SaaS Solutions Still Essential Amid Declining IT Spending in APAC

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The International Data Corporation (IDC) has released the latest version of the “Worldwide Black Book: Live Edition.” The report revealed that IT consumer spending in the APAC region is slowing down in 2022. On the other hand, enterprise IT spending will remain stable in the short term.

According to the report, the risk of a global recession is affecting the IT spending decisions of consumers and businesses. Consumers are not spending on gadgets like tablets, mobiles, and wearables. This is mainly due to the IT spending spree consumers have been making in the past two years. Consumers worldwide raised their tech spending at the height of the COVID-19 pandemic to accommodate remote work setups. The increasing inflation will continue to hurt any remaining growth prospects for the year.

Meanwhile, companies are delaying projects and spending only on business-critical operations; thus some capital spending is vulnerable. Operational budgets are distributed to services such as cloud, software-as-a-service, and subscriptions.

“One in two businesses in the region expect that IT cost price increase stemming from inflation will impact their spending plans for the rest of 2022,” says IDC Research Director, Vinay Gupta. Gupta added, “If the situation persists, businesses will either delay projects or adjust spends to focus on strategic initiatives essential to future business functions and needs.”

The Worldwide Black Book: Live Edition is IDC’s monthly analysis of the worldwide ICT industries in 100 countries. It reports on the status and projected growth of the industry. It also covers segments such as software, infrastructure, devices, and IT services.

The Resilience of SaaS During a Recession

There are other factors affecting the rising inflation in economies that could trigger a worldwide recession. The ongoing war in the Ukraine and rising fuel and food prices are two examples. Also, the pandemic lockdowns in China during the early part of 2022 disrupted global supply chains, which pushed inflation higher. The declining tech market is also negatively impacting SaaS vendors.

All these are making businesses tighten their IT spending. The report said that for the short-term though, SaaS is one of those expenses that will continue to receive its share of the enterprise IT budget. Looking back at the performance of SaaS during economic downturns, we can see that the sector showed resilience in hard times.

For example, not one public SaaS company during the 2008 Great Recession became insolvent. Growth was slow but SaaS companies were able to continue their business.

SaaS products are often part of essential enterprise IT tools that allow businesses to operate efficiently. Customer relationship management (CRM) apps, for instance, are crucial for maintaining excellent customer service and marketing activities. Collaboration software, content management, and business intelligence software products, meanwhile, proved how important they are for the digital transformation of businesses. SaaS enables companies to be agile during crises such as the global pandemic and function effectively in remote and hybrid work setups.

With that said, vendors shouldn’t keep their guard down. As we learned from the report, the stable spending on enterprise software and IT requirements are for the short term. SaaS companies should continuously work on improving features and reexamining their pricing plans to attract new clients and keep current ones from terminating their subscriptions.