For years, the standard B2B software contract was simple: a flat annual fee for a fixed seat count, with feature tiers that encouraged buyers to pay for more than they used. That model is under pressure.
Mid-market firms — typically those with 100 to 1,000 employees — are increasingly renegotiating their SaaS contracts. They are unbundling features they do not need and rebundling only the components that match actual usage. This reconfiguration is not a marginal trend. It reflects a structural shift in how software is bought, sold and valued.
What Changed
The shift has several drivers. First, the proliferation of SaaS tools has made it easier for departments to buy software independently, bypassing central IT procurement. This has created sprawl. According to a 2023 survey by Productiv, the average mid-market company uses 137 distinct SaaS applications, many with overlapping features. Finance teams, facing pressure to reduce costs, are now auditing these contracts more closely.
Second, the rise of usage-based pricing models — where customers pay per transaction, per active user or per API call — has given buyers a benchmark. If a vendor offers a usage-based option, buyers question why they should pay a flat fee for features they rarely use. Vendors such as Snowflake, Twilio and Stripe have popularised this model, and mid-market buyers now expect similar flexibility from their enterprise software providers.
Third, the economic environment has changed. Higher interest rates and tighter capital markets have made cost discipline a priority. CFOs are scrutinising recurring software spend, which often represents a significant and growing line item. A 2024 report from Gartner indicated that software spending now accounts for roughly 15% of total IT budgets for mid-market firms, up from 10% five years ago.
Why It Matters
For SaaS vendors, this reconfiguration threatens predictable recurring revenue. Flat annual subscriptions provide cash flow stability and simplify forecasting. Usage-based models introduce variability. Revenue can fluctuate with customer activity, making it harder to project quarterly results. Publicly traded SaaS companies that have moved to usage-based pricing, such as Snowflake, have seen their revenue growth rates decelerate as customers optimise usage downward.
For mid-market buyers, the shift offers potential savings but also introduces complexity. Unbundling and rebundling contracts requires detailed usage data, which many firms do not have. Without it, they risk under-licensing (and incurring overage fees) or over-licensing (and wasting money). Procurement teams must develop new skills in data analysis and contract negotiation.
For investors, the trend signals a potential re-rating of SaaS companies. Those that can successfully transition to usage-based models without losing revenue may command higher multiples. Those that resist may see churn accelerate as buyers vote with their contracts.
Commercial Impact
The commercial impact is most visible in three areas: pricing strategy, product packaging and customer success.
Pricing strategy. Vendors are experimenting with hybrid models. A common approach is a base fee that covers a minimum level of service, plus variable charges for usage above that threshold. This preserves some revenue predictability while offering flexibility. For example, Salesforce has introduced usage-based pricing for its Marketing Cloud, and Microsoft offers consumption-based options for Azure services.
Product packaging. Unbundling forces vendors to decouple features that were previously bundled. This can lead to simpler, more modular product lines. It also creates opportunities for third-party integrators who can rebundle features from multiple vendors into custom solutions. Startups such as Zylo and Productiv have built platforms that help firms manage this complexity.
Customer success. Usage-based models change the role of customer success teams. Instead of ensuring renewal, they must ensure adoption. If customers do not use the product, revenue declines. This shifts incentives toward product quality and user engagement, which may benefit vendors with strong product-led growth strategies.
Risks / Unknowns
Several risks and unknowns remain.
Data accuracy. Usage-based pricing depends on accurate metering. Disputes over what constitutes a transaction or an active user can erode trust. Vendors must invest in transparent, auditable usage tracking.
Revenue volatility. For vendors, the transition period is dangerous. Existing customers may switch to usage-based plans and immediately reduce spend. The net effect on total revenue is uncertain and depends on whether increased adoption offsets lower per-unit prices.
Market segmentation. Not all mid-market firms are equally affected. Companies in regulated industries, such as healthcare or financial services, may prefer fixed contracts for budgeting certainty. The trend may be strongest in technology, media and professional services.
Vendor resistance. Some established vendors have strong incentives to maintain the status quo. Their sales compensation, partner channels and financial models are built around annual subscriptions. Changing these systems is costly and slow.
FY Outlook
Over the next 12 to 24 months, we expect the following developments:
- More mid-market firms will adopt SaaS management platforms to track usage and identify savings opportunities. This will create a new category of procurement software.
- Vendors will increasingly offer hybrid pricing as a standard option, not a negotiated exception. This will become a competitive differentiator.
- The unbundling trend will extend beyond SaaS to adjacent categories such as cloud infrastructure, data storage and even professional services.
- Finance teams will develop new metrics to evaluate usage-based contracts, such as cost per transaction or cost per active user, replacing simple per-seat comparisons.
Conclusion
The reconfiguration of B2B subscription contracts is not a passing fad. It is a rational response to a market that has become saturated with overlapping tools and opaque pricing. Mid-market firms are demanding alignment between what they pay and what they use. Vendors that adapt will build stronger, more defensible customer relationships. Those that do not will face increasing churn and margin pressure.
The shift carries risks for both sides, but the direction is clear. Usage-based pricing is becoming the default expectation, not a niche offering. For founders, operators and investors, the question is no longer whether to adopt it, but how to manage the transition without breaking the business.
