Software & services dominate growth
Hardware is no longer the center of mass. Software spending jumped roughly 10% in 2024 as suppliers folded AI features into existing categories (Tropic).
ISG
RESEARCH
SIM Advantage Research · Prepared for SIM Advantage
The New Gravity of IT Spend
Software, services, and AI are pulling enterprise technology budgets into a new orbit. The decisive control lever is no longer cost cutting, it is portfolio architecture.
- SaaS spend is rising faster than app counts.
- AI is repricing the stack, not just expanding it.
- Buying authority has moved closer to the user.
Executive overview
Three forces are redrawing the spend map
Technology spend is no longer a centralized IT line item. It is a distributed operating system for the business, shaped by software, services, AI add-ons, and line-of-business buying behavior (Zylo 2026 SaaS Management Index, Tropic 2025 Software Spending Trends, Productiv / Gartner).
Portfolios are flat, but moving
Large enterprises still add about 21 applications per month even when the total count is stable (Zylo 2026).
Buying is now distributed
34% of SaaS purchases involve line-of-business managers, creating speed and fragmentation in the same motion (Productiv / Gartner).
Industry KPIs
The numbers behind the new gravity
Industry benchmarks for the average enterprise. Use the 500-employee module for a mid-market blended view.
The six-part report
Read the report by chapter
Switch between chapters to see the data, the implication, and the operator move.
The new shape of IT spend
Software and services, not hardware, are the center of spend growth. SaaS spend per employee is the operating metric that now matters, and AI is a forcing function for portfolio redesign (Tropic 2025, Zylo 2025).
- $49M average SaaS spend and $4,830 per employee, with spend outpacing portfolio growth (Zylo 2025).
- Average portfolio at 305 apps and $55.7M annual spend (Zylo 2026).
- Top-10 suppliers still control roughly three-quarters of the software budget (Tropic).
Operator move
Build one technology spend ledger, AP, card, SSO, and contracts, and report per-employee and per-revenue, not just absolute budget.
Your SaaS estate is bigger than you think
The average enterprise now manages roughly 275–305 applications, with portfolios stabilizing in size but turning over quickly underneath (Zylo 2026, Chiefmartec).
- Large enterprises still add 21 apps per month while total counts look flat (Zylo 2026).
- The long tail is most of the apps and a minority of the spend, but a majority of the risk (Tropic).
- License waste sits in the 20–30% range for typical estates (Zylo optimization research).
Operator move
Run portfolio reviews by category, not just by vendor. Require a sunset path in every new software business case.
Who is really buying the stack
SaaS buying is now a distributed decision network. 34% of purchases involve LoB managers, with finance, security, and IT acting as co-decision-makers (Productiv / Gartner).
- “Shadow IT” is usually unmet demand with a credit card, a discovery signal, not a compliance problem alone.
- AI tools are entering through expense channels, raising the stakes on visibility (Zylo 2026).
- Mature models assign decision rights by spend, risk, and integration, not by org chart alone.
Operator move
Replace blanket gatekeeping with a decision-rights matrix and a pre-approved catalog for common use cases.
Low riskMed riskHigh risk
High spendIT + FinanceIT + Finance + SecurityCIO + CFO + Sec
Mid spend LoB + IT reviewIT + Sec reviewCIO + Sec
Low spend LoB self-serveLoB + IT noteIT + Sec
AI is the new multiplier on spend & complexity
AI is increasing spend directly through new tools and indirectly through pricing uplifts on existing software. Tropic flagged 20–37% AI-related price increases in some categories (Tropic), while AI apps are the fastest-growing spend category in Zylo's 2026 benchmark.
- AI enters through three channels: AI-native apps, AI embedded in incumbents, and consumption-based AI services (ETR).
- The right question is not “are we using AI?” but “where is AI durable value vs. duplicate cost?”
- AI procurement requires model provenance, data handling, training rights, and audit clauses.
Operator move
Inventory AI in three buckets. Tie AI renewals to proof-of-value checkpoints, not pilot approvals alone.
The enterprise operating model
Strong operators treat software as a lifecycle, discover, decide, deploy, drive, decommission, rather than a one-time sourcing event. The winning model is faster than old-school enterprise sourcing and more governed than free-form business buying (Zylo 2026).
- Quarterly portfolio reviews with IT, procurement, finance, security, and business owners.
- Renewals tied to usage and outcome evidence, not just renewal dates.
- An AI procurement addendum: data rights, model behavior, pricing logic, approved use cases.
Operator move
Score every application on usage, fit, integration, and exit cost. Retire on a cadence, not on a crisis.
- DiscoverInventory, AP, card, SSO, expense.
- DecideDecision rights, business case, sunset path.
- DeployProvisioning, integration, security review.
- DriveAdoption, value tracking, AI POV check.
- DecommissionRetire, consolidate, reclaim spend.
ISG point of view
The next competitive advantage in software is not negotiating harder. It is designing a procurement and portfolio operating model that absorbs speed without losing discipline. Centralize visibility, decentralize informed selection, and standardize retirement with the same seriousness used for onboarding.
“Your app count may be flat, but your portfolio is still moving under your feet.”
