The Rising Cost SaaS

As we navigate these hectic and uncertain times, organizations are taking a closer look at costs across the board. A recurring concern among our clients is the rising expense of SaaS tools. While these solutions promised reduced IT and labor costs, many organizations are instead facing significant year-over-year cost increases related to SaaS solutions.

Software as a Service (SaaS) has revolutionized the way businesses operate by offering numerous advantages, such as enhanced stability, reduced maintenance, and the elimination of the need for custom software development to meet proprietary requirements. However, the cost of SaaS solutions has risen exponentially, prompting many companies to reassess their licensing models and the associated maintenance and support expenses. What was once considered a cost-effective alternative is now consuming a significant portion of annual operating budgets, leading organizations to evaluate whether their reliance on SaaS remains financially sustainable. As large enterprises increasingly rely on Software-as-a-Service (SaaS) tools and IT infrastructure, the costs associated with maintaining these essential services continue to rise.

Breakdown of Cost Per Employee (Per Month and Per Year)

This article provides a detailed cost breakdown per employee for a medium-to-large-sized organization with approximately 5,000 employees. The presented costs represent an average based on data from various service providers across key business verticals, including productivity, human resources (HR), enterprise resource planning (ERP), and other essential operational domains.

SaaS Software Costs (Per Employee, Per Month & Year)

·????? Total SaaS Cost (Per Employee, Per Month): $850

·????? Total SaaS Cost (Per Employee, Per Year): $10,200

·????? Total SaaS Cost for 5,000 Employees (Annual): $51,000,000

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IT Support & Infrastructure (Per Employee, Per Month & Year)

·????? Total IT Support & Infrastructure Cost (Per Employee, Per Month): $570

·????? Total IT Support & Infrastructure Cost (Per Employee, Per Year): $6,840

·????? Total IT Support & Infrastructure Cost for 5,000 Employees (Annual): $34,200,000

Total Cost Per Employee & Enterprise (Per Month and Year)

Year-Over-Year Growth in Costs

The cost of IT and SaaS services has been increasing steadily. Below is a breakdown of cost growth per employee and its impact on the overall enterprise budget.

SaaS Expenditures Growth:

• 2023: $10,200 per employee → $51,000,000 total
• 2024: $10,935 per employee (+7.2% increase) → $54,675,000 total
• 2025 (Projected): $11,750 per employee (+7.5% increase) → $58,750,000 total

IT Support Cost Growth:

• 2023: $6,840 per employee → $34,200,000 total
• 2024: $7,500 per employee (+9.6% increase) → $37,500,000 total
• 2025 (Projected): $8,225 per employee (+9.7% increase) → $41,125,000 total

Total Cost Growth (Per Employee Per Year)

• 2023: $17,040 → $85,200,000 total
• 2024: $18,435 (+8.2% increase) → $92,175,000 total
• 2025 (Projected): $19,975 (+8.4% increase) → $99,875,000 total

Key Factors Driving Cost Growth

1. Security & Compliance Requirements: Rising cybersecurity threats require stronger protections.
2. Cloud Adoption: More enterprises shifting to cloud-based systems, increasing infrastructure costs.
3. Subscription Model Inflation: Many SaaS providers increase prices annually.
4. Employee Growth: More tools per user as digital transformation expands.
5. Economic Pressures: Inflation affecting software licensing and IT service pricing.

Conclusion

For a 5,000-employee enterprise, annual IT and SaaS expenditures surpass $85 million, with costs projected to rise by 8-9% each year. As businesses increasingly adopt digital tools, proactive cost management, and strategic budgeting become critical for long-term financial sustainability. Now is the time to explore opportunities for platform consolidation and process optimization to streamline workflows, enhance efficiency, and drive significant cost reductions.

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