19. Of those individuals, 53% said this was because they already had the infrastructure to go remote. 

When we surveyed our audience three weeks ago on March 19, 18% of respondents planned to reduce spending on technology. Most said they anticipated a freeze on all new spending, as well as mid-implementation projects (24% of reduced spenders). This means that they weren’t signing any new contracts, but weren’t planning on cutting existing contracts or subscriptions either. This group represented 4% of total respondents to this survey.

Now over 30% of surveyed buyers say they plan to spend less as a result of COVID-19. To better understand this change, we’ve broken down this week’s survey data by company size, job title, and industry. You’ll find those results below. 

COVID-19 Impact by Company Size

Covid-19 impact on Q2 software spending, by company size graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Compared to enterprises, fewer SMBs plan to increase software spend according to our April 9 survey. This trend is even more pronounced when compared to last month’s numbers. 50% of midsized businesses planned to increase their software spending back in March, compared to only 15% today.

Fewer midsize businesses are increasing spend than a month ago // two comparative pie charts
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Again, much of the increased spending generally focuses on businesses getting the tools necessary to transition to remote work nearly overnight. This led to localized spikes in buying interest—such as the 500% increased interest in web conferencing since the beginning of the crisis. 

The larger the organization, the more intensive and drawn out the going-remote process will be. That could help explain why many enterprise buyers still plan to increase spending today. In contrast, many smaller companies can adjust more nimbly, and are more likely to have already achieved this transition. 

COVID-19 Impact by Job Title

Viewing the data by job title confirms the notion that uncertainty about software spending this quarter is centralized around entry level and junior respondents. More senior-level respondents tend to be more confident in the direction of their software spending. 

Covid-19 impact on software spend, by job title graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Software vendors will be interested to note that senior leaders are much more likely to forecast reduced software spend in Q2. Respondents who are C-suite executives, VPs, and senior managers were particularly unified in their reduced spending, and nearly half of C-suite executives planned to reduce software spend in their organizations this quarter. 

2.5x more c-suite execs are cutting software spending after a month of covid-19 // two comparative charts
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Since these roles most frequently hold organizations’ purse strings, software vendors should prioritize touching base with high-level contacts at their clients’ organizations to make sure their relationship isn’t at risk. Don’t just rely on current POCs—instead, endeavor to build connections with multiple high-authority individuals to build a stronger foothold. 

COVID-19 Impact by Industry

When comparing the survey results by industry, we see that spending largely reflects the direct changes in business operations and demand COVID-19 triggered rather than the broader economic recession that has followed. 

The increased spenders in the industries below are likely to still be adjusting to the COVID-19 economy, be it new internal logistics like WFH or building out infrastructure to cope with new demand. Likewise, many of the heaviest reductions are in industries that were the first and hardest hit by the effect of COVID-19 on the global economy. 

Covid-19 impact on Q2 software spending graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Some industries stand out for their resilient expectations to increase their software spend. The industries that are still expanding software spending are Government Administration (38%), Non-Profit (25%), Telecommunications (25%), Insurance (23%), and Education (24%). We assume that buyers in both Telecommunications and Education plan to increase spending in order to meet the ever-rising demand from a remote society.  

Looking at industries that are reducing all software spend, the results should surprise no one. 40% or more of respondents in Retail, Hospitality, Marketing & Advertising, and Oil & Gas are reducing spend this quarter. Half of Retail respondents are reducing spend, and a whopping 64% of those in Hospitality are cutting spending. 

The Impact of COVID-19 as of April 14, 2020

When we re-surveyed our audience of software buyers and vendors on April 9th, we expected to find that COVID-19 has had a profound impact on the B2B tech community. Our assumptions proved true. The resounding response was that nearly everyone has been impacted by the pandemic: 

How much has covid-19 impacted your work life? chart
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Of the 2,168 responses to our survey, the plurality of individuals (42%) have experienced a large impact on their work lives and careers, and only 5% report experiencing no impact thus far. We even had a community member who was infected with COVID-19, and whose partner is still sick with the virus. As we’re looking at the economic and market impacts of the virus, we also cannot understate the human impact. 

When asked how they’ve been impacted by COVID-19, people are most frequently adjusting to working remotely and balancing work and family while at home, while also feeling pressure to be more productive than before. 23% of the respondents experienced pay cuts or loss of benefits, and 8% (173 individuals) had been laid off or furloughed. 

How has your work life been impacted by covid-19? graph
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Expectations for the Future

Now that over 95% of respondents have been impacted by COVID-19, we were interested to see how they perceive the future. 

As of March 19, 69% of buyers expected to repurchase canceled products or return to prior spending levels over the long term. According to our most recent survey on April 9, 60% expect their spending to return to prior levels by 2021. Unfortunately, this is about 10% lower than what respondents said 3 weeks ago, indicating a growing belief that the economic healing process will be longer than initially believed. 

Most people still expect to return to prior spend levels by 2021 // two comparative charts
Data collected from 2,168 respondents from 4/9-4/10 by email survey to TrustRadius database of software buyers and users

Moving Forward After COVID-19 

The fact that more than half of respondents across seniority levels still expect spending cuts to be short term suggests that this year’s losses are not death knells. Software vendors that can ride out the next few difficult quarters will be poised to come out of this pandemic from a strong position. 

Still, 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.

As our world continues to weather the storm of COVID-19, TrustRadius is committed to providing insights to help software vendors and buyers meet their needs.

In addition to this research, we provide category-level and product-level intent data for software vendors who want to keep a pulse on the market. Right now we’re offering 30 days of free True Intent data to all qualified vendors. It’s one of many ways we’re working to help the tech industry overcome the challenges of COVID-19. Learn more here.