SaaS Costs Soar as Vendors Test Negotiation Limits
Organizations relying on Software-as-a-Service (SaaS) are facing rapidly escalating costs, with some price hikes reaching over 1,000 percent, industry experts warn. The trend, spurred by Broadcom‘s aggressive pricing following its acquisition of VMware, is prompting calls for businesses to sharpen their negotiation tactics or risk unsustainable financial strain.
The shift sees vendors increasingly offloading governance risks onto their clients, potentially leaving companies vulnerable to outages without awareness. This, coupled with unchecked price increases, demands a proactive approach to vendor management, including robust exit strategies and a willingness to challenge cost adjustments. The stakes are high: failing to negotiate effectively could lead to crippling cost growth and operational disruption for businesses of all sizes.
Experts advise securing comprehensive exit provisions in saas contracts to ensure business continuity should a provider terminate the relationship. Data escrow – holding critical data with a neutral third party – is a key component of such planning. “Vendors shift governance risks to clients,and you may therefore be at risk of an outage without knowing it,” cautioned one source.
Beyond exit strategies, organizations should actively test vendor continuity plans by simulating workload migrations to alternative datacenter regions, according to Ellery.”Test your vendor’s continuity plans,” he added.
The VMware acquisition by Broadcom, which saw prices jump as much as 1,050 percent, has served as a catalyst for other vendors to explore similar strategies. ”we are worried about the VMware effect,” he said. ”broadcom showed the market what is absolutely possible.”
Liversidge emphasized the importance of developing strong negotiation skills, stating, “Don’t accept increases as a done deal.” Organizations that master this skill will gain a competitive edge, while those that don’t “may find themselves struggling with unsustainable cost growth.” Continual price increases are now considered standard practice, experts say.
