The conversation most CFOs and CIOs are not having directly enough: enterprise software spend is on a trajectory that will outpace general operating expense growth through at least 2027, driven by forces that are not temporary and will not self-correct. The organizations that acknowledge this trajectory and manage it strategically will generate competitive advantages from their software investment. The organizations that treat rising software costs as a budget nuisance to be minimized without strategic intent will pay more and get less.
Here is why the trajectory continues — and the five decisions that determine where your organization lands.
Why Software Costs Will Continue Rising Through 2027
AI monetization is in early innings. Every major enterprise software vendor is now in active AI product development and pricing experimentation. What we’ve seen in 2024–2025 — Copilot at $30/user/month, Einstein 1 at $500/user/month, Now Assist at $25/agent/month — is the first chapter. As AI capabilities mature and adoption proves ROI, vendors will price more aggressively into that proven value. The vendors that successfully tie AI to measurable business outcomes will command higher prices. This dynamic runs through at least 2027 for every major platform category.
Perpetual licensing is gone. The decade-long transition from perpetual to subscription licensing is functionally complete for most enterprise software categories. Perpetual licensing allowed organizations to amortize software investment over long periods and control their renewal risk. Subscription licensing transfers pricing power to vendors at every annual renewal. The organizations that most benefited from perpetual licensing — those with large, stable enterprise deployments — are now exposed to annual pricing decisions in ways they weren’t before.
Market consolidation reduces competitive pressure. Broadcom’s acquisition of VMware, Cisco’s acquisition of Splunk, Salesforce’s ownership of Slack and Tableau — the wave of enterprise software consolidation has reduced the number of independent competitors in nearly every category. Fewer independent competitors means reduced pressure on pricing discipline. Vendors with dominant market positions in a category use that position at renewal time.
SAP ECC end of maintenance creates forced migration spend. SAP’s mainstream maintenance end for ECC in 2027 means thousands of organizations must invest in S/4HANA migrations regardless of market conditions. This is non-discretionary IT spend that competes with everything else in the IT budget. Organizations on ECC that haven’t started their S/4HANA migration journey are running out of affordable runway.
Compliance requirements expand software needs. DORA (Digital Operational Resilience Act) in the EU, expanding cybersecurity disclosure requirements from the SEC, CMMC for defense contractors, and evolving data residency regulations in global markets all create software requirements that didn’t exist in prior budget cycles. Compliance-driven software spending is non-discretionary in regulated industries and growing.
Decision 1: Build a Software Procurement Function — Not Just a Software Budget
The most impactful structural decision an organization can make about rising software costs is the decision to treat software procurement as a discipline rather than an accounting category. Organizations with dedicated Software Asset Management capability — even a single experienced analyst whose full-time job is tracking, optimizing, and negotiating software contracts — consistently outperform organizations that handle software renewals reactively, by 20–35% in effective software cost per user.
This function needs three capabilities: visibility (complete, current software inventory with renewal tracking), market intelligence (what comparable organizations are paying for the same tools), and negotiation authority (the organizational mandate to negotiate actively rather than approve renewals as submitted). Most mid-market organizations can build this capability for $80,000–$150,000/year in fully-loaded personnel cost — an investment that pays back many multiples in a software portfolio above $1 million annually.
Decision 2: Decide Which Vendors Get Strategic Relationships — and Which Get Vendor Management
Not all vendor relationships deserve the same investment of time, trust, and strategic alignment. Organizations that treat every software vendor as a strategic partner end up with none — because the relationship investment required to make strategic partnerships meaningful is substantial.
The right framework: identify your top 3–5 software vendors by combined spend and operational criticality. These vendors — typically a cloud provider, an ERP, a security platform, and 1–2 others — deserve genuine strategic relationships: executive engagement between organizations, active participation in advisory boards and product roadmap discussions, and multi-year commercial agreements that give both sides planning certainty. The remaining 90% of your software portfolio should be managed transactionally, with clear renewal processes, competitive evaluation at meaningful contract sizes, and proactive right-sizing on an annual cadence.
Decision 3: Choose a Cloud Platform Strategy Before Your Vendors Choose One For You
AWS, Azure, and Google Cloud all have mechanisms by which large committed spend on their platform reduces the effective cost of other software purchased or consumed through their ecosystem. AWS EDP (Enterprise Discount Program) credits apply to software purchases through the AWS Marketplace. Microsoft MACC (Azure Consumption Commitment) credits apply to qualifying Azure Marketplace purchases — which increasingly includes Databricks, Snowflake, and other major SaaS tools. Google Cloud committed use contracts operate similarly.
The organizations that have made a deliberate primary cloud platform choice — and structured their software procurement to channel significant spend through that platform’s marketplace — are capturing 10–25% effective discounts on large portions of their software portfolio that organizations without a platform strategy are not. This is not a small number at enterprise software spend levels.
Decision 4: Build Your Software Evaluation Muscle Before You Need It
The most expensive software decisions are the ones made under time pressure. A 45-day evaluation of an alternative to a platform whose contract expires in 60 days is not a real evaluation — it’s a rationalization of a decision you don’t have the leverage to change. A 6-month evaluation with clear criteria, multiple stakeholders, and a genuine willingness to change platforms is a real evaluation that generates the competitive tension vendors respond to.
Building evaluation capability means: maintaining updated knowledge of the competitive landscape in your major software categories, developing internal scoring frameworks before you need them, and creating organizational processes that identify renewals far enough in advance to run real evaluations when warranted. The cost of maintaining this capability is modest. The value, exercised at the right renewal moments, is substantial.
Decision 5: Treat AI Software Investment as a Business Case Requirement, Not a Budget Line Item
AI software is the fastest-growing spending category in enterprise IT, and the category with the most heterogeneous ROI outcomes. Some organizations are generating real, measurable productivity returns from AI tools. Others are spending $30–$50/user/month on AI add-ons with adoption rates below 30% and no measurable outcome improvement.
The organizations that generate AI software ROI share a common discipline: they require a business case before licensing, they measure specific outcomes during the pilot, and they gate enterprise rollout on demonstrated performance against pre-defined metrics. The organizations that waste AI software budgets approved AI spending based on vendor demos and competitive anxiety rather than measured outcomes in their own environment.
The total enterprise AI software market is growing at 35%+ annually. The ROI distribution is not uniform. Building the discipline to be a selective, evidence-based AI software buyer — rather than a reflexive one — is the highest-value procurement decision available to most organizations in 2025.
The Forward Outlook: Optimism With Eyes Open
Rising software costs are not purely a problem. They reflect a market where software generates genuine value at scale — and vendors are capturing more of that value than they used to. The organizations that will look back on 2025–2027 as a period of competitive advantage are the ones that invested in their software portfolio intentionally, managed the cost discipline to avoid waste, and captured the productivity returns from AI investments that were genuinely ROI-positive.
Software will continue to be your most scalable investment — the only expense category where a single decision can be deployed to 10,000 people simultaneously. Managing that investment with the same rigor you bring to capital allocation, headcount decisions, and major operational programs is what the moment requires.