Smartsheet Inc. (SMAR): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at Smartsheet's competitive landscape, and honestly, the work management sector is a brutal, high-stakes game right now, especially as the company targets that $1.116 billion to $1.121 billion revenue range for FY2025. We see extreme rivalry from giants and specialists, plus a high threat from substitutes like Microsoft Teams, but the real story is customer stickiness-their Dollar-Based Net Retention Rate hit 113% in Q2 FY2025, proving the enterprise value proposition works. Still, you need to watch the rising SMB churn against the high switching costs that protect their 2,056 customers paying over $100,000 ARR, which grew 23% last period. Below, we map out exactly where the pressure is coming from across all five forces.

Smartsheet Inc. (SMAR) - Porter's Five Forces: Bargaining power of suppliers

When you look at Smartsheet Inc.'s supplier landscape, the power dynamic is heavily skewed toward a few key players, primarily those providing the foundational cloud infrastructure. Honestly, this is the biggest lever suppliers have over Smartsheet's cost structure and operational flexibility.

Cloud infrastructure providers (AWS, Azure) have high power due to platform switching costs.

The hyperscale cloud providers-Amazon Web Services (AWS) and Microsoft Azure-wield significant bargaining power. Smartsheet runs its platform on this infrastructure, meaning any move away from a primary provider involves substantial engineering effort, data migration risk, and potential service disruption. This creates high platform switching costs, which is a classic supplier power lever. As of the third quarter of 2025, AWS held a 29% market share in the worldwide cloud infrastructure market, with Azure at 20%. Together, the 'Big Three' control over 60% of this ever-growing market, which reached $107 billion in end-user spending in Q3 2025. To be fair, Smartsheet is actively deepening its relationship with one of these giants; they entered a multi-year strategic collaboration with AWS, including a global go-to-market motion. Still, this deep integration, which involves leveraging services like Amazon Bedrock, locks them in further, even as it promises new customer access.

Here's a quick look at the market concentration influencing this power:

Smartsheet's reliance on third-party connectors and APIs is a moderate dependency.

SaaS platforms like Smartsheet thrive on integration, meaning dependency on third-party application programming interfaces (APIs) and connectors is inherent. While this dependency isn't as existential as the core cloud hosting, it matters for feature completeness and customer stickiness. If a key connector breaks or changes its terms, it directly impacts the customer experience. Smartsheet is clearly addressing platform sophistication, as evidenced by internal metrics showing data shuttle workflows increasing nearly 200% and Dynamic View configurations growing by 450% over the past year. This internal investment in platform modernization suggests an effort to control the integration layer, which helps temper the power of external API providers.

Strategic partnerships, like with KPMG, reduce reliance on internal professional services.

You're seeing Smartsheet use strategic alliances to outsource or co-deliver services that might otherwise require massive internal build-out, effectively reducing the supplier power of hiring and scaling a huge internal professional services arm. For example, KPMG utilizes the Smartsheet platform to power its advanced transaction execution tools for M&A integration. This partnership means Smartsheet's platform is validated for complex, high-stakes enterprise use cases, which is great for them. From a supplier perspective, this reduces the internal need for Smartsheet to develop equivalent, specialized consulting tools from scratch. Contextually, Smartsheet's professional services revenue was only $13.2 million in Q3 2025, projected to be just 4.5% of total revenue for FY2025. Relying on partners like KPMG to drive complex implementations helps keep that internal cost low.

Core technology suppliers are few, but Smartsheet's scale offers some counter-leverage.

For the truly core technology-the underlying database, AI models, or specialized components-the supplier base is narrow, which usually means high supplier power. However, Smartsheet's growing scale provides a shield. The company is projecting total revenue between $1,113 million and $1,118 million for the full fiscal year 2025. Plus, their enterprise adoption is accelerating; they had 77 customers with Annualized Recurring Revenue (ARR) over $1 million as of Q2 2025, a 50% increase from the prior year.

This scale translates into tangible counter-leverage:

• Large contract value provides negotiation weight with niche tech suppliers.
• High customer count (20,198 customers spending over $5,000 in Q2 2025) makes platform stability a non-negotiable for suppliers.
• Strong cash generation: Free cash flow for Q3 2025 was $61.8 million.

They can definitely afford to walk away from unfavorable terms, even if the alternatives are limited. Finance: draft 13-week cash view by Friday.

Smartsheet Inc. (SMAR) - Porter's Five Forces: Bargaining power of customers

You're looking at Smartsheet Inc.'s customer power, and it's a tale of two segments. For your largest clients, the enterprise folks, their bargaining power is somewhat muted by the stickiness of the platform, but they definitely have a seat at the table when it comes to negotiating value. The real leverage for these high-value enterprise customers is their sheer scale and the potential for massive expansion, which is why their retention rate is so critical.

