The last decade Many technology companies have adopted product-driven growth (PLG) and bottom-up sales strategies, as opposed to traditional enterprise sales, to drive their go-to-market strategies and overall growth.
Many software startups loved (and still love!) the bottom-up approach. What’s wrong with designing a software product to “sell itself” through viral adoption and word-of-mouth marketing? Bottom-up and PLG both promise a faster sales cycle at a much lower cost – no more golf and expensive steak dinners on the expense account.
PLG also offers other strategic advantages: by shortening the feedback loop between users and product teams, it enables early-stage and growth-stage technology companies to land and expand the use of their technology to within corporate accounts, with internal champions driving the sale.
However, as enterprise tech buyers watch spending more closely these days, they are also tightening restrictions on self-supply. This means that founders who have become very dependent on the bottom-up approach need a more robust and faster business selling strategy.
It is too early to pronounce death from top to bottom, but he seems quite moribund. And “pure” PLG must also evolve rapidly. Today’s PLG must inform both the product And sales teams so they can work together smoothly and close the next deal.
Spending on enterprise software: slower transaction cycles, increased oversight
Some clues to this changing face of corporate tech spending can be found in our latest Battery Ventures Cloud Software Spend Status Reportwhich surveyed 100 CTOs, CIOs and other big tech buyers in industries ranging from financial services to healthcare to manufacturing.
Collectively, survey respondents account for $30 billion in annual technology spending. Our respondents include a healthy cross section of companies consuming software through an upward/PLG movement, as shown in the slide below.
Bottom-up adoption buying models Picture: Battery Q1 2023 Cloud Software Spending Survey
While nearly half of our respondents (46%) expect to increase their total technology budgets in 2023, companies are obtain more conservative and shifting priorities. Many plan to standardize expenses, consolidate vendors to save money, and optimize SaaS licensing. Companies are re-examining pricing models to determine whether consumption-based or seat-based pricing makes more sense, given how the software is used, and choosing vendors in part based on that.
Today’s PLG needs to educate both product and sales teams so they can work together smoothly and close the next deal.
The sometimes bureaucratic governance systems within companies could operate even more slowly in the coming months, as organizations across all sectors strive to become more efficient and increase control over spending.
The slide below quantifies our findings that upward and PLG adoption is slowing. An example: only 46% of survey respondents now allow individual engineers to install tools in a “sandbox development” environment, compared to 76% since our last survey in September 2022. The drop in tools selected by engineers and deployed in production is also important. : Now only 11% of companies allow this to happen, down 27% from September 2022.
