The $450B Problem Nobody’s Talking About

At its core, every B2B tech value prop boils down to this: we’ll make you money or save you money.

Most of us have seen the results: moving from spreadsheets to a CRM helped my business make money. AWS, Azure, and Google Cloud have helped millions of businesses save billions.

Along the way we’ve also bought tools that didn’t live up to the hype, but for the most part, our lives are infinitely better because of technology. That’s why, even in 2023’s tech recession, net software spend hit $880 billion. By next year, we’re projected to dish out $1.24 trillion on software.

And that’s all well and good—as long as more software equals better results. Sadly, that’s not what we’re getting. In fact, our tech obsession is costing us $450 billion annually in lost productivity.

Yes, the tech designed to make us productive is doing the opposite. The culprit? Context switching.

Toggle Tax
The human brain is a powerful machine, capable of storing around 2.5 million gigabytes of digital memory. That’s the equivalent of 2,500 4K movies or 1.25 billion photos. Our brains have made us the world-builders we are, but they come with preferences, and one is monotasking—focusing on one thing at a time.

Every time we switch contexts, it takes 23 minutes for the brain to regain full focus. Unless you’re part of the 2.5% who can multitask effectively, your best work will happen when you focus on one task.

But monotasking is nearly impossible in today’s landscape, where each department uses an average of 73 SaaS applications. Operations alone is running on 81 apps. And even if you’re in a smaller company, you’re still lugging around a heavy tech stack.

In a recent Fortune 500 CPG study, every person involved in a single supply-chain transaction switched about 350 times between 22 applications. Each employee toggled around 3,600 times per day, spending 9% of their work time just toggling.

What’s the toll? Reduced working memory, making it harder to retain and process information. Attention residue, making it tough to focus on a new task. And decision fatigue, leading to poorer decision-making and ultimately worse outcomes.

This isn’t an isolated issue. A recent Gong report highlighted that sales reps’ biggest challenge is switching between multiple systems to complete their activities.

Back to the beginning
Ask any founder or exec what keeps them up at night, and you’ll hear “growth” and “retention.” And the data isn’t encouraging—both are trending downward.

Sure, the macro environment isn’t helping, but look deeper, and you’ll find companies realizing that more tech doesn’t mean more value. In fact, they’re facing diminishing returns on tech investments.

Part of the problem is the toggle tax; another part is the overwhelming vendor management. Take a small ops team running on 30 tools: they’re constantly learning, configuring, and managing renewals for each one. That’s a heavy cognitive load, which is why 40% of SaaS licenses go unused.

So, companies are cutting the “nice-to-haves” and moving away from point solutions. The promise of point solutions was always in deeper functionality for a specific task. But now, that benefit doesn’t outweigh the cost.

Where are companies going? To platforms, or what some call “compound startups.” Companies like Rippling have built powerful, multi-product businesses by offering customers less complexity, fewer headaches, and a smaller price tag.

Until now, the compound startup approach has been the territory of the well-funded, often led by seasoned founders like Parker Conrad. But with AI driving down the cost of building software, more companies can now adopt this approach.

Maybe this takes us back to where it all began: a world where software finally does what it was always meant to—make work easier, not harder.