Software subscription costs are rising, putting pressure on business budgets. Average SaaS spend per employee reached $4,830 in 2025, a 21.9% increase from the previous year. The $4,830 figure is a 2025 SaaS spending benchmark based on Zylo's managed software portfolio, not a representative average for all small businesses. Actual subscription costs vary by company size, industry, and software requirements.
AI-powered no-code tools like Hercules offer an alternative. Instead of paying monthly fees for multiple off-the-shelf products, businesses can build custom software that fits their exact workflows. Commercial use, including internal business applications, requires a Business or Enterprise plan. For suitable projects, this approach can reduce subscription overlap and help businesses build software around their existing workflows.
Key takeaways
- SaaS spending: Software spending increased 8% year over year in Zylo's 2026 research, even as application counts remained nearly flat.
- Small-business costs: Smaller companies spend more per employee on software, according to Cledara's research.
- Renewal costs: Price increases and unexpected charges are common, making software budgets harder to predict, according to Zylo's 2026 findings.
- Custom software: Hercules app builder helps businesses build custom applications without hiring developers, reducing reliance on separate subscriptions for suitable workflows.
- Customer savings: Kingdom Construction reports saving $30,000 annually after replacing four software vendors with a Hercules application.
1. Global SaaS market was projected to reach $465 billion in 2026
The global SaaS market was estimated at $408.21 billion in 2025 and was projected to reach $465.03 billion in 2026. This growth reflects continued business demand for cloud-based software across industries. The market is projected to reach $1,367.68 billion by 2035, representing a 12.85% compound annual growth rate (CAGR) from 2026 onward.
2. SaaS spending increased 8% year over year in 2026 research
Organizations in Zylo's 2026 SaaS Management Index increased their average annual SaaS spending 8% year over year, reaching $55.7 million. At the same time, their average software portfolios remained nearly flat at 305 applications.
This indicates that higher spending is not necessarily driven by companies purchasing more applications. Changes in pricing, AI features, and usage-based charges can increase costs even when the number of subscriptions stays stable. These figures reflect Zylo's managed organizational portfolios, not typical small-business budgets.
3. Spending on AI-native SaaS applications increased 108%
AI-native SaaS spending increased 108% year over year, according to Zylo's 2026 SaaS Management Index. AI-native applications are products where artificial intelligence is central to the software's functionality.
The report also found that large enterprises experienced a 393% increase in spending on these applications. These findings show how AI adoption is changing software budgets. Businesses evaluating AI-powered subscriptions should review both fixed subscription charges and usage-based fees.
4. Average SaaS spend per employee rose 21.9% to $4,830
Average SaaS spend per employee reached $4,830 in 2025, up 21.9% from the previous year. The $4,830 figure is a 2025 SaaS spending benchmark based on Zylo's managed software portfolio. Actual subscription costs vary by company size, industry, and software requirements. These costs can strain budgets, especially when multiple subscriptions overlap in functionality.
5. Small technology companies spend $121,336 annually on software
Smaller technology companies face proportionally higher per-employee software costs. According to Cledara's 2025 Software Spend Report, published in September 2024, technology companies with 0 to 20 employees spent an average of $121,336 annually on software. Cledara separately reports average software spending of about $8,000 per full-time employee for companies with up to 20 staff.
6. Mid-sized technology companies spend $193,716 annually on software
According to Cledara's 2025 Software Spend Report, technology companies with 50 to 100 employees spend approximately $193,716 on software annually. Larger SMBs with 100 to 200 employees invest around $251,119. These figures reflect annual software subscription spending, before factoring in additional implementation, training, and integration expenses.
7. IT and healthcare companies exceed $10,000 per employee in SaaS spend
Industry matters when calculating software costs. In Vertice's Q1 2025 benchmarks, healthcare companies spent $10,150 per employee annually, while IT companies spent $10,050. Finance and professional services spent $8,750 per employee. Retail and consumer goods spent around $7,750 per employee. Media and entertainment companies spent the least at approximately $3,250 per employee.
For businesses in high-spend industries, custom apps built with Hercules can reduce reliance on expensive specialized software. Global Connectors, an accounting firm in Côte d'Ivoire, built an ERP system in one month after receiving developer quotes starting at $100,000.
