The true cost of SaaS subscriptions for UK SMEs is almost always higher than businesses realise. Software-as-a-Service pricing is designed to look affordable, with low per-user monthly fees that seem harmless individually. But when a business accumulates ten, fifteen, or twenty subscriptions, the total is staggering. Research by Blissfully found that the average company spends 53% more on SaaS than leadership believes, and that subscription sprawl, the uncontrolled growth of software subscriptions, is a significant and growing cost for SMEs.
What Is Subscription Sprawl?
Subscription sprawl is the gradual, uncontrolled accumulation of software subscriptions within a business. It happens when different people in the business sign up for different tools, each solving a specific problem, without anyone tracking the total cost or the overlap between tools.
A typical UK SME might have:
- A CRM at £40 per user per month
- An accounting system at £30 per month
- A project management tool at £15 per user per month
- A communication tool at £8 per user per month
- A marketing automation platform at £150 per month
- A file storage service at £10 per user per month
- A help desk tool at £25 per user per month
- A reporting tool at £100 per month
- An e-commerce platform at £200 per month
- Various smaller tools and add-ons
For a 20-person business, this can easily exceed £3,000 per month, or £36,000 per year. And that is before the annual price increases that SaaS vendors routinely apply.
Why Does Subscription Sprawl Happen?
Decentralised Purchasing
In most SMEs, there is no central control over software purchasing. The sales team buys a CRM, the finance team buys accounting software, marketing buys automation tools, and operations buys project management software. Nobody is tracking the total. The British Chambers of Commerce reports that only 23% of UK SMEs have a formal software budget.
Low Per-Tool Cost
Each subscription seems affordable in isolation. £40 per user per month for a CRM does not sound expensive. But multiplied across 20 users and added to nine other subscriptions, the total is significant. The pricing model is designed to make each individual purchase feel small.
Free Trials That Become Paid Plans
Many SaaS tools offer free trials that convert to paid plans automatically. A team member signs up for a trial, uses it for a few weeks, and then moves on to something else. The subscription continues, charged monthly, unnoticed on the company credit card. According to a survey by Cledara, 38% of SaaS subscriptions in UK SMEs are rarely or never used.
Annual Price Increases
SaaS vendors increase prices regularly, often 5% to 15% per year. These increases are buried in renewal emails and automatic. Over three years, a £40 per user subscription becomes £50 or more, with no corresponding increase in value.
How Do You Calculate the True Cost of Your SaaS Stack?
Most businesses underestimate their SaaS spend significantly. Here is how to calculate it accurately.
Step 1: Audit Every Subscription
Go through bank statements, credit card statements, and expense reports for the last 12 months. List every recurring software payment. You will likely find subscriptions you did not know about.
Step 2: Calculate Per-User and Total Costs
For each subscription, calculate the per-user cost and the total monthly and annual cost. Include any add-ons, premium tiers, and usage-based charges.
Step 3: Add the Hidden Costs
SaaS costs are not just the subscription fees. Add:
- Admin overhead: The time spent managing subscriptions, adding and removing users, and dealing with billing
- Integration costs: The cost of third-party tools needed to connect your SaaS apps
- Training costs: The time spent onboarding new users to each tool
- Unused licences: Fees paid for users who rarely or never log in
Step 4: Compare Against Revenue
Express your SaaS spend as a percentage of revenue. For most UK SMEs, software spending should be 1% to 3% of revenue. If it is higher, you are overspending.
When Does Bespoke Software Become More Cost-Effective?
Bespoke software has an upfront cost but negligible ongoing licensing fees. SaaS has no upfront cost but ongoing monthly fees that continue forever. The break-even point depends on your total SaaS spend and the cost of building a custom alternative.
The Break-Even Calculation
If your annual SaaS spend is £30,000 and a bespoke system that replaces the core functionality costs £50,000 to build, the break-even point is approximately 20 months. After that, the bespoke system is effectively free while the SaaS subscriptions continue indefinitely.
When the Numbers Favour Bespoke
Bespoke software becomes economically attractive when:
- Your annual SaaS spend exceeds £20,000
- You use fewer than 40% of the features in your current tools
- You need custom workflows that SaaS tools cannot accommodate
- You have integration needs that require expensive third-party connectors
- Your SaaS prices are increasing faster than the value you derive
Our guide on custom software vs SaaS total cost of ownership provides a detailed framework for this calculation.
How Can You Reduce SaaS Costs Without Building Custom Software?
If bespoke software is not yet justified, there are steps you can take to reduce your SaaS spend.
Consolidate Overlapping Tools
If you have three tools that do similar things, pick one and cancel the others. Many SMEs have overlapping project management tools, communication platforms, and file storage services.
Audit User Licence Usage
Review which users actually use each tool. Remove licences for users who rarely log in. Many SaaS platforms charge per active user, so removing inactive users reduces costs immediately.
Negotiate Renewals
SaaS prices are not fixed. When renewal comes up, negotiate. Vendors would rather offer a discount than lose a customer, especially in the current economic climate.
Downgrade to Lower Tiers
Many businesses pay for premium tiers with features they do not use. Review what features you actually need and downgrade to the tier that includes them.
What Are the Risks of Continuing With SaaS Sprawl?
Cost Escalation
SaaS prices increase annually. Over five years, a £3,000 monthly spend can become £4,500 or more, with no additional value. This is money leaving your business every month, forever.
Vendor Lock-In
Each SaaS tool locks your data in its format and its system. Moving away from a SaaS tool means exporting your data, often in a format that is difficult to use elsewhere. The more SaaS tools you use, the more locked in you become.
Integration Complexity
The more SaaS tools you use, the harder they are to integrate. Each tool has its own API, its own data model, and its own limitations. Connecting ten SaaS tools is significantly more complex than connecting two or three.
Data Fragmentation
When your data is spread across multiple SaaS tools, getting a complete picture of your business is difficult. Customer data in the CRM, financial data in the accounting system, and operational data in the project management tool cannot be combined without significant effort.
If you operate in a specific sector, we have guidance tailored to your needs. For example, retail businesses drowning in SaaS subscriptions can benefit from our software for retail insights. We also offer workflow automation services if you need strategic direction before committing to a build.
Recommended Reading
- Custom Software vs SaaS Total Cost of Ownership - The detailed maths behind the build vs subscribe decision.
- Build vs Buy Software UK SME - A structured framework for deciding whether to build or buy.
- Custom CRM Development UK - The CRM as a case study in bespoke vs SaaS cost comparison.
Next Steps
If you are concerned about your SaaS spend, the first step is an audit. Explore our bespoke software development services to understand what a custom alternative could look like, or book a free discovery call to discuss your specific situation. For businesses in sectors with specific software needs, our industry-specific solutions show how bespoke software addresses the unique requirements of different industries.