Key SaaS inflation stats: How to mitigate in 2025

While the giddying heights of the November 2022 inflation peak may feel like a distant memory, many organizations remain under immense pressure to minimize spending and get more from their budgets.

For certain areas of spending – such as SaaS – this is far easier said than done.

Not only does software account for an average of 12.5% of total organizational expenditure, it’s also one of the most unpredictable areas of business spending, due to variable pricing models and ever-evolving user requirements.

Annual price increases also regularly far outpace general market inflation rates. As of January 2025, SaaS pricing was up by 11.4% compared to the same time in 2024, a stark difference from the 2.7% average market inflation rate of G7 countries.

So, why is SaaS inflation so high? And more importantly, what can you do to mitigate its impact on your 2025 budget?

How SaaS inflation is impacting organizations in 2025

Reducing software spend has never been an easy task, but the rate at which prices are surging is making it all the more challenging with each passing year.

Just take the cost of a typical SaaS stack today, compared to just 12 months ago.

Companies that were paying $1,000,000 on software at the beginning of 2024 would now be paying an extra $114,000 for the exact same stack, based on the current average SaaS inflation rate. That’s before making any changes to their subscriptions or implementing any new tools.

So, why’s it happening?

Common reason behind soaring SaaS prices

Price hikes

The most obvious reason for surging SaaS costs is due to the majority of vendors simply having raised their list prices over the past few years.

But while this number has decreased from close to 75% of vendors in 2022 to just 58% in 2024, the impact on your budget will still be significant. Especially given how some vendors raised their prices by as much as 25%.

And for some there is good reason – enhanced functionality such as AI, increased operational costs, a better support offering to name a few.

Shrinkflation

Some vendors are also implementing subtle tactics to boost their revenue without making obvious increases to their pricing. In other words, they reduce the features and/or value of their offering, while keeping the subscription price the same. The problem for many organizations is that this inadvertently leaves them paying more overall.

This process, referred to as SaaS shrinkflation, can manifest in a number of ways, including:

• Feature bundling – Some providers will bundle features into a single offering, requiring customers to subscribe to a plan that consists of functionality they have no use for, and at a higher cost than they would otherwise need to pay. ‍
• Feature unbundling – In contrast, some vendors will separate a package of features that were previously included within a single plan type, opting to instead list each one as an individual line item at a fixed cost. ‍
• Non cumulative pricing – Vendors that may have previously allowed users to collect cumulative credits are shifting towards a fixed monthly usage model. This can leave organizations with fluctuating usage requirements faced with either hefty overage charges, or the need to commit to a more expensive subscription tier.

Currency harmonization

Currency harmonization is the practice of adjusting prices regionally to account for currency drift. In recent years, enterprises such as IBM and Microsoft announced they would be changing their fees across the globe to ensure that the prices they charge in each international market were more closely aligned to the US dollar.

While this is undoubtedly a smart business move, it can leave a lot of global customers paying significantly more at the point of renewal.

How to mitigate SaaS inflation in 2025

The unfortunate reality is that soaring software prices are somewhat inevitable, but the impact that SaaS inflation can have on your budget can certainly be minimized.

Below, we’ve outlined some steps that you can take:

‍Rationalize your existing SaaS stack

Technological advancements such as AI, better integration capabilities and the shift towards more hybrid and remote working environments are all contributing to larger tech stacks, with the average company now using around 130 tools.

But just as quickly as the number of applications in use across an organization grows, SaaS requirements also evolve. Changes to employee headcount and business priorities can ultimately impact how software is consumed – or utilized – across the business.

Having oversight of these utilization rates is therefore crucial, not only for driving value from your SaaS stack, but perhaps more importantly for avoiding – or at the very least minimizing – wasted spend.

And it’s a problem that is getting worse. According to our own data, 45.7% of all SaaS licenses go unused, up by 7% in just 12 months.

So, what exactly is contributing to this SaaS wastage?

Redundant apps

‍As the number of tools across an organization increases, so does the risk of redundant applications. In other words, multiple tools that serve the same purpose.

This can happen for a number of reasons, but will typically be the result of either a decentralized purchasing process or an existing platform introducing new functionality that eliminates the need for some of the smaller best-of-breed tools that are being subscribed to.

Duplicate SaaS tools

Although typically less common than the occurrence of redundant software, companies can also fall victim to duplicate software. As an example, companies may find themselves with more than one subscription to the same SaaS application.

