Inflation starts coming down as SaaS pricing goes up

So, let’s talk about inflation and the market.

First, the Washington Post with some good news on the consumer front – their reporting moderation in inflation.    Quote “ In October, the Federal Reserve’s preferred price gauge, the personal consumption expenditures index, posted its smallest monthly increase since September of last year and is up 6 percent over the past 12 months. The better-known consumer price index is rising at an annual rate of 7.7 percent, down from 9.1 percent in June.” End quote.  That is resulting in drops or leveling in prices of gasoline, retail inventory, rent, car prices, and chicken wings.  

CNBC notes that United Airlines is reporting business travel demand has “plateaued,” but revenue continues to rise thanks to strong demand and capacity constraints.

Before we get too ahead of ourselves, CEO confidence is dropping, although not to a level as glum as previous recessions.  The latest CEO economic outlook index from the Business Roundtable declined 11 points, continuing the steady slide that happened every quarter this year. 

However, what’s worse than inflation?  SaaS pricing.   Some new data from SaaS purchasing management platform Vertice, SaaS pricing inflation is growing four times faster than global inflation. Moreover, the survey found that customers put 53% more toward licensing than they were five years ago, with $1 in every $8 that enterprises spend today going into SaaS products.

From the report:   A growing percentage of all business expenditures goes to SaaS, with around 12.7 percent of total spending now used on software investments. That means $1 in every $8 that modern organizations spend is now dedicated to SaaS. To translate that into dollars, as of 2022, companies spend around $3,112 per employee each year on SaaS. This figure rises to $4,552 for technology companies, which spend more than firms in any other category.

It’s tempting to think “good” or “bad” as we consider the environment we’re doing, and will do, business in.   It’s far more subtle than that.     It wouldn’t be any fun if it were easy.   In particular, as the more challenging times look less extreme than the worst case, it’s a maze.       Plan for a turbulent 12 months… and likely, not a crash landing.

However, let’s note the increase in pricing for SaaS.  This is a thing – to manage for customers, both technically and financially.    It’s also clearly the direction of forward spending and why I spend so much time thinking about it.  I hope you are too.