June 29, 2021

The Software Inflation Rate in 2021: 1.4%

For once, inflation is outpacing software.

by @maguay

Writer. Amateur photographer. Information architect. Frm. founding editor @racket and @capiche, senior writer @zapier, Mac and Web editor @AppStorm. Personal blog: @techinch.
maguay's avatar

Inflation's back.

After decades of relatively low inflation rates—averaging 1.2% a year in the US since 2000—suddenly prices are rising again, especially in the US where consumer goods, on average, cost 5% more this year and inflation is predicted to hit 3.4%. That's been illustrated most dramatically by lumber, with prices for wood almost quadruple what they were last year.

After a decade where software got 62% more expensive, you'd almost expect the price of digital goods to keep rising, faster if anything.

And yet, they didn't. Software prices, largely, haven't inflated nearly as much as the broader market this year.

The 2021 Software Inflation Rate is only 1.4%, less than 2020's inflation rate of 2.2%, and far less than the average 5% annual software price inflation seen over the previous decade. Your software likely didn't get cheaper last year—but it also likely didn't get much more expensive.

When most things have changed

The world broke last year. Tech, in many ways, patched the loose ends.

It's hard to imagine 2020 without Zoom, without Slack, without the dozens of SaaS tools that let millions of people instantly move the office into their homes. The gradual shift from in-house servers and native, single-user software to subscriptions and the cloud meant you could pick up where you left off, anywhere.

Software got more expensive over the past decade largely as tech moved from one-time licenses and upgrades to per-user subscriptions, and as we moved from traditional office suites and email to using dozens if not hundreds of SaaS tools to collaborate. Where a few hundred dollars might have bought you a copy of Office a decade ago, today your team might pay a few hundred dollars a month for your software, $9/month here and $12/month there. Pricing that might have made you second-guess started feeling worth it, though, when your office could go virtual on a whim.

Over the past few years, software pricing has almost stabilized. Traditional software mainstays migrated fully to subscriptions. Newer SaaS startups found what pricing made sense. That helped make software pricing last year more boring.

And yet, it's still easy to pay more for software today than last year.

Where software got more expensive

Most software stayed the same price over the past year. If the software you use did get more expensive, though, odds are you'll have noticed already.

Of the hundred software products' pricing we monitored, 11% got more expensive—and those apps got, on average, 69% more expensive.

Sometimes the changes were inconsequential. MailChimp and SurveyMonkey both cost $1 more per month than last year. Infusionsoft, QuickBooks, ActiveCampaign, and Zoho CRM all went up between 8-12%—so you'll pay more, but only a few dollars more.

Sometimes the price didn't change, just the quality offered, much like shrinking portions in consumer goods. Gravity Forms has slowly included fewer sites with their Pro plan: You could use it on 5 sites originally, 4 last year, then only 3 this year. 123FormBuilder did something similar; the plan that came with 20 forms now includes only 5.

Then, there were the dramatic jumps, often driven by changing how software's priced. Buffer's original plans, for example, let you connect 55 social accounts before lowering that to 50 accounts, then 25. This year, they switched to charging $6/month per social account—so if you wanted to connect 25 accounts as in last year's plan, today's bill would be 50% higher. GitLab similarly removed their starter plan, so if you want their paid features, you now need to pay $19/month, 4.5x as much as the starter plan would have cost. Typeform and WebEx are others where plan changes often mean you'll need to pick a far more expensive plan today.

Perhaps most frustrating is when pricing disappears. QuickBase joined the growing band of software that requires a sales call to purchase, with no publicly listed pricing. InVision requires a sales call for more than 15 users, and RescueTime now only shows pricing after you've signed up. Intercom still lists their base pricing—but that's it. Their base plan went from $49 to now $65 for startups and $79 for everyone else, and all other plans now require a demo first.

Finding the right spot

Software doesn't always get more expensive. Witness the dramatic decrease in video call software pricing over the past decade, or the massive increase in storage space tools like Dropbox offer now for little more than their original same price.

5% of the hundred software we monitored last year got cheaper. Those savings add up to an average of a 32% discount.