SaaS license underutilization

‍Licenses that are either barely used or not used at all by intended employees is usually due to the overprovisioning of licenses, reduced headcount, or even the fact that certain tools auto-renewed but are no longer required. ‍

By evaluating and optimizing your software portfolio – a process known as application rationalization – you can make more informed decisions on whether to consolidate, amend or cancel subscriptions, helping to reduce spend and mitigate the impact of inflation in 2025.

Negotiate with leverage

Software prices are rarely set in stone. However, many companies will accept the list price at face value, and fail to secure a more favorable rate.

When you apply these missed savings to all 130 tools within the average tech stack, that’s a huge amount of budget that could otherwise be invested elsewhere.

But while it is possible to drive down costs – in turn mitigating the impact of SaaS inflation – a strong negotiation strategy does require leverage:

Time

‍Time often translates to purchasing power and if you approach these discussions too close to your renewal date, you’ve almost certainly lost any real leverage. Giving yourself enough to not only do your research and obtain other quotes, but also understand your SaaS utilization metrics to make more informed decisions, will put you in a better position to secure a more lucrative deal.

Pricing intel

‍One of the biggest issues in SaaS is the lack of any real pricing transparency, with 55% of vendors opting to obscure their costs. Unfortunately, as the buyer, it makes it difficult to know if you’re getting a fair price, let alone the best possible price. Knowing what other companies are paying for the same subscription and using this intel as leverage is the best way to drive down your SaaS spend.

With access to the pricing and discounting data for more than 16,000 vendors worldwide, Vertice can help you obtain this intel, using it to negotiate the very best deal on your behalf. Find out how here.

Flexibility

‍Generally speaking, the more flexible you can be with your contract terms, the better the deal you can negotiate. Multi-year discounts, flexibility with payment terms, and volume discounts are all examples of tactics that can be leveraged to drive down the overall cost of a subscription.

‍See a full list of contract terms you should be negotiating on

Vendor timings

‍Timing your negotiations to coincide with a vendor’s fiscal calendar, end-of-quarter, or annual sales cycle can provide you with further leverage. Having an understanding of these internal sales pressures is no easy feat though, which is why it can pay to partner with a procurement expert who will understand the intricacies of each SaaS provider, including their internal sales pressures, and therefore know when they are likely to be more flexible.

Request the removal of auto-renewal clauses and cap price increases

It’s not just the price itself that can be negotiated, it’s also the terms of the contract. According to our Head of Procurement, Nick Riley, vendors will almost always remove an auto-renewal clause when requested, something that could help you avoid getting tied into unwanted contracts down the line.

Price uplift clauses can also catch companies out, with 33% of vendors – significantly more in certain industries – including wording in their contracts that allow them to increase their pricing at the point of renewal. For some SaaS providers, there’s no limit on this price uplift, which is why it is worth negotiating a cap.

Regardless of whether your contracts are due to auto-renew or not though, it’s wise to invest in a renewal management platform to ensure you keep on top of your software renewals and notice periods.

Establish your BATNA

While it is essentially a back up option, establishing a BATNA goes beyond simply getting a quote from an alternative provider. It can give you leverage and therefore a degree of purchasing power in your negotiations – helping to drive down the overall cost – while also ensuring you’re not pressured into accepting a deal that doesn’t work for you.

In addition to this, your BATNA can:

• Empower you to reject unfavorable terms
• Provide a benchmark for negotiations
• Enable you to counteract high pressure sales tactics

Take advantage of currency drift

Some companies take advantage of fluctuating currency rates to purchase certain software applications at more favorable rates.

When a particular currency weakens, for example the US dollar, purchasing power in other foreign currencies becomes stronger, creating pricing discrepancies. This in turn creates an opportunity for organizations to purchase SaaS in a currency that has weakened relative to their own.

Paying for software in a different currency can of course come with its challenges, so it’s important that you’re aware of the process and all of the considerations you’ll have to factor into any decision you make.

Find out all there is to know about currency drift

How Vertice can help you tackle SaaS inflation in 2025

Rising software costs may well be inevitable, but the rate at which annual SaaS inflation continues to outpace general market inflation is proving a huge challenge for many organizations.

Taking steps to mitigate the impact of these soaring costs is essential for driving down spend and achieving the maximum value from your budgets.

Vertice not only helps you get a handle on this spend by providing you with total visibility of your tech stack and utilization rates, but with access to a proprietary database containing the pricing and discounting information for more than 16,000 vendors, will also ensure you’re getting the best possible deal on every contract.

See for yourself how we helped one company reduce its annual SaaS spend by 30%.

Alternatively, access the full list of SaaS inflation statistics for 2025, including more detailed breakdowns by geography and category, in our latest report.