Rising Software Costs Challenge CIOs’ Tech Spending Decisions

As businesses continue to shift towards cloud-based software solutions, the cost of technology spending is becoming increasingly complicated. Corporate technology chiefs are reporting price hikes of 20% or more on certain cloud-based software products, which is outpacing the rate of inflation. The situation has resulted in IT leaders rethinking their vendor relationships, as they look for ways to cut costs in a sluggish economy.

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In the past year, the research and consulting firm also predicts that due to the effects of inflation, competitive labor markets, and meeting environmental sustainability objectives, 16 of the 20 largest cloud-based software providers will increase their list prices by over 25% in the next few years.

Microsoft Corp. is among the companies that have increased prices, with hikes in the range of about 8% to 25% on some of its Microsoft 365 and Office 365 business software products. The company notes that it has not made any significant price adjustments to the software in over a decade, and that the increase will take effect when customers renew. Since launching the software suite, Microsoft has also added new products and features, including Microsoft Teams and Power Apps.

SAP citing the consumer price index and the “current macroeconomic environment” as the reasons behind the change. The company says it has not raised its prices in nearly a decade. The situation is not limited to cloud-based software providers, as digital subscription services such as YouTube TV have also seen an increase in cost. The cost of subscriptions grew by about 12%, which was the first increase in three years.

This “subscription creep” has affected consumers as well, as they face increased costs for digital subscriptions.

In conclusion, ballooning software prices are making tech spending a more complicated calculus for CIOs. With price hikes outpacing the rate of inflation, IT leaders are having to rethink their vendor relationships and find ways to cut costs in a sluggish economy. As more software providers announce price hikes, businesses will have to navigate the increasingly complex landscape of technology spending to ensure they are getting the best value for their money.