Sometimes those changes come when companies step back a bit in new pricing strategies. Mixpanel's shift to MTU pricing raised the base prices in 2019. This year, Mixpanel's a tad cheaper, thanks to both cheaper pricing per user and splitting out add-ons so you can choose which features you need. Piesync similarly lowered their per-contact pricing, after nearly doubling prices the year before, so you can sync 2,500 contacts for the same price it'd cost last year to sync 1,000.

Others changed their pricing strategy, making things cheaper at least for some teams. ScheduleOnce now costs $9/month per user—where formerly, the base plan cost $15/month for 3 users then $10/month per additional user. That makes it cheaper for people using it on their own and teams with more than 15 members. InVision used to bill per project; now they bill per user, making it cost a third of what it used to for solo users, while likely costing more at scale.

Then there are the discounts that aren't. Typeform, for instance, dropped their cheapest plan's price from $35 to $29 a month—but also cut the plan to include a tenth of the former plan's form responses, so the base plan now includes 100 form responses a month. You'll now pay $59/month for Typeform if you want the same number of form responses as $35 would have bought you last year. WebEx did something similar; you'll save $1.50 on your base plan per month, though can only have calls with half as many participants.

Those are the outliers, the 16% of software that changed their pricing last year. Most software stayed largely the same. If you're paying more for most of your software this year than last, odds are it's from your team growing (as most software now charges per team) or needing premium plan features.

Yet it's getting harder, if anything, to know what software actually costs for larger teams. Software aimed at larger companies increasingly hides pricing, requiring a sales call first before sharing an estimate of what it'd cost for your team. And even when pricing's more direct, it's easy to get confused by annual pricing showed per month but billed per year, and with discounts shown as the core number with the actual price after the discount in smaller type. If inflation trends continue in the broader market, it's entirely possible software inflation might rise to meet it next year, as costs for team and hardware.

It takes eternal vigilance to save money on software. And yet, if the past year has proven anything, maybe it's all worth it. It's hard to put a real value on the tools that help us all do our best work every day.

Our Methodology

As in previous years, we researched pricing on a hundred popular business software products, chosen in 2019 from top rankings in popular software directories. We checked how much each product cost for a single user or the minimum number of supported users, with the app’s primary feature set. We first checked the pricing starting in 2009 or the next earliest year where pricing was available on Wayback Machine, then checked each subsequent year and noted price changes, using the closest plan possible to the one with the original public pricing. Prices current as of June 23, 2021.

Photo Credit: Header photo by MBM via Unsplash.

torrec's avatar
@torrec (replying to maguay )
2 years ago

QuickBooks just sent an email notifying clients that the Essentials plan will increase by $10/month starting next month. Pretty big jump. I’d never consider switching though, there are too many years worth of data and tracking and learning invested in the platform…

2 points
maguay's avatar
@maguay (replying to @torrec )
2 years ago

Yeah that's a big change—and you have a good point that sometimes, it's the mid or upper tier plans where pricing gets changed, even if base plans stay closer to the same. QuickBooks has long had confusing pricing, at best, where the price that's shown by default is a 50% discount ... that lasts for your first three months.

So were you paying $30 previously and now will pay $40?

1 point
torrec's avatar
@torrec (replying to @maguay )
2 years ago

I think we pay $42/month now?? So that will go up to $52/month or so, I believe. Oh well.

1 point
maguay's avatar
@maguay (replying to maguay )
2 years ago

And then there’s another: I just got an email from Backblaze that their plans are going up a dollar a month, from their 2019 price of $6 a month to now $7 per month or $70 per year.

1 point
caro_g's avatar
@caro_g (replying to maguay )
almost 2 years ago

Hey! Has the google sheet been updated? cause when I see the data I'm getting average inflation of 5.7%

1 point
klapicheza's avatar
@klapicheza (replying to @caro_g )
almost 2 years ago

Hi there! Are you going off the data in columns T and U for your percent change? (cc @maguay)

1 point
caro_g's avatar
@caro_g (replying to @klapicheza )
almost 2 years ago

yup, and i also calculated it myself with the price list on the g sheet. Still getting 5.7%

1 point
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