Aggregate software spend figures can genuinely mislead if taken at face value, and a closer look at how that spend actually breaks down by company size reveals a pattern worth understanding before assuming the headline trend applies to your own organisation. Total software spending increased around fifteen percent year over year, but that headline figure masks sharply divergent patterns by segment: mid-market companies saw a seven percent increase in average spend per employee, while small and medium businesses saw a one percent decrease, and growth-stage companies saw a six percent decrease over the same period.
Why Mid-Market Is Moving in the Opposite Direction
The mid-market increase is worth understanding specifically rather than treating as simply part of a general upward trend, since it appears to reflect a genuine, deliberate shift in this segment’s buying behaviour rather than passive cost inflation alone. Mid-market organisations are frequently at the stage where they are actively formalising previously ad hoc tool adoption, consolidating scattered departmental purchases into properly negotiated enterprise agreements, and adding genuine new capability, including AI-related tooling, as part of a broader operational maturity push. That combination produces a real increase in spend per employee that reflects deliberate investment rather than simply paying more for the same footprint.
Why Smaller and Growth-Stage Companies Are Pulling Back
The decline visible among small and medium businesses, and the sharper decline among growth-stage companies specifically, likely reflects a different, more defensive dynamic: tighter funding environments and heightened cost scrutiny pushing these segments toward active software rationalisation, cutting genuinely underused tools and consolidating overlapping subscriptions rather than expanding their footprint. That is a meaningfully different story than mid-market’s increase, even though both trends are happening simultaneously inside the same overall fifteen percent aggregate growth figure.
Why This Matters for How You Benchmark Your Own Spend
Any organisation benchmarking its own software spend trajectory against a general industry figure risks drawing the wrong conclusion entirely if it does not first confirm which segment pattern actually applies to its own size and growth stage. An organisation in the growth-stage category comparing its own spending discipline against the aggregate fifteen percent increase might wrongly conclude it is under-investing, when in fact its own segment peers are actively reducing spend by six percent over the same period, making its own position considerably stronger relative to genuinely comparable peers than the headline aggregate figure would suggest.
Why the Growth Itself Is Concentrated in a Narrow Set of Categories
It is worth understanding that even within the segments actively expanding spend, that growth is not spread evenly across every category of software being purchased. Independent industry benchmarking shows SaaS portfolio growth is no longer evenly distributed across the organisation, with application development tooling specifically experiencing the largest year over year spend growth of any category, while software renewals continue to account for the large majority of total software spend across organisations generally.
That concentration matters directly for how a mid-market organisation should read its own seven percent spend increase. If that growth is concentrated in a small number of genuinely strategic categories, application development and AI tooling chief among them, it likely reflects the kind of deliberate capability investment described above. If instead it is spread thinly and evenly across many unrelated categories, it more likely reflects quiet cost creep across an expanding, under-managed software estate, a considerably less favourable explanation for the same headline percentage increase.
What This Means for Negotiating Leverage by Segment
This divergence also has a direct bearing on negotiating leverage with vendors, since a vendor’s own account team is likely aware of which segment is currently expanding and which is contracting, and will calibrate its own posture accordingly. An organisation in a segment currently pulling back on spend has a genuinely stronger negotiating position right now than one in a segment actively expanding, since vendors have more incentive to work to retain and grow business inside a contracting segment than inside one already expanding on its own.
How Application Development Specifically Is Skewing the Mid-Market Number
It is worth naming the specific category most responsible for pulling the mid-market average upward, since a single, concentrated driver behind a broad statistic is considerably more useful than treating the whole increase as evenly distributed demand. IT budget benchmarking data shows software and SaaS-specific spending running considerably higher as a share of revenue, in the range of eight to twelve percent or more, than general IT spending benchmarks for mid-market organisations overall, reflecting how concentrated new software category investment has become relative to broader, flatter IT budget growth.
Distinguishing between a seven percent increase driven by renewal cost inflation on tools already in place, versus one driven by genuine new capability investment in a small number of strategic categories, changes what conclusion an organisation should draw about its own spend trajectory entirely.
Why Renewal Timing Should Be Read Against Your Own Segment, Not the Headline
A further practical implication worth drawing out directly concerns how an organisation should time and frame its own renewal conversations against this segment data. An organisation in a segment actively contracting spend has a genuine, evidence-backed reason to approach a renewal expecting flexibility, since it can point to a documented, industry-wide pattern rather than presenting its own cost pressure as an isolated, potentially less credible claim. An organisation in an expanding segment, by contrast, should expect less natural sympathy for a cost-reduction request during the same period, and may find a better outcome focusing the conversation on value and capability alignment rather than price pressure alone.
Conclusion
The fifteen percent aggregate increase in software spending this year conceals a genuinely divergent pattern by company segment, with mid-market organisations actively expanding spend while small, medium, and growth-stage companies pull back, and understanding which pattern actually applies to your own organisation’s size and stage is essential before drawing any conclusion from the headline industry figure.
Confirming your own genuine peer segment before benchmarking spend discipline, and recognising that a contracting segment currently holds stronger vendor negotiating leverage than an expanding one, are the practical steps that turn this divergence into useful, actionable intelligence rather than a confusing, contradictory headline statistic.
