AI Usage, SaaS Billing Changes Mean Budget Headaches For Midmarket CIOs

The shift from seat-based pricing to AI consumption models is turning once-predictable SaaS budgets into moving targets—just as CIOs head into planning season.

Midmarket CIOs heading into budget season face a new and concerning reality: the per-seat model that made SaaS pricing predictable for the last two decades is quickly disappearing. Instead, AI-driven consumption, restructured vendor tiers, and upstream hardware shortages are making software costs harder to predict than ever.

The pressure is being felt at every layer of the stack. Michael Nesi, a senior solutions architect at Presidio—a global IT solutions and service provider—is watching the hardware constraints play out in real time with his clients.

“We are only able to provide quotes that are viable for 14 days,” Nesi said. “The prices have increased so significantly that customers are opting to run their servers out of support or with limited third-party hardware support only. Lead times are beyond six months—and we are hearing this will go on for years.”

While the crunch is hitting on-prem customers the hardest right now, Nesi warns that could change. “As this predicament drives more customers to the cloud as an alternative, they will be forced to expand their infrastructure-as-a-service offerings,” he said, citing Amazon EC2, Azure Virtual Machines, and Google Compute Engine. Even cloud-based bare-metal options like Nutanix NC2 and VMware Cloud, he noted, are built on the same constrained components.

His experience echoes that of many IT executives. Seventy-eight percent of IT leaders said they had experienced unexpected charges and pricing disruptions tied to consumption or AI features in the past year, according to a report from Zylo, a SaaS platform vendor.

There is a core pricing chaos problem afoot.

Reasons Behind The Current SaaS Pricing Chaos

Technology spend is now more company-wide than strictly within IT’s control

Departments outside of IT now control 81 percent of SaaS spend and IT directly manages 15 percent, according to a report from Advisable, a technology provider. More business units are adopting AI solutions to reach productivity goals.

AI agent pricing complexities

AI token pricing is another cudgel thrown into the pricing chaos mix. Even as AI token prices fell 80 percent year-over-year, AI spending in total grew 320 percent—creating budget volatility that most IT teams had never experienced before, according to data from BetterCloud.

The midmarket is particularly vulnerable. Midsized firms are too large for simple tier pricing models, while lacking the leverage to negotiate pricing as large corporations may have.

The takeaway for midmarket CIOs and other leaders? As they head into budget season, they are advised to treat software/SaaS-related spending as a cost that fluctuates rather than one that is predictable and avoid budget headaches.