8. SaaS spending per employee increased 21% among SMBs
According to Vertice, SaaS spending per employee among small and medium-sized businesses increased 21% between Q1 2024 and Q1 2025.
Although this was the lowest percentage increase among the business-size groups Vertice analyzed, it still represents a significant rise. Higher software list prices and bundled subscription features contributed to rising costs. Businesses should compare the features they actually use with the amount they pay for each subscription.
9. Technology companies with 100 to 200 employees spend $1,741 per employee
Technology companies with 100 to 200 employees spent approximately $1,741 per full-time employee annually on software, according to Cledara's 2025 Software Spend Report.
This is substantially lower than the approximately $8,000 per employee reported for companies with up to 20 staff. Larger teams can spread the cost of shared applications across more employees, although total company spending may still increase as the business grows.
10. SaaS inflation reached 16.4% in June 2026
SaaS inflation reached 16.4% in June 2026, according to Vertice's software pricing research. This was the highest monthly rate recorded in its dataset at that point, exceeding the previous peak of 14.7% in November 2025.
Price increases at renewal create additional budget pressure for businesses. Comparing renewal quotes with current pricing benchmarks can help teams identify unusually high increases and negotiate more effectively.
11. 79% of IT leaders encountered price increases at renewal
According to Zylo's 2026 SaaS Management Index, 79% of IT leaders encountered SaaS renewal price increases during the previous 12 months. This finding reflects surveyed IT leaders rather than all small businesses.
These increases make renewal planning important for organizations managing multiple subscriptions. Review contract terms, renewal notices, and upcoming price changes before a subscription renews.
12. 77% of surveyed IT leaders reported unexpected post-contract costs
Unexpected costs are widespread in SaaS agreements. According to Zylo's 2026 research, 77% of IT leaders experienced unexpected costs that surfaced after a SaaS contract was signed. These costs might include:
- Implementation and onboarding fees
- Data migration charges
- Premium support tiers
- API access or integration costs
- Overage charges for exceeding usage limits
- Training and certification requirements
13. 61% of surveyed IT leaders reported project cuts from unplanned SaaS costs
Unexpected software expenses have real business consequences. In Zylo's 2026 research, 61% of organizations were forced to cut projects or initiatives due to unplanned SaaS cost increases. When subscription prices rise unexpectedly, businesses may need to redirect budget from growth initiatives to maintain existing tools.
14. 78% of IT leaders reported unexpected AI or usage-based charges
AI features and consumption-based pricing are creating new software expenses. According to Zylo's 2026 SaaS Management Index, 78% of IT leaders reported unexpected charges tied to AI features or consumption-based pricing in the previous year.
Unlike fixed subscription fees, usage-based charges can change with activity levels. Businesses should review AI feature limits, usage allowances, and overage rates before agreeing to a SaaS contract.
15. SaaS renewals account for 87% of total software spending
SaaS renewals accounted for 87% of total software spending across organizations in Zylo's 2026 SaaS Management Index.
This finding highlights how much of an existing software budget can be committed to maintaining current subscriptions rather than purchasing new tools. Although the figure comes from Zylo's managed organizational portfolios, it shows why reviewing renewals can be an important part of software cost management.
16. Organizations manage an average of 211 SaaS renewals annually
According to Zylo's 2026 SaaS Management Index, organizations managed an average of 211 SaaS renewals annually. This figure reflects large organizational software portfolios and should not be interpreted as a typical small-business renewal count.
Managing frequent renewals requires visibility into contract dates, pricing changes, and software usage. Even businesses with smaller software portfolios can benefit from reviewing subscriptions before automatic renewals occur.
17. Companies underestimate their number of software tools by 40%
Many companies do not know how many software tools they actually use. Companies in Cledara's research underestimated the number of software tools in use by 40% on average. For every 10 tools they believed they used, 14 were actually in use.
This gap between perceived and actual software inventory makes it harder to identify duplicate subscriptions and manage expenses accurately.
