Software Costs Up 12%/Year: 60% of Vendors Won't Tell You

The Silent Crisis Bleeding Your IT Budget Dry

My verdict is clear: we're experiencing the largest enterprise software price escalation of the past decade, and most companies aren't realizing it until it's too late.

After 8 years managing technology budgets at scale-ups, I've seen it all. But what's happening in 2026 is unprecedented: SaaS software inflation hits 12.2% annually, five times higher than general inflation. And that's just the tip of the iceberg.

The numbers don't lie: among the top 500 SaaS providers, there were over 1,800 price changes in 2025 alone. The average organization manages 112 different SaaS applications, spending $9,100 per employee per year. And here's what irritates me most: 60% of vendors mask their real price increases through "restructurings" and hidden fees.

I won't sugarcoat it: if you don't take action now, your software budget will become a black hole consuming more and more resources with nothing you can do about it.

The Price Hikes Nobody Tells You About (But We All Pay)

Let me be straight about what's really happening with pricing:

Big Tech Leads the Charge

Microsoft has been especially aggressive. Their Microsoft 365 Frontline plans will experience increases of up to 33% in July 2026. If you manage a company with frontline workers, this translates to thousands of additional dollars annually. I already wrote about the best Microsoft 365 alternatives because I saw this wave coming.

Google Workspace isn't far behind: 16-22% increases with Gemini AI now mandatorily included in certain plans. The problem? Many companies don't need generative AI in their productivity suite, but they have no option to exclude it.

Startup "Favorites" Are Rising Too

Notion Business: from $15 to $20 per user per month (33% increase). After two years using it with my team, I can say it's worth every penny... but not for everyone. If you only need a corporate wiki, you're paying for functionality you'll never use.

Slack Business+: from $12.50 to $15 per month (20% increase). The problem isn't the price itself, but that many organizations have unused licenses. In my experience, 25% of SaaS licenses sit idle at any given time.

Adobe Photography Plan: from $9.99 to $14.99 (50% increase). This is the perfect example of how a "small" increase in absolute terms represents a brutal percentage jump affecting millions of users.

The "Silent" Increases

These are the ones that worry me most:

• Figma: complete per-seat billing restructuring without clear communication
• HubSpot: new mandatory seats for Commerce Hub that many customers didn't anticipate
• Atlassian: 5-10% increases on cloud plans presented as "market adjustments"

The reality is that effective increases, when you include hidden fees and mandatory add-ons, are between 20-30%. Not the 8-12% they publicly announce.

The Credit-Based Revolution: Innovation or Trap?

Here comes the part that generates the most debate in my CIO circle: the massive shift toward credit-based models.

The numbers are clear: 79 companies adopted credit-based pricing in 2025, a 126% increase over 2024. But if you ask me directly whether this benefits companies, my answer is: it depends entirely on your use case.

How Credit Models Work

Instead of paying per user/month (traditional per-seat licensing), you buy "credits" consumed based on usage:

• OpenAI API: tokens consumed per request
• Snowflake: credits for data processing
• Twilio: credits per message/call
• AWS/Azure/GCP: hybrid models with credits for specific services

The Advantages (Yes, They Exist)

1. Real flexibility: If your usage fluctuates seasonally, you only pay for what you consume. At my previous startup, this saved us $30k annually on email marketing services.

2. Elimination of "shelfware": No more unused licenses. The average 25% waste disappears.

3. Scalability: You grow without negotiating new contracts every quarter.

The Disadvantages (That Nobody Tells You)

1. Budget unpredictability: Your CFO will hate the volatility. One month you pay $5k, the next $15k with no apparent operational changes.

2. Audit complexity: Who consumed 50,000 AI credits in February? Good luck tracking that without dedicated FinOps tools.

3. Silent escalation: Credit prices can change without you noticing. I've seen 15% increases in cost-per-credit presented as "infrastructure adjustments."