To be fair, switching costs are substantial once a company builds its mission-critical processes around Smartsheet's platform, especially with deep integrations and organizational habit built up. Still, the company is keenly aware that these big spenders drive the best expansion metrics. For instance, the dollar-based net retention rate was a strong 113% in Q2 FY2025, showing that even with some churn pressure elsewhere, the core enterprise base is expanding its spend significantly. The enterprise retention rate itself was even higher for that quarter, coming in at 120%.

The power dynamic shifts when you look at the smaller end of the spectrum. The SMB segment shows a slight uptick in churn, indicating higher price sensitivity in that cohort. This is a near-term risk you need to watch; if onboarding takes 14+ days, churn risk rises, especially for smaller accounts less invested in the platform's full suite. This pressure is what pulls the overall net retention rate down from the enterprise-only figure.

The increasing concentration of Annual Recurring Revenue (ARR) in the top tiers clearly shows where Smartsheet Inc. derives its stability and growth potential. These customers are locking in, making them less likely to defect over minor price changes, but more likely to demand better terms as their spend grows. Here's the quick math on that growing importance:

The data shows that customers with over $100,000 in ARR grew 23% to 2,056, increasing their collective importance to the platform's financial health. This cohort is expanding at a much faster clip than the broader base, which is a classic sign of strong enterprise adoption and upsell success.

On the flip side, Smartsheet Inc. is actively trying to manage the perception of friction for new and existing customers. New subscription models simplify pricing, potentially lowering perceived switching friction for smaller customers who might have been confused by the old structure. This transition, which existing customers will face upon renewal in 2025, aims to make the value proposition clearer:

• Simplified user types: Moving from over 10 legacy types to four defined roles (Member, Provisional Member, Guest, Viewer).
• Provisional Member access: A 'try before you buy' timeframe, allowing users full access for up to 90-days at no cost.
• Transparent, predictable pricing: A stated goal of the new model to help purchasers forecast costs easier.

This simplification is a direct action to reduce the administrative burden that can sometimes lead to customer frustration and, ultimately, churn. Finance: draft 13-week cash view by Friday.

Smartsheet Inc. (SMAR) - Porter's Five Forces: Competitive rivalry

The competitive rivalry in the work management space for Smartsheet Inc. is definitely high, maybe even bordering on brutal. You're looking at a market segment packed with established giants and nimble specialists all fighting for the same enterprise dollar. This isn't a quiet pond; it's a shark tank.

Smartsheet is clearly staking its growth on the enterprise segment. The company is projecting full fiscal year 2025 revenue between $1.116 billion and $1.121 billion, which shows scale, but the competition is fierce at that level. To keep pace, Smartsheet is leaning into its enterprise success, reporting 2,056 customers with Annualized Recurring Revenue (ARR) over $100,000-that's a 23% year-over-year increase. Still, the dollar-based net retention rate, while strong at 113% overall, is being watched closely, especially since the enterprise retention rate was 120% for the quarter, suggesting the SMB segment might be lagging.

Your direct rivals are a mix of broad platform players and focused specialists. We're talking about Asana, monday.com, ClickUp, and the behemoth that is Microsoft with its Project and Planner offerings. Each one is aggressively pushing new features to capture market share, especially in the high-value enterprise tier where Smartsheet is making its big push.

Here's a quick look at how some of these key players stack up against Smartsheet on a few critical dimensions as of late 2025:

The arms race for AI superiority is driving R&D spend across the board. If you aren't keeping up with generative AI features, you risk looking dated quickly. Competitors are not just adding bells and whistles; they are embedding intelligence to automate routine work, which directly challenges Smartsheet's value proposition around automation rules.

Consider the free tier strategies, which often serve as the initial entry point for smaller teams that might eventually scale up. This creates a constant pipeline of potential migration targets for Smartsheet's enterprise sales team, but also a pool of users who might never need to upgrade:

• monday.com free plan supports up to two members.
• Asana free plan supports up to 15 team members.
• ClickUp free plan offers 100 MB of storage.
• Smartsheet's baseline pricing starts at $7/user/month.

This landscape means Smartsheet must continuously prove its enterprise-grade security and scalability outweigh the lower-cost or more feature-rich entry points offered by rivals. You need to watch those R&D budgets very closely.

Smartsheet Inc. (SMAR) - Porter's Five Forces: Threat of substitutes

The threat of substitutes for Smartsheet Inc. remains a significant dynamic, as many tasks it addresses can be accomplished using existing, often lower-cost, tools. However, the platform's increasing enterprise focus builds barriers against these alternatives.

