If you build your 2027 software budget by taking this year’s spend and adding a modest inflation factor, you are going to be wrong, and you are going to be wrong in a direction that costs you projects. Zylo’s 2026 SaaS Management Index found that 79% of IT leaders encountered a price increase at renewal in the previous twelve months. That is not a tail risk to hedge against. It is the base case.
The number that matters more is the second-order one: 61% of organizations reported cutting projects or initiatives because of unplanned SaaS cost increases. Renewal creep does not just consume budget. It consumes the discretionary part of the budget, which is where anything new lives.
Why Renewals Became the Growth Lever
Understanding the mechanism tells you what is negotiable.
New-customer acquisition got harder and more expensive across SaaS. Existing accounts, meanwhile, have switching costs, embedded integrations, and trained users. Renewal-time increases became the most reliable way for vendors to grow revenue from an installed base, and the market has broadly normalized it. Overall SaaS spend rose close to 8% in a single year, with typical annual increases landing in the 8–12% range and more aggressive vendors pushing 15–25%.
AI is the proximate justification for much of it, and it arrives in three distinguishable forms that deserve different responses:
Features bundled into your existing tier. The vendor adds AI capability to the plan you already have and raises the plan price. You are paying more for something you may or may not use.
Tier restructuring. The plan you are on is discontinued or repositioned, and the nearest equivalent costs more. This is often presented as a migration rather than an increase.
Consumption charges layered on subscription. Your base license stays flat and a usage meter appears alongside it. This is the most dangerous of the three for budgeting, because the cost is no longer a known annual number — it is a function of adoption, and adoption is something you are actively encouraging elsewhere in the business.
Microsoft deserves specific mention because of its weight in most stacks. Info-Tech Research Group has flagged both Enterprise Agreement price increases and a collapse of discount tiers as a 2026 renewal risk — meaning the negotiated position a mid-market firm held historically may not be available at the same volume. If Microsoft is a material line in your budget, that renewal needs its own workstream rather than a line item.
The Budgeting Change This Forces
The practical adjustment is to stop treating software as a fixed cost with an inflation adjustment and start treating it as a portfolio with a renewal calendar.
Build the calendar first. List every contract with its renewal date, notice period, and current annual value. The notice period is the part operators most often miss: many contracts auto-renew unless you give notice 60 or 90 days out, which means the leverage window closes months before the renewal date. A renewal you learn about three weeks ahead is a renewal you have already lost.
Budget an explicit escalation assumption, and say what it is. If you assume 10% across the portfolio, write that down as an assumption rather than burying it. When a vendor comes in at 22%, you then have a documented variance to escalate rather than a vague sense that things cost more.
Segment by consumption exposure. Separate the contracts with a usage meter from the ones with a flat license. The metered ones need a forecast tied to headcount or transaction volume, and they need a spend alert configured. A consumption contract without a monitoring threshold is an uncapped liability.
What Actually Works at the Table
Bring usage data. The single strongest negotiating position in a SaaS renewal is a license utilization report showing that you are paying for seats nobody logs into. Most organizations are, typically by a wide margin. Reducing seat count is often more achievable than reducing unit price, and it is a conversation the vendor cannot dispute because the data is theirs.
Trade term for price. Vendors will frequently discount meaningfully for a multi-year commitment. This is a real trade rather than a free win — you are giving up the option to leave — so it is worth taking on infrastructure you are confident about and worth refusing on anything you are actively evaluating.
Ask what the increase is for, specifically. If the answer is bundled AI features, ask for the usage data on those features in your own tenant. A vendor charging you for capability with near-zero adoption in your environment is in a weak position to defend it.
Get consumption caps in writing. For any metered component, negotiate a ceiling or a notification threshold into the contract. Vendors resist hard caps and will often accept an alerting commitment, which is most of the value.
Start the highest-value renewal 120 days out. Not 30. The vendor’s quarter-end is your leverage, and you can only use it if you still have time to walk.
The Uncomfortable Structural Point
There is a version of this problem that negotiation cannot fix. If your stack has grown to the point where 79% of renewals coming in hot means 61% of firms cut initiatives, the issue is the number of contracts, not the price of each.
A stack audit is the higher-leverage move, and it is a different exercise from a renewal negotiation — it asks which tools have overlapping function, which have an internal owner who would notice if they vanished, and which were bought for a project that ended. That analysis pairs naturally with the renewal calendar, because the audit tells you what to cut and the calendar tells you when you are able to.
Do the calendar this quarter regardless. Even if you change nothing else, knowing which notice periods expire before December converts a set of surprises into a set of decisions.