SaaS users are starting to feel the financial pinch in 2017

SaaS users - price increases

Trump, Brexit, market turmoil and currency fluctuation are leading to price hikes for SaaS users.

We are big fans of Software as a Service (SaaS) and the benefits and flexibility that it gives to small and large business alike. Pricing and deployment options are still a bit of a movable feast though, in particular in relation to value for money and the way in which product modules or groups of applications are priced and delivered. On the whole, though, moving to SaaS represents a more agile approach and a better allocation of budget and all important cash flow.

Riding the wave of fluctuation

The year has started with political and market turmoil. The inauguration of US President Donald Trump and the UK Parliament’s agreement to trigger exit procedures from the European Union has led to significant currency fluctuation and uncertainty in the financial markets. The one thing that has remained a constant over the past few months is the devaluation in the value of the British pound against the US dollar. From the heady heights of £1.49 to $1 in June 2016, we have seen a significant drop in the value of sterling, with it levelling out at about £1.25 to $1. As a nation, we have started to see the impact that this is having on goods and retail pricing, but in the business world things seem to have remained buoyant with little change. This is, however, no longer the case for SaaS users.

Percentage points should mean prizes, not penalties

Due in no small part to the month-to-month flexibility of SaaS ownership, vendors have started to increase the per-seat cost per month. Our own personal experience of this has been to the tune of an average of 10%. Of course, if you are still an on-premises user of software, the pricing will likely change for you at the point of upgrade or additional license requests. SaaS could therefore be seen as a new barometer for how the economies of the US and the UK, and indeed further afield, are doing in relation to market confidence.

But is this realistic? We think not. Many hold the view that SaaS should reduce in price as the user base increases. Companies such as Amazon have followed this model with obvious success. Blaming a price increase on currency adjustment is a very short-term view and one that is likely to irritate your users, especially when you consider that the common perception will be that the vendor will not reduce the price again should the strength of the pound change in a more favourable direction.