“AI did not just create new tools; it repriced the old ones.”
“Shadow IT is often just unmet demand with a credit card.”
“If you cannot explain what leaves the stack, you do not control what enters it.”
ISG methodology
The ISG Customer Experience Transformation Platform
A two-page executive overview for aligning CX technology decisions to business outcomes, operational maturity, adoption, and recurring value creation.
Page 01
The ISG Experience Operating Model
Transforming customer and employee experience through engagement, intelligence, and execution.
ISG helps organizations modernize technology ecosystems so they can focus on the experiences technology enables.
The 7 Pillars of MRR
Foundational experience enablers
- Network
- Edge
- Cloud
- Security
- Customer Experience (CX)
- Business Intelligence & Application Intelligence
- Operational Efficiency
ISG is not a collection of vendors. It is an operating model that aligns engagement, intelligence, and execution to create measurable business outcomes and durable recurring revenue growth.
Page 02
The C.L.E.A.R. Governance Methodology
C.L.E.A.R. guides every transformation.
A governance framework that ensures technology decisions remain aligned to business outcomes, adoption, and long-term operational value.CCustomer
LLandscape
EEvaluation
AAdoption
RRoadmap
Governance
Outcome-aligned transformation
- C, CustomerDefine customer expectations, operational priorities, and desired outcomes.
- L, LandscapeUnderstand the current technology ecosystem, workflows, suppliers, and operational constraints.
- E, EvaluationUse analytics, operational insight, and business intelligence to identify friction, opportunity, and ROI priorities.
- A, AdoptionDrive employee engagement, operational alignment, and successful utilization of deployed solutions.
- R, RoadmapCreate a phased modernization strategy focused on continuous improvement and measurable business value.
Why Organizations Choose ISG
- Independent technology advisory approach
- Cross-platform expertise across leading CX ecosystems
- Certified professional services and execution capability
- AI and automation integration expertise
- Focus on measurable operational outcomes
- Long-term recurring revenue and optimization alignment
ISG helps organizations transform customer and employee experience into a scalable operational advantage.
Benchmark module
Benchmark scenario planner
Start with ISG's blended mid-market view (~500 employees), then switch to size, industry, or CX-intensive scenarios. Anchored to industry data (Zylo, Vertice, Chiefmartec, Avasant) and tuned for a planning conversation, not a vendor pitch.
$
SaaS spend per employee (blended)
$
Annual SaaS spend
Apps under management
–30%
License & portfolio waste
$–$600k
Reclaimable opportunity
–8%
Total IT spend as % of revenue
Scale comparison
What the numbers look like as the company gets larger
Company size changes the discussion from “how many tools do we have?” to “how much economic density, governance load, and supplier concentration can the operating model absorb?”
| Company profile | Employees | SaaS spend / employee | Annual SaaS spend | Apps under management | Likely governance pressure |
|---|---|---|---|---|---|
| Blended mid-marketCurrent base case | 500 | $4,000 | $2.0M | 220–260 | Category overlap, license waste, shadow buying |
| Upper mid-marketMore functions, more suppliers | 2,500 | $4,830 | $12.1M | ~255 | Decision-rights, renewal discipline, long-tail risk |
| Enterprise benchmarkZylo-style modern SaaS estate | 10,000 | $5,570 | $55.7M | 305–473 | Supplier concentration, AI pricing, portfolio turnover |
| Large enterprise fully countedCore stack plus visible long tail | 10,000+ | Varies by sector | $55M+ | 400–660+ | Operating-model maturity, security exposure, decommissioning |
Interpretation: larger companies do not always add apps linearly with headcount. The management burden comes from decision velocity, supplier concentration, AI add-ons, and the long tail of departmental tools.
Industry view
Sector intensity changes the benchmark
The same 500-employee company can carry very different SaaS economics depending on regulatory burden, customer-contact intensity, digital revenue dependency, and workforce model.
| Industry | SaaS spend / employee | 500-employee SaaS envelope | Benchmark implication |
|---|---|---|---|
| Healthcare | $10,150 | $5.1M | High compliance, workflow, data, and patient/customer-experience intensity. |
| IT / Software | $10,050 | $5.0M | High tool density across engineering, product, revenue, support, and cloud-adjacent operations. |
| Finance & Professional Services | $8,750 | $4.4M | High client-service, compliance, analytics, planning, and collaboration demands. |
| Retail & Consumer Goods | $7,750 | $3.9M | Customer, commerce, marketing, service, and operational-platform intensity. |
| Blended cross-industry | $4,000 | $2.0M | Useful midpoint for all-sector planning conversations. |
| Media & Entertainment | $3,250 | $1.6M | Lower average, but category spikes in collaboration, content, analytics, and distribution. |
| Education / Utilities / Manufacturing | $3,000–$5,500 | $1.5M–$2.8M | Often below SaaS-intensive sectors, but modernization pressure can push spend upward quickly. |
Interpretation: industry context should set the first benchmark range. The C.L.E.A.R. session then tests whether spend is justified by experience outcomes, adoption, and operational value.
