Are Tech Companies Aggressively Cutting Back on Vendor Spend?
A deep dive into why vendor cuts are happening, which areas are most impacted, and actionable advice on how to save costs. With data points from more than 70 companies.
Two months after this article was published, The Wall Street Journal reported on a similar trend in the article Corporate technology under new scrutiny amid recession fears, published on 28 April 2023. To get a close pulse on how the software engineering industry is changing - with trends surfaced sometimes months before mainstream publications pick them up - subscribe to The Pragmatic Engineer:
At the beginning of this month, I noted an emerging trend: large cutbacks on vendor spend. From The Scoop #37:
“I’m starting to notice emerging trends, especially industry-wide ones. One strong emerging trend is aggressively cutting down vendor costs
In the past week, I have been talking to well over a dozen founders, CTOs and software engineers at 10-person companies and 10,000+ ones, asking them about changes they see in vendor cost management. Everyone said their company has a renewed focus on bringing down vendor costs: infrastructure, SaaS subscriptions, pay-per-usage tooling, and so on.”
Since then, I’ve talked with more founders and engineers, and dozens of readers have shared data points of what you’re seeing at tech companies. Today, we cover this emerging trend in depth:
Cutting vendor costs: the numbers. What can we tell about the scale of the reduction? How are cuts being spread between infra like cloud, observability, security, and between collaboration tools, developer experience, sales, HR and recruitment tools? Insights based on data from more than 70 companies, and the data source shared.
Observations from across the market. Insights from a vendor in touch with more than 100 startups, also from a principal engineer, plus a peek into what’s happening at vendors.
Reducing Cloud and SaaS spending. A list of competitively priced SaaS alternatives which survey respondents mentioned, plus approaches for reducing Cloud bills for IaaS, PaaS and Saas spending. And a list of competitively priced SaaS alternatives.
Common cost-reduction approaches across Big Tech. And the challenge of identifying and tracking infra-related spend within a large company.
The “Build vs buy,” vs “buy cheap” struggle. We are unlikely to see as many “build vs buy” decisions, but many more “buy vs buy cheap, vs run open source infa ourselves” ones.
Advice on how to proceed with reducing vendor costs. For those working at product companies, tips for lowering vendor bills.
Advice for people working at vendors. How can vendors minimize the longer-term impact of budget cuts? Cases where vendors can keep customers, even if losing revenue, short-term.
Staying independent in my coverage is central to this publication. As with other issues, this piece isn’t sponsored, and I have no affiliations with any vendor mentioned. See more details on how I strive to remain independent in my ethics statement.