Thursday, March 27, 2025
Josh Cable
B2B SaaS is supposed to be a cost‑effective alternative to traditional on‑premises software. But in recent years, relentless SaaS price increases have been driving software spending to dizzying new heights.
Global SaaS spending is expected to top $300 billion in 2025 and is on track to surpass $1 trillion by 2032, according to Fortune Business Insights.
If it seems like SaaS spending is spiraling out of control, that’s because it is.
The average SaaS spend per employee in 2025 is projected to hit $9,000, according to the Vertice SaaS Inflation Index. To put it in perspective, that’s more than the average employer contribution to healthcare coverage per worker.
While it’s undoubtedly true that surging SaaS adoption is a factor, persistent and aggressive SaaS price increases are a key reason why software as a service has become one of the biggest cost centers for many organizations.
In this post, we’ll cover SaaS pricing trends, examine how vendors justify price increases, and – most importantly – explore strategies to help your business push back against surging software costs.
Inflation refers to the rate at which prices for goods and services increase over time, reducing the purchasing power of businesses and consumers.
In recent years, elevated inflation has spurred central banks to raise interest rates to cool the economy, while businesses have compensated for higher input costs by increasing their prices.
However, while consumer prices have largely stabilized, SaaS costs continue to climb unchecked – outpacing inflation across nearly every industry.
Data from the Vertice SaaS Inflation Index paints a disturbing picture. In 2024, SaaS pricing inflation was 273% higher than consumer inflation across the G7 nations. In 2025, SaaS inflation is projected to be 322% higher – with some providers hiking prices by 25% or more.
So why are SaaS vendors raising their prices with impunity? Are there overarching economic trends affecting SaaS pricing models? Are traditional SaaS providers justifying price increases with new features?
When it comes to rationalizing rate hikes, Dumb SaaS vendors often blame external factors such as rising cloud‑infrastructure costs or inflationary pressures. But in reality, many impose price increases solely to squeeze more profit from a captive customer base.
Another alarming trend: SaaS shrinkflation. Vendors aren’t just increasing prices – they’re reducing value in subtle ways, such as bundling unnecessary features into higher-priced plans, unbundling core features that once were included for free, quietly restricting discounts, and charging for data exports or API access.
Regardless of why vendors raise their prices, the result is always the same: business customers end up paying significantly more than they did the previous year – without any new features or performance improvements.
SaaS vendors know businesses rely on their software for daily operations, making it difficult to switch providers without significant disruption.
That’s why Dumb SaaS vendors strategically implement price increases in ways that minimize pushback and maximize revenue. Some use transparent communication, while others quietly raise costs through auto‑renewals, fine‑print adjustments, or changes to pricing structures.
Let’s take a closer look at how B2B SaaS companies handle price increases – and how customers can fight back.
Many SaaS contracts include auto‑renewal clauses, ensuring that businesses continue paying for the software unless they cancel before a set deadline. While auto‑renewals aren’t inherently bad, Dumb SaaS vendors take liberties by quietly increasing renewal prices – often without clear, upfront communication.
In a scenario ripped from the Dumb SaaS playbook, a business customer signs a contract at a competitive rate. Upon renewal, the vendor increases pricing without prior notice, expecting customers to overlook the change until it’s too late.
If businesses don’t review their renewal terms in time, they’re locked into a higher price for another contract period.
SaaS vendors routinely restructure their pricing models by bundling previously separate products or unbundling features that once were included. These tactics allow them to raise prices without appearing to do so directly.
Examples:
Dumb SaaS providers lure businesses with affordable base‑tier plans, only to introduce limits on storage, API calls, or essential features – forcing upgrades to higher‑priced plans when businesses outgrow the constraints.
In an all‑too‑common scenario, a customer starts on a lower‑tier plan, believing it has all the necessary features, then hits an arbitrary limit that forces them into a much higher‑priced plan.
Overage fees kick in when businesses exceed predefined limits on metrics such as storage, API calls, emails, or transactions. These fees can escalate rapidly – some vendors charge exponentially higher rates after you cross the initial threshold.
For example, the first 10,000 API calls might cost $0.002 per call, but the next 10,000 could cost $0.008 per call – a 400% increase.
Instead of raising prices directly, some vendors reduce the value of their product while keeping the cost steady. Common tactics include:
How to fight back: If you notice a reduction in service or features without a corresponding price cut, push back during renewal negotiations.
Some vendors adjust pricing based on geographic region, claiming they need to align prices with local market conditions. In reality, many use this tactic to boost revenue in high‑income regions while keeping prices lower elsewhere.
For example, prices in North America and Western Europe might be raised, while emerging markets see little or no change.
Some vendors justify price increases by citing rising operational costs or inflation, even when no new features are added. They might raise prices by 15% annually without delivering additional value.
Traditional SaaS providers have mastered the art of squeezing extra revenue from locked‑in customers. Every price increase deserves scrutiny, and understanding these tactics is the first step toward mitigating their impact on your business.
For too long, businesses have been at the mercy of Dumb SaaS providers—rising costs, restrictive contracts, and hidden fees have become the norm. But the future of software pricing doesn’t have to be an endless cycle of escalating expenses and diminishing control.
Smart SaaS™ offers a radically different approach built on transparency, flexibility, and long‑term value. Instead of locking customers into restrictive agreements with ever‑rising fees, Smart SaaS provides clear, upfront pricing with predictable cost structures that align with actual usage and business needs.
Smart SaaS™ isn’t a single product—it’s a philosophy that empowers customers by giving them control over their software spending. With transparent pricing, flexible plans, true data ownership, and sustainable cost models, Smart SaaS™ is paving the way for a fairer, more customer‑centric future in software pricing.
In recent years, the SaaS industry has raised prices far beyond overall consumer inflation. These increases often come with little transparency, leaving customers frustrated by unexpected costs and complex service agreements.
In this FAQ, we address some of the most common concerns about SaaS pricing trends and explain how Smart SaaS™ offers a more transparent, predictable approach.
SaaS prices have been rising at an average rate of 9% to 15% per year, far outpacing overall inflation. Some providers have increased prices by 30% or more in a single adjustment, often with little notice or justification.
SaaS inflation frequently exceeds three to five times the rate of CPI inflation. While consumer inflation averages around 3% to 4%, SaaS price increases often range from 9% to 15% annually.
SaaS providers often cite rising infrastructure costs, enhanced security, new features, and inflation as reasons for price hikes. However, many increases are driven by shareholder expectations and revenue-growth targets rather than actual cost increases.
Yes, usage‑based pricing can make price increases more frequent and unpredictable. Although marketed as a flexible model, it often results in higher costs as usage grows, with little transparency on rate adjustments.
