Published on the 15/10/2025 | Written by Heather Wright

Shelfware and complexity eroding ROI…

Enterprise software spending is ballooning, but much of the investment may be going to waste and may even be hampering innovation as consumption-based pricing leaves companies struggling to track spending, leading to a proliferation of ‘shelfware’.

Boston Consulting Group says software spend makes up about one-fifth of total IT spend, but the move to SaaS, new pricing models, new vendors, open-source solutions and frequently changing products are leaving organisations battling to keep control of that spend.

“Companies need to ensure the actual demand for software is justified and aligned to ongoing business requirements.”

While IT budgets for third-party services have risen around six percent per year from 2019 to 2024, hitting US$5 trillion, software costs have grown even faster, ballooning from 13 percent to 21 percent, largely driven by SaaS spend.

“Procurement has become exceedingly complex, and companies are struggling to reduce spending in an increasingly fragmented landscape,” the consulting company says.

It is warning organisations to rethink their approach to software procurement and take control of enterprise software costs – and digital clutter. It is, they say, an opportunity to not only slow spending but also reduce complexity, lower technical debt and free up cash to re-invest in ‘high-impact’ areas such as data, AI and automation.

BCG notes that the shift to consumption-based pricing has rendered traditional flat-rate negotiations obsolete. In their place, organisations face a dynamic and often opaque pricing environment, where usage-based models can lead to unexpected cost spikes and underutilised software, or ‘shelfware’.

Alongside the new pricing models and shift to SaaS, there are a number of drivers for the increasing complexity, according to BCG’s analysis, including

• A proliferation of vendors, particularly in areas such as business intelligence and cybersecurity;
• Consolidation among providers which it says – citing Broadcom’s VMware acquisition as one example –  can lead to vendor lock-in, steep price increases and more-rigid contract terms;
• Decentralised purchasing, resulting in redundant software and narrow-use applications; and
• Hidden infrastructure costs, especially in cloud environments and genAI workloads.

It notes that software management teams can become too focused on contract compliance to ensure there are no volume overages, warning that approach won’t work.

“This kind of compliance mindset is understandable, but companies also need to ensure the actual demand for software is justified and aligned to ongoing business requirements.”

The good news, according to BCG, is that there are clear paths to reclaim control.

“Leaders can spend smarter by strengthening commercial discipline, improving demand management and optimising.”

It recommends organisations strengthen their commercial discipline by taking a more holistic, systematic approach to vendor negotiations, understanding both current and future enterprise requirements, along with the product roadmap for each software asset.

“Look beyond pricing benchmarks and use market intelligence to evaluate the potential for negotiation among vendors.”

Echoing Gartner’s Luke Ellery’s comments in iStart earlier this year, BCG cites as an example the need to understand when assessing a vendor what products they are pushing and how your contract could impact the vendor’s product goals – especially for large, multiyear deals.

Improving demand management is the second prong in BCG’s approach. That includes mapping software assets to enterprise business capabilities to uncover overlapping assets and provide insights into the tradeoffs between best-of-breed solutions and scalable software suites. By engaging stakeholders across departments, organisations can better understand real usage needs and avoid over-licensing or duplication of tools.

It says IT teams may need to push back on vendors – and the business – over add-ons and additional service elements.

“For example, if a vendor offers premium user support, an organisation should evaluate whether it is sufficiently different from the baseline customer support to warrant the higher cost.”

The third lever is technical optimisation. BCG advises adopting open-source software, even for critical applications, to reduce costs and reliance on bigger SaaS vendors, refactoring code so it consumes less mainframe computing capacity and fine-tuning cloud configurations to eliminate hidden infrastructure costs.

However, the report also cautions that technical solutions alone are not enough, with a deeper cultural shift required. Organisations need to move away from the more reactive, fragmented software procurement practices towards a more strategic, value-driven mindset.

“In a more complex software environment, traditional approaches to procurement are no longer enough,” the report says. “ Companies that embrace innovate procurement practices and technical optimisation can improve their financial performance, reduce complexity and equip themselves to compete more effectively.”