What you can do about rising SaaS prices

SaaS price hikes continue to make headlines, with major vendors – including Microsoft – continuing to adjust pricing structures in response to global market conditions.

But Microsoft is far from alone. Across the software industry, vendors have been increasing prices by an average of 13.9% each year – far outpacing general market inflation.

While some level of price increase may be inevitable, the bigger question is how sustainable this growth really is – especially as the average company now manages subscriptions to 134 tools.

With SaaS sprawl becoming the norm and economic pressures mounting, many organizations are reaching a tipping point. The result? A growing need to rein in SaaS spending.

Why are Microsoft, IBM and other SaaS companies raising their prices?

Before we explain the steps that can be taken to control software spend, it’s important to understand why prices are rising so rapidly.

Back in 2023, Microsoft cited "price harmonization" as the reason for its price adjustments – ensuring that the prices being charged across all markets were closely aligned to the US dollar. At that time, customers outside the US saw significant increases, ranging from 9% in the UK to 15% in Japan for its cloud-based services.

IBM also implemented price harmonization, with customers outside the US facing SaaS price increases of up to 15%.

While these moves were framed as efforts to create pricing consistency across regions, many customers saw them as justifications for substantial price hikes.

How to protect your business from spiraling SaaS spend

So, what’s the solution? How can you start future-proofing your business and keep your SaaS costs to a minimum?

Right-size your SaaS licenses

Whether you’re using Microsoft, IBM or any other SaaS tool, the first thing you should do is review each of your subscriptions and understand whether you:

• Need the number of licenses being paid for
• Need the tier of license being subscribed to

While this should be part of a wider application rationalization process, you ultimately need to determine whether the company is making full use of the tool, or whether there are opportunities to downgrade to a cheaper plan, remove licenses, or even terminate the subscription altogether.

Implementing a SaaS procurement software solution can streamline this process, helping you monitor usage trends, flag underutilized licenses, and make data-driven decisions before your next renewal.

Of course, you won’t necessarily be able to make immediate changes to your subscription if you’re tied into a contract, but it will ensure you’re prepared ahead of your next renewal.

Take control of your entire SaaS stack

It’s not just individual licenses you should be optimizing, it’s also your SaaS stack as a whole.

As your business scales, you will almost certainly see cases of redundant and duplicate applications – SaaS tools that have overlapping features, or instances where multiple teams or employees are subscribed to the exact same software, independently of one another.

Unless you have both visibility and control of your software, that is.

The right procurement analytics software can provide the insights you need to track usage, identify these overlaps, and make informed optimization decisions.

Plus, by centralizing procurement and managing SaaS spend effectively, you can curb maverick spending, reduce shadow IT and shadow AI risks, and eliminate wasted SaaS costs.

Remove or amend contractual clauses

When it comes to negotiating software contracts, many buyers only focus on the price, not realizing that there are certain contractual clauses that can be negotiated as well. One such clause being auto renewals.

While 89% of vendors include these auto renewal clauses in their contracts, according to Vertice’s Head of Buying, Nick Riley, almost all of them will remove these clauses when asked to do so.

They aren’t the only contract clause to be wary of though. You should also be aware of price uplifts. This is because 88% of SaaS vendors include clauses in their contracts that allow them to increase their pricing at any given time, in many cases without having to notify the customer.

Another critical risk to watch out for is vendor lock-in – contractual terms or technical dependencies that make it difficult or costly to switch providers. This can severely limit your negotiating power and keep your organization tied to escalating costs and suboptimal solutions.

These risks highlight the importance of having a robust SaaS contract management process in place to track renewal terms, pricing clauses, and negotiation windows.

For example, Microsoft has announced that it will be reviewing its pricing every six months, which will likely mean further increases down the line.

By negotiating a maximum price cap, you can more effectively manage and prepare for any future price rises. You should also consider working with an intermediary to negotiate on your behalf, as they will understand the intricacies of SaaS purchasing and therefore be able to advise you on the specific details related to any agreement.

Use pricing intelligence to secure the best possible deal

In order to survive any period of economic uncertainty, businesses must do all they can to reduce their spending. As one of the largest outgoings in any modern organization, this increasingly includes SaaS.

The fact that the cost of software is rising isn’t the only challenge you face as a business though. There’s also the fact that in most instances, the vendors hold all the cards in negotiations. Or at least they have the upper hand.

Just take the fact that as many as 90% of buyers are overpaying for SaaS by as much as 20-30%.But with the right leverage, this doesn’t have to be the case.

Which is where we come in.

At Vertice, we have access to the pricing and discounting data of more than 16,000 SaaS vendors worldwide through our SaaS purchasing platform. This not only provides us with the insights into what other companies are paying for software, but it allows us to leverage this pricing intelligence on your behalf, negotiating the best possible deal on any SaaS contract.

Why not see for yourself how much you could be saving on SaaS by using our free cost savings analysis tool. Alternatively, find out more about how Vertice’s price benchmarking works.