Fordel StudiosFigma raised prices. GitHub raised prices. Notion raised prices. Datadog raises prices every year. Stripe raises prices. The pricing email arrives, the number is higher, and the company pays because the alternative is a migration project that costs more than the price increase. This is a transfer of value from companies who onboarded when the pricing was competitive to a vendor who knows you cannot leave without significant pain.
The venture-backed SaaS pricing strategy is now well understood: price low to win adoption, build deep integration into workflows, then raise prices once the switching cost exceeds the pain of paying. Most companies are deep into this cycle with most of their tooling.
The Switching Cost Is the Product
The best SaaS businesses do not compete on price. They compete on integration depth. The deeper a tool is embedded in your workflow — the more data it holds, the more automations depend on it, the more your team's habits have formed around it — the higher the switching cost and therefore the higher the price that can be charged without losing the customer. The onboarding experience is designed to maximise this integration. Every API connection, every automation, every data import is a ratchet that makes leaving more expensive.
This is rational business behaviour. It is not unique to SaaS. The problem is that buyers often do not realise they are optimising for integration depth rather than value when they onboard. The tool solves the immediate problem. Three years later, the tool's price has increased 60%, the vendor knows you are trapped, and the annual renewal negotiation is a formality.
“Your SaaS stack is not a collection of tools you chose. It is a collection of dependencies you accepted at a price that no longer reflects their market value.”
The Open Source Alternative Problem
For most SaaS categories, there is a self-hosted open source alternative. Self-hosting requires engineering time to maintain, security responsibility you do not currently have, and infrastructure costs. For many small teams, the SaaS premium is justified by avoiding this overhead. For larger teams, the calculus changes: the SaaS pricing at scale often exceeds the fully-loaded cost of a dedicated platform engineer running open source infrastructure.
The companies that made this calculation early — that invested in self-hosted infrastructure when they were small enough that the investment was cheap — have significantly lower tool costs than the ones who stayed on SaaS vendors. The switching cost at small scale is manageable. At large scale, it is the project that the engineering team does not have time for because they are building product.
What Buyers Should Do
Negotiate annual contracts with explicit price caps for renewals. Vendors will push back. The ones who refuse should be treated as a vendor relationship risk. Evaluate every major SaaS dependency annually: what would migration cost today, and is the current price justified by that switching cost? Invest modestly in tooling that reduces integration depth with the highest-cost vendors — abstractions that make replacement easier, even if replacement is not currently planned.
None of this eliminates the SaaS lock-in problem. It reduces the leverage that vendors accumulate over time. The goal is not to avoid SaaS — the tools are genuinely valuable. The goal is to preserve enough optionality that the annual renewal is a choice, not a capitulation.