Building with Hercules can help businesses consolidate compatible workflows. Hercules Cloud usage is tracked in the platform, and cloud usage alerts help teams monitor spending before it becomes a surprise.
18. Companies with 100 to 200 employees waste 34% of software budgets
Technology companies with 100 to 200 employees wasted an average of $89,033, or 34% of their software budgets, according to Cledara's 2025 Software Spend Report.
Common sources of wasted spending include unused licenses, duplicate subscriptions, and applications with overlapping features. Reviewing software usage and identifying redundant tools can help businesses determine which subscriptions still provide value.
19. SaaS license utilization reached 54% in 2025
SaaS license utilization increased from 47% in 2024 to 54% in 2025, according to Zylo's 2026 SaaS Management Index.
Although this represents an improvement, it also indicates that a substantial share of purchased licenses remained unused in the portfolios measured. Businesses can reduce unnecessary spending by reviewing inactive accounts, removing unused seats, and adjusting subscription quantities before renewal.
20. 45% of surveyed technology companies believe they overspend on software
In Cledara's 2025 Software Spend Report, 45% of surveyed companies believed they were overspending on software. The survey included more than 200 technology companies with fewer than 200 employees across the United States, United Kingdom, and Europe.
This finding measures perceived overspending rather than verified financial waste. Businesses can evaluate whether those concerns are justified by comparing software costs with actual usage, business requirements, and available alternatives.
How Hercules helps small businesses control software costs
Rising SaaS costs push small businesses to find alternatives. The Hercules app builder lets businesses build custom applications by describing what they need, without hiring developers. These applications can help consolidate software used for compatible workflows.
- Reduce subscription overlap: Instead of paying for separate CRM, project management, and operations tools, businesses can build one unified system. Kingdom Construction replaced four software vendors with a custom operations app and reports saving $30,000 annually.
- Monitor software costs: Hercules offers subscription plans and usage tracking to help manage application expenses. Hercules Cloud usage is tracked in the platform, and cloud usage alerts help teams monitor spending before it becomes a surprise. Subscription prices can change at renewal.
- Build exactly what you need: Off-the-shelf software can require businesses to adapt their workflows. Petony Transportes built a logistics ERP tailored to its quote-to-payment workflow, avoiding a $230,000 developer quote and reporting 20% revenue growth.
These customer outcomes are not guaranteed results. Compare your existing subscription costs with Hercules plan fees, cloud usage, and integration expenses to determine whether building custom software makes financial sense for your business.
Frequently asked questions
What is the average SaaS spend for small businesses?
According to Cledara's 2025 Software Spend Report, published in September 2024, technology companies with 0 to 20 employees spend an average of $121,336 annually on software, while technology companies with 50 to 100 employees spend approximately $193,716. Zylo reported average spending of $4,830 per employee in its 2025 managed SaaS portfolio. This is not a representative average for all small businesses.
Why do SaaS prices keep increasing?
SaaS prices can increase because of higher list prices, new feature tiers, and usage-based billing. Vertice recorded SaaS inflation of 16.4% in June 2026. Review your contract terms and renewal quote to understand how these changes affect your business.
What hidden costs should small businesses watch for in SaaS contracts?
Common hidden costs include implementation fees, data migration charges, premium support tiers, API access fees, training requirements, and overage charges. Zylo's 2026 research found that 77% of IT leaders experienced unexpected costs after signing a contract. Review agreements carefully and ask about total cost of ownership.
How can building custom software reduce SaaS costs?
Building custom software can consolidate compatible workflows into one application and reduce the need for some subscriptions. Instead of paying for separate CRM, project management, and operational tools, businesses can build a unified system tailored to their workflows. Hercules customer stories document different types of savings. Kingdom Construction reports saving $30,000 annually by replacing software vendors, while MMA Plumbing avoided a development quote of at least €250,000.
Can Hercules replace multiple SaaS subscriptions?
Yes. Hercules customers have built unified operating systems that replace multiple vendors. MMA Plumbing built a 46-module system replacing separate tools. Kingdom Construction consolidated four vendors into one custom application. Results depend on your requirements and workflows. Compare your current subscription costs with the full cost of building, running, and maintaining your Hercules application before deciding which tools to replace.