Over 90% of companies overpay for project collaboration software

Over 90% of companies overpay for project collaboration software

SaaS purchasing platform Vertice reports that enterprises are overpaying between an average of 20-30 per cent for collaboration tools.

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As popularity of project collaboration software grows along with other software-as-a-service (SaaS) products, a research report from SaaS purchasing platform Vertice shows that more than 90 per cent of enterprises are overpaying for these tools.

The project collaboration software market is estimated to reach a value of US$27.40 billion by the end of 2022, from US$21.69 billion in 2021, according to a report from Grand View Research, which links the growth to factors such as the evolution of the workplace and the rising need to incorporate effective means of team collaboration across different geographies in an enterprise due to the pandemic.

Another survey, conducted by market research firm Gartner, showed that there was a 44 per cent increase in the use of SaaS-based project collaboration tools between 2019 and 2021.

This increase in usage of these collaboration tools have led more than 80 per cent of vendors to increase their price listing by 10 per cent every year since 2019, the Vertice report showed.

Lack of pricing transparency is a challenge

A lack of transparency in pricing seems to be the biggest challenge for enterprises when buying project collaboration software, resulting in overpayment for these tools, according to the Vertice report.

A meagre 14 per cent of software vendors selling project collaboration software list prices on their website or through third parties, the report showed.

The non-disclosure of pricing poses a significant challenge for enterprises as they are not able to compare pricing across a variety of vendors, the company said in its report, adding that most project collaboration vendors require a consultation with their sales teams before they quote a price.

Lack of pricing transparency also plagues the broader SaaS category as well. Only 45 per cent of vendors list pricing online, while 55 per cent of vendors obscure pricing from potential customers, a separate report from OpenView Venture Partners showed.

Is long-term commitment the answer?

Considering long-term commitment or multiyear contracts could be the only solution that an enterprise might have when looking to seek discounts while buying project collaboration tools, Vertice said. Currently, 89 per cent of project collaboration vendors offer discounts based on term length, the report showed.

In addition, the auto-renewal clauses of software contracts also contributes to price increases, Vertice said, noting that 91 per cent of vendors have auto-renewal clauses stipulated in their contracts and nearly 72 per cent of project collaboration vendors have clauses that allow them to change their pricing at any given time.

“It’s typical for vendors to automate the cost increases that are passed onto customers,” the company said in a statement.

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