4. Psychological lock-in: Once you have prepaid credits, you're incentivized to consume them even if better alternatives exist.

My verdict: credit-based models are excellent for early-stage startups and companies with genuinely variable usage. They're terrible for organizations that need predictable budgets and don't have teams dedicated to FinOps.

The SaaS Market Reality in 2026

Context that matters: the global SaaS market reached $295 billion in 2025 and is projected to hit $344 billion in 2027. This massive growth partially explains why vendors feel comfortable raising prices: they know demand will remain.

But here's the part few analysts mention: negotiating power is shifting. With market saturation and the proliferation of open-source alternatives, companies that know how to negotiate are getting 10-30% discounts.

Related to this consolidation trend: the VMware chaos under Broadcom showed that even established giants can lose customers massively when they abuse pricing power.

Concrete Strategies to Protect Your Budget

1. Immediate License Audit

Concrete action: Dedicate one week to mapping ALL your SaaS subscriptions. In my last consultancy we found:

• 3 different CRM tools (only used one)
• 47 unused Zoom licenses ($700/month wasted)
• 2 duplicate Dropbox Business accounts

Recommended tools:

• Zylo: automatic SaaS discovery
• Torii: spend management and optimization
• Productiv: SaaS Management Platform

2. Strategic Negotiation

I won't sugarcoat it: most teams don't negotiate because they assume prices are fixed. Costly mistake.

Tactics that work:

• Vendor consolidation: "If we also move [product X] to your platform, what volume discount do you offer?"
• Timing: Negotiate in Q4 when vendors chase quotas
• Visible alternatives: Mention you're evaluating competitors (with real scheduled demos)
• Multi-year contracts: Lock in current prices for 2-3 years in exchange for commitment

In my experience, average negotiation saves 15-20%. My best result: 34% discount on an enterprise suite by consolidating 4 tools.

3. The Shift to Open-Source Alternatives

If you ask me directly, most companies could replace at least 30% of their SaaS stack with open-source alternatives without functionality loss. The problem is switching cost and organizational inertia.

Production-proven alternatives:

But beware: real cost includes hosting, maintenance, and internal support. For teams without technical capacity, commercial SaaS may still be cheaper long-term.

For teams evaluating CRM tools, my CRM guide for startups covers both commercial and open-source options with real use cases.

4. Payment Model Optimization

Annual vs Monthly: Paying annually typically saves 10-20%. Do the math:

• Slack Business+ monthly: $15 × 12 = $180/user/year
• Slack Business+ annual: $12.50 × 12 = $150/user/year
• Savings: $30/user (16.7%)

For 100 users: $3,000 annually you can allocate to other tools.

Per-seat vs Credit-based: General rule from my experience:

• Choose per-seat if: Your usage is predictable, you need fixed budgets, you have stable teams
• Choose credit-based if: Your usage fluctuates >40% monthly, you're in rapid growth, you have FinOps expertise

5. Build vs Buy Revisited

This is a conversation many avoid because it seems like "we already decided this years ago." But with current increases, the calculation has changed dramatically.

Real case: A client paid $40k annually for a ticketing tool. They built an internal alternative in 3 months (cost: $60k in development). Break-even in 18 months, projected savings of $200k over 5 years.

It's not for everyone, but if you have:

• Development team with capacity
• Specific needs not covered by standard SaaS
• SaaS prices >$30k annually
• Usage timeline >3 years

Then it's worth doing the math.

The Future of SaaS Pricing: Where We're Heading

Based on conversations with vendors and analysts, these are the trends I see for 2026-2027:

1. Aggressive AI Bundling

All major vendors are packaging AI capabilities (whether you want them or not):

• Microsoft Copilot in M365
• Google Gemini in Workspace
• Salesforce Einstein in all plans
• Notion AI included in higher tiers

My prediction: in 12 months, it will be nearly impossible to buy enterprise software without paying for some AI component, whether you use it or not.

