SaaS Spending Rebounds, AI Fuels Costs and Complicates Governance
The Software-as-a-Service (SaaS) landscape is experiencing significant shifts, as indicated by Zylo’s 2025 SaaS Management Index. In 2024, the average annual SaaS expenditure reached $49 million, reflecting a 9.3% increase. This expenditure supports approximately 275 applications. Consequently, the cost per employee surged to $4,830, marking a substantial 21.9% rise. These trends have direct implications for African businesses adopting and scaling SaaS solutions. The report highlights the growing complexity of managing SaaS spend, a challenge facing many African tech companies.
Rising Costs and Growing Concerns
The report underlines that spending growth is outpacing the expansion of SaaS portfolios. While the average SaaS spending is up, the average number of applications used remained relatively stable at about 275 apps. This discrepancy is a critical factor driving up the per-employee cost. Key drivers of this increase include vendor inflation, the adoption of complex licensing models, and a growing preference for one-year contracts, which offer flexibility but often come at a higher price point and are subject to compounded price increases. Specifically, spending on AI-native applications has skyrocketed by 75.2%. Furthermore, cybersecurity risks are a major concern, with 89.4% of IT leaders expressing worry. In addition, 66.5% of those surveyed report encountering unexpected costs linked to usage-based pricing models and the incorporation of AI.
This data shows how businesses on the African continent must be vigilant about managing their SaaS investments. The complexity requires careful planning and cost control.
Keywords
Related Keywords: SaaS spending rebound, SaaS cost acceleration, AI cost impact, SaaS governance challenges, SaaS spend management, AI in SaaS, SaaS cost optimization, software as a service, SaaS expenses, cloud spending