CX/contact-center intensive view
Customer-contact intensity changes the technology envelope
Organizations with heavy customer-care, sales, support, or workforce-engagement operations usually carry a larger experience stack: UCaaS, CCaaS, WEM, CRM, analytics, AI, automation, and integration services.
| Operating profile | Seat model | Likely stack emphasis | Core CX software envelope | AI / analytics overlay | ISG advisory implication |
|---|---|---|---|---|---|
| Standard CX-enabled businessCustomer service exists, but is not the main operating center | 500 employees 75 CX seats |
UCaaS broad base; CCaaS for service and sales queues | ~$450k / year | $75k–$150k implementation or add-on range | Control queue design, CRM integration, reporting, adoption, and license fit. |
| CX-intensive mid-marketSupport, sales, and care are core operating functions | 1,000 employees 250 CX seats |
Omnichannel CCaaS, WEM, quality, analytics, workforce optimization | ~$1.6M / year | $250k–$500k AI integration range | Govern experience analytics, AI use cases, agent adoption, and process redesign together. |
| Enterprise contact centerCustomer interaction is a scaled operating system | 5,000 employees 1,000 CX seats |
Enterprise CCaaS, advanced WEM, automation, BI, integrations, managed execution | ~$7.2M / year | $1.0M–$1.5M+ conversational AI integration range | Shift from platform selection to operating-model orchestration across engagement, intelligence, and execution. |
EngagementUCaaS, CCaaS, digital, collaboration, service, and sales interactions
IntelligenceWEM, speech/text analytics, sentiment, BI, and performance visibility
ExecutionAI integration, automation, workflow optimization, and professional services
Interpretation: in CX-intensive environments, the spend question is not just “what does the platform cost?” It is whether the operating model converts engagement data into intelligence and intelligence into measurable execution.
Optimization playbook
Five levers that move the number
Estimated reclaim ranges blended from Zylo's optimization research, Tropic's spend benchmarks, and ISG client work.
-
01
License optimization
Right-size by usage. Reclaim inactive seats, downgrade tiers, and collapse duplicate logins.
Est. reclaim 10–18% of SaaS spend (Zylo) -
02
Consolidation
Retire overlap inside the same category. Decide which suite owns writing, search, and automation.
Est. reclaim 5–12% via category rationalization -
03
Contract optimization
Reset terms before vendors reset them for you. Index AI uplifts. Add usage-based caps and exit clauses.
Est. reclaim 3–10% on top-10 suppliers (Tropic) -
04
AI & premium-feature governance
Approve AI SKUs with proof-of-value, not enthusiasm. Avoid paying three vendors for adjacent AI features.
Est. cost avoidance 5–15% on AI uplifts (ETR) -
05
Intake & sunset governance
Every new app requires a sunset path. Every quarter retires at least one. Make exit a normal operating activity.
Compounds with every other lever
“If you cannot explain what leaves the stack,
you do not control what enters it.”
ISG point of view
The gateway
Start with a simple proof of concept, and see the impact you can have
SIM Advantage is a SIM-vetted technology buying and renewal process: every engagement follows the C.L.E.A.R. methodology, runs on one intelligence platform, and produces a defined deliverable. You keep your suppliers, your contracts, and your negotiating leverage, and the same activity creates value back to you, your team, and your chapter.
- Step 1Bring one to three spend initiativesRenewals, purchases, reviews. A few minutes to register. No signature, nothing changes on your accounts.
- Step 2Compare the proofRun your traditional process as usual. The program prices the same requirements in parallel, line for line, at the same price or less.
- Step 3Evaluate what it would earnAlongside the price comparison, see what those initiatives would generate for you, your team, and your chapter. Then you decide.
No signature, no meeting, no obligation. Ask your chapter leadership or SIM National about SIM Advantage.
Source notes
What this report draws on
All figures cited in this report link to their primary research. ISG's blended benchmark is a synthesis of these sources tuned for a 500-employee enterprise.
- Zylo 2025 SaaS Management Index, average SaaS spend, per-employee spend, portfolio growth. Report · News release
- Zylo 2026 SaaS Management Index, 305-app average, $55.7M average spend, 21 apps/month turnover. Report · News release
- Zylo SaaS optimization & license waste, license reclaim and waste ranges. Article
- Tropic 2025 Software Spending Trends, $11B+ of analyzed spend, 10% software increase, AI feature pricing. Report
- Tropic, top-10 supplier concentration & AI price increases. Article
- Productiv (Gartner data), 34% of SaaS purchases involve LoB managers. Article · 2025 stats
- ETR, AI reshaping SaaS spending and cloud; macro IT spend survey. AI/SaaS analysis · Macro views
- Vertice, SaaS benchmark and SaaS Inflation Index. Benchmarks · Inflation Index
- Chiefmartec, 500-employee app count benchmark and 2024 stack discussion. 2023 · 2024
- Avasant, IT spend as percentage of revenue by industry, size, and region. Report
- CX/contact-center benchmarks, CCaaS seat pricing, cloud contact-center implementation ranges, and AI/customer-service benchmark context. TrustRadius pricing guide · TeleCloud pricing guide · Plivo/Gartner benchmark summary