Businesses across the globe are facing a growing concern regarding the escalating costs of software-as-a-service (SaaS) subscriptions. As companies become increasingly reliant on various software applications for their day-to-day operations, such as customer relationship management (CRM), human resources, accounts, and payroll, the steady rise in subscription fees is starting to create a backlash in the business community.
SaaS Fees
Financial officers, in particular, are finding it increasingly challenging to manage their budgets effectively due to the relentless increase in software prices. This worrisome trend is highlighted in a report by the IT Asset Management Review, which emphasizes the impact of rising software licensing and subscription costs on businesses’ bottom lines. The combination of escalating costs and extended contracting periods is threatening to undermine profits in both the short and medium term.
One of the concerns raised by the business community is the pricing strategies employed by software vendors. Chief officer Bruce Paveley from TymeBank suggests that excessive price hikes could lead to a loss of customers. He advises SaaS providers to avoid aggressive price increases, particularly for international vendors who may not account for exchange rate fluctuations. This is especially pertinent for South African businesses, where exchange rate volatility poses an additional risk. Given the example of Adobe Creative Cloud, where subscription fees increased by almost 10% in just a few months.
Yatin Narsai, CEO of Bank Zero, reinforces the need for businesses, especially those operating with stronger currencies, to think critically before committing to a particular software vendor. While there may be cheaper alternatives available, migrating from established software systems can be complex and costly. This lack of flexibility can result in businesses feeling trapped, which further exacerbates the issue of increasing SaaS fees.
To address this concern, Paveley suggests businesses adopt a strategic approach to contract negotiations and avoid vendor lock-in. By engaging in robust negotiations that offer value to both parties, businesses can ensure they are receiving the necessary services at a reasonable price point. Additionally, fostering competition among SaaS providers can help regulate prices and enable businesses to manage costs effectively.
The issue of rising SaaS subscription fees is not limited to businesses alone. Consumers are also affected, with vendors of video-on-demand services, such as Apple and Walt Disney Co, increasing their prices. Even Microsoft has followed suit by hiking its Xbox Game Pass subscriptions this year. It is crucial for businesses to remain vigilant and proactive in their approach to software contracts to ensure long-term sustainability and profitability.