2. Consolidation or Death

Markets are rewarding all-in-one platforms:

• Notion absorbing wiki + docs + project management use cases
• ClickUp competing with Asana + Monday + Notion simultaneously
• Microsoft/Google absorbing more and more specialized tools

Niche tools will have to: a) Be 10x better at their specialty, or b) Compete on price (typically 50-70% cheaper)

If you're interested in the productivity tools landscape, my Notion vs Obsidian comparison explores how specialized tools can still compete.

3. Usage-Based Will Become the New Standard

My controversial prediction: in 3 years, 60% of enterprise software will have some usage-based component. The question won't be "credit-based or per-seat?" but "what percentage of my cost is fixed vs variable?"

This will force companies to:

• Invest in FinOps tooling
• Train teams in cloud-style cost optimization
• Implement automated spending alerts and limits

4. The Return of On-Premise (For Some)

After years of dogmatic "cloud-first," we're seeing a pendulum swing. Large enterprises are evaluating:

• On-premise for predictable workloads: If you constantly use 1,000 Office 365 seats, does a perpetual subscription make sense?
• Hybrid hosting: SaaS for dev/testing, on-premise for production
• Self-hosted open-source: Especially in Europe with strict GDPR regulations

It's not a massive return, but 100% cloud is no longer the only valid path.

What Nobody Tells You: The Hidden Cost of "Innovation"

Here comes my most opinionated part of the article.

The SaaS industry has sold "continuous innovation" as justification for perpetual price increases. But after evaluating dozens of "new features" in my consulting work, the truth is brutal: 70% of new functionality adds no real value to most users.

Examples I've seen:

• Generative AI packaged into tools that don't need it (do you really need GPT in your CRM?)
• Integrations with 50+ tools when you use 3
• Advanced dashboards nobody looks at after the first month
• Automations requiring configuration so complex it's faster to do tasks manually

And here's the insult: you pay for all this in the form of 8-15% annual increases, even though you never use 80% of the features.

My verdict: the industry needs an "unbundling" model where you only pay for capabilities you actually use. Some vendors are trying this (Basecamp with their flat pricing, 37signals with their return-to-simple), but they're the exception, not the rule.

How to Evaluate If a Price Increase Is Justified

I've developed this framework after evaluating hundreds of contract renewals:

The 5-Question Test

1. Did they add functionality you actively use?

• YES and we use it weekly → Increase justified
• NO or we don't use it → Negotiate or seek alternative

2. Is the increase below SaaS inflation (12.2%)?

• YES → Acceptable
• NO → Requires aggressive negotiation

3. Do they offer free data migration if we decide to leave?

• YES → Sign of confidence in their product
• NO → Red flag for vendor lock-in

4. Is cost per user aligned with value generated?

• Metric: How much revenue/savings does the tool generate per $1 invested?
• If <3x → Probably too expensive

5. Are there viable alternatives at <70% of price with 80% of functionality?

• YES → Negotiate hard or migrate
• NO → You have less leverage, but can still negotiate terms

Conclusion: Don't Accept Increases Passively

After 15 years in tech, my final advice is this: passivity in software management is the biggest budget waste in modern companies.

Vendors count on your inertia. They know switching tools is painful. They bet you'll accept a 15% increase because the alternative (migration) seems worse.

But here's the reality I've seen again and again: companies that actively audit their SaaS stack, negotiate fearlessly, and aren't afraid to migrate when it makes sense end up saving between $50k-$500k annually depending on their size.

Concrete action for this week:

1. Export all your SaaS subscriptions to a spreadsheet
2. Mark those raising prices in 2026
3. For each one, apply the 5-Question Test
4. Schedule negotiation calls for those failing 2+ questions
5. For those failing 4+ questions, schedule demos with alternatives

The market is changing. Credit-based models can be allies or enemies depending on how you use them. And the general enterprise software trend shows we're at an inflection point.

If you ask me directly: the next 24 months will define which companies control their software costs and which let software control them. Which side will you be on?