High threat from generic productivity suites like Microsoft Teams and Slack integrations is evident in their massive user bases. Microsoft Teams reached roughly 320 million monthly active users (MAUs) in 2024, securing about 37% market share among team-collaboration platforms in 2025. Slack, while smaller, reported up to 79 million MAUs projected for 2025 and held around 13% market share in the same segment in 2025. The revenue scale is also telling; Slack is projected to generate approximately $4.22 billion in revenue by 2025, while Microsoft Teams is bundled into Microsoft 365, which generated about $77 billion in revenue from the productivity and business processes segment in the 2024 financial year.

You see this substitution pressure most clearly when comparing the core offerings:

Free or low-cost open-source tools offer another layer of substitution, especially for organizations prioritizing cost control and customization over immediate enterprise support. The Open Source Project Management Software market size was estimated at $2.5 billion in 2025. This segment is projected to grow at a Compound Annual Growth Rate (CAGR) of 15% from 2025 to 2033. Companies like OpenProject GmbH are key players in this space, providing alternatives for basic use cases.

Customers can use spreadsheets and email for many tasks, the lowest-cost substitute. Still, the value proposition of Smartsheet Inc. is built on moving beyond these basic tools. For instance, a composite analysis showed that Smartsheet Inc. delivers a 601% return on investment (ROI) over three years, with a payback period achieved in just 2.7 months. This rapid value realization directly counters the perceived low cost of manual methods.

The platform's enterprise-grade features and security create a high-value barrier to substitution. Smartsheet Inc. is trusted by over 85% of the 2024 Fortune 500 companies. This commitment to the high end of the market is reflected in customer stickiness:

• Enterprise retention rate was 120% for Q2 Fiscal 2025.
• Overall dollar-based net retention rate was 113% for Q2 Fiscal 2025.
• The company had 2,056 customers spending over $100,000 annually as of Q2 Fiscal 2025, a 23% increase year-over-year.
• Smartsheet Inc. reported a total gross margin of 84% for the quarter.
• The introduction of AI tools saw nearly 50% sequential growth in user adoption in Q2 Fiscal 2025.

These figures suggest that while the threat from basic tools is high, the value captured by large, scaling customers-who are less likely to churn for a free alternative-is substantial. Finance: draft 13-week cash view by Friday.

Smartsheet Inc. (SMAR) - Porter's Five Forces: Threat of new entrants

You're looking at the barriers to entry for a new player trying to crack the enterprise work execution space where Smartsheet Inc. sits. Honestly, the threat is moderate, but the hurdles are steep for anyone without deep pockets.

The initial capital required to build an enterprise-grade platform that meets modern security and governance standards is a high barrier. Consider the scale Smartsheet Inc. already operates at; their cash, cash equivalents, and short-term investments stood at $706.6 million at the end of Q2 Fiscal Year 2025. A new entrant needs significant runway to match that stability and fund the necessary R&D. The global enterprise software market size is estimated at $280.49 billion for 2025, but capturing a slice requires massive upfront investment to compete on features, not just price.

Established brand recognition and a large, sticky enterprise customer base create a significant entry hurdle. Smartsheet Inc.'s Annualized Recurring Revenue (ARR) reached $1.093 billion as of Q2 FY2025, showing deep market penetration. New competitors face the challenge of displacing these established relationships. Look at their enterprise success:

• Number of customers with ARR over $1 million: 77, marking a 50% year-over-year increase.
• Number of customers with ARR over $100,000: 2,056, up 23% year-over-year.
• Enterprise retention rate was 120% for the quarter.

New entrants must overcome the network effects and data lock-in of existing platforms. When you have 2,056 customers spending over $100,000 annually, the cost of switching-in terms of retraining and data migration-is substantial. Furthermore, Smartsheet Inc. discontinued its limited free plan in 2025, moving to a 30-day free trial model, which signals a push to monetize collaboration early and increase lock-in faster than before.

The need for extensive integrations with existing enterprise systems is a major complexity. A new platform must connect seamlessly to the existing tech stack, or it becomes another data silo. Smartsheet Inc. has over 175 integrations already, which is a massive head start for them. If onboarding takes 14+ days just for integration setup, churn risk rises for any new vendor.

Here's a quick look at the scale Smartsheet Inc. commanded as of Q2 FY2025, which sets the bar for new entrants:

To even be considered by a large organization, a new entrant needs to demonstrate immediate compatibility with the core enterprise infrastructure. Think about the sheer volume of established connections:

• Microsoft Suite: Microsoft Teams, Power BI, OneDrive, Entra ID.
• CRM/Data: Salesforce, Microsoft Dynamics, Tableau.
• Collaboration: Slack, Google Workspace, Dropbox, Box.
• DevOps: Jira, GitHub.

Finance: draft 13-week cash view by Friday.