A pandemic, a recession, an energy crisis — for businesses in the 2020s, it seems that the next big challenge is always just around the corner. Yet in true entrepreneurial spirit, new UK businesses continue to populate the market at a staggering rate, with an average of 90 created each hour in the first half of last year.
If you’re a savvy businessperson with your finger on the pulse, chances are that you’re already aware of the turbulent landscape for companies in 2023. But there’s one more hidden obstacle threatening budgets and forecasts that you might not have accounted for — and that’s rising software expenditure.
Between e-commerce solutions, remote communication and cloud computing, businesses are relying on software more than ever before. Therefore, it’s vital to consider how your spending could increase over the next year. With that in mind, here are our top three factors to consider in 2023.
1. Contract auto-renewal
In our day-to-day lives, we’re surrounded by auto-renewing contracts — from phone plans to Netflix subscriptions and even some tenancy agreements. But in software procurement, the danger is that your organisation will be repeatedly locked in at a set rate, losing the opportunity to regularly re-negotiate according to your business needs.
SaaS management platform Vertice advises that as many as 89% of vendors include auto-renewal clauses in their contracts. So, it’s always important to be aware of your contract terms to ensure that you’re getting the best possible deal when procuring new software, and request that these clauses are removed during negotiations. This way, you can evaluate your usage within the organisation and determine whether you want to renew on the same terms again each year. In the long run, this may help your business to minimise unnecessary software expenditure.
2. Dispersed workforces
Remote working was already growing in popularity through the 2010s, but the pandemic made it a mainstay of working culture in the UK. When a business chooses to operate as a fully remote or hybrid in-person venture, a more widely dispersed workforce is associated with a number of hidden costs. This is because remote staff are likely to need various additional tools to facilitate collaboration and communication.
As a result, you’ll need to consider the added costs of going remote, such as video conferencing services, file-sharing platforms, and other dedicated software packages that employees might require licences for to use off-premises. IT research firm Gartner estimates that by 2024, companies will be spending more than ever before on collaborative work management, enterprise social networks and employee communication tools — and their revenues are set to reach nearly $7 billion per year.
3. High development costs
One recent survey by Harvey Nash Group found that there is an acute shortage of skills and specialists available to fill the gaps in the IT industry, while as many as 66% of companies are looking to boost their IT headcount. This underpins many of the rising costs associated with IT development and support. The landscape for IT is dynamic and ever-changing, and as advances continue to outpace skills education, the pioneering frontiers of development, AI and more simply lack the staff to fill roles.
Ultimately, this is leading to high demand for IT professionals. And with increased demand, comes increased prices — Software Mind reports that scarcity is driving up the costs of software development, along with inflation and the rising costs of living. These higher production costs are then passed on to the consumer, meaning as the development of software tools becomes more expensive, the businesses that rely on them are spending more.
The bottom line
Increased software expenditure is a vital factor for businesses of all sizes to consider, particularly in the current economic climate. To mitigate the effects of a rising spend, you’ll need to forecast any increases and budget for software accordingly. You may also wish to consider whether the licence price and contract terms of each of your tools provide sufficient return on investment. By assessing your existing portfolio, effectively negotiating, and closely monitoring the trends in yearly price uplifts, you can ensure that you minimise your costs wherever possible.
