$29.5 Billion in Global Cloud R&D Investment Squandered When Software Features Go Unused, reveals Research

Pendo, creator of the product cloud for digital products and data-driven product teams, today released the 2019 Feature Adoption Report, a first-of-its-kind analysis of the economic impact of software feature adoption. The company also announced four new analytics features that extend its core analytics platform and make product and user data more accessible and actionable throughout software organizations and digital enterprises.

The research found that public cloud software companies collectively invested up to $29.5 billion in R&D costs associated with these unadopted or underutilized features, funds that could have been allocated to higher value features and unrealized customer value.

Based on an aggregation of anonymized product usage data, Pendo determined that
80 percent of features in the average software product are rarely or never used.
Publicly-traded cloud software companies collectively invested up to $29.5 billion
developing these features, dollars that could have been spent on higher value features
and unrealized customer value.

Using an aggregation of anonymized Pendo usage data over a three-month period, the firm determined that an average of 12% of features generate 80% of average daily usage
volume. Meanwhile, 80% of features are rarely or never used. These percentages vary
only slightly by size of company, making it confident that it could use them as a proxy
for the broader software industry. The sample also included companies from numerous
verticals including banking/finance, HR technology, education, shipping and logistics,
healthcare and e-commerce.

To extrapolate across all public software companies, the firm used Gartner, Inc.’s latest
calculation of combined public cloud revenue. In its September 2018 report by Fred
Ng, et al., Gartner forecast that public cloud revenue would reach $175.8 billion in 2018.
To estimate research and development costs, the firm took an average of reported R&D
expenses from 54 publicly-traded software companies on the Bessemer Venture Partners
Emerging Cloud Index.

The firm divided that number by 80% to total $29.5 billion, its estimate of dollars spent
by public cloud companies on features that may rarely or never be used. Using this
methodology, a software company with $50 million in revenue might spend $8.4 million
developing features customers rarely or never use.