The last decade saw many technology companies embrace product-driven growth (PLG) and bottom-up sales strategies, as opposed to traditional corporate sales, to drive their go-to-market strategies and overall growth.
Many software startups loved (and still love!) the bottom-up approach. What’s not to like about designing a software product to “sell itself” via viral adoption and word of mouth? Bottoms-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 benefits: By shortening the feedback loop between users and product teams, it enables early- and growth-stage technology companies to bring in and expand their technology within corporate accounts, with internal champions driving sales.
However, as corporate technology buyers become more spending-conscious these days, they are also tightening restrictions on out-of-pocket purchases. This means that founders who have become heavily dependent on the bottom-up will quickly need a more robust corporate sales strategy.
It’s too soon to declare bottom-up dead, but it looks pretty moribund. And ‘pure’ PLG also has to switch quickly. Today’s PLG must inform both the product And sales teams so they can work together smoothly and win the next deal.
Business software spend: slower deal cycles, more control
Some clues about this changing face of business technology spending can be found in our latest Battery Ventures State of Cloud Software Spending Reportwhich surveyed 100 Chief Technology Officers, Chief Information Officers and other major technology buyers in industries ranging from financial services to healthcare to manufacturing.
Collectively, survey respondents represent $30 billion in annual technology spending. Our respondents included a healthy sample of companies consuming software through a bottom-up/PLG movement, as the slide below indicates.
Bottom-up buying patterns Image: Battery Q1 2023 Cloud Software Spending Survey
While nearly half of our respondents (46%) expect to increase their total technology budget by 2023, enterprises are Are become more conservative and priorities shift. Many plan to standardize spend, consolidate suppliers to save money, and optimize SaaS licensing. Enterprises are re-examining pricing models to determine whether consumption-based or seat-based pricing makes the most sense given how the software is used, and choose vendors based in part on that.
Today’s PLG needs to inform both the product and sales team so they can work together smoothly and close the next deal.
Corporate governance systems, sometimes bureaucratic, may slow down even more in the coming months as organizations across industries work to improve operational efficiency and control over spending.
The slide below quantifies our findings that bottoms-up and PLG adoption is slowing. For example, only 46% of survey respondents now allow individual engineers to install tools in a “sandbox dev” environment – down from 76% since our last survey in September 2022. The drop for engineer-selected tools deployed in production is also significant : Now only 11% of enterprises allow it, a decrease of 27% compared to September 2022.
