Over the past two years, 70% of organizations have reported unexpected increases in software costs — subscriptions to SaaS products and other software solutions. This is particularly true for IT businesses that operate in international markets, where currency fluctuations affect their IT budgets. According to Gartner, fluctuations in currency exchange pairs such as USD/EUR, USD/JPY & USD/GBP can increase the cost of your software licenses by 20% over the course of a year. 

What will happen to your IT budget if next month your critical software licenses increase by 15% due to currency fluctuations? There are more than enough reasons for such volatility: the weakening of national currencies against the dollar, inflation and economic instability, changes in central bank policy, and even more unpredictable global economic events — trade wars and sanctions. An example of such a fall is the Turkish lira, which lost 52% in 2024, and the Russian ruble, which lost 27%. If you are at risk, here is how you can protect your IT budget from unexpected costs. Find out more about how to protect your budget from exchange rate fluctuations from Irina Tsymbaliuk.

Impact of currency fluctuations on software costs

So, currency fluctuations have a direct impact on the cost of business software licenses and subscriptions. Here are the three main reasons from a business perspective:

• Changes in the value of imports and exports: For example, if you buy software from abroad, the cost of imported software will increase if the local currency weakens against the US dollar. An example of this weakening is the Brexit referendum in 2016, when the pound weakened significantly against the US dollar. 
• Restatement of accounts: International companies often restate their financial statements in foreign currencies. Fluctuations in exchange rates affect reported profits and losses, as well as the structure of assets and liabilities.
• Pricing and competitiveness: Changes in exchange rates also affect the pricing of IT products and services, which in turn affects the competitiveness of the companies that purchase them in international markets.

An example of the increase in the cost of an IT product in 2024 is subscriptions to Microsoft 365 (formerly Office 365), which for European users saw prices increase by 11 percent for such currency pairing of euro (EUR) and Danish kroner (DKK), and 15 percent for Swedish króna (SEK) — confirmed by Microsoft News Centre. Another example is Adobe, which has adjusted prices for Creative Cloud subscriptions in some countries due to currency fluctuations. In Japan, for example, the subscription price for the annual Creative Cloud plan for individual users increased from $54.99 to $59.99 per month, an increase of approximately 9.1 percent.

How to protect software costs from currency fluctuations

We’ve found that the digital economy, which experts predict will account for up to 50% of the global economy by 2030, is highly vulnerable to currency fluctuations. These fluctuations have such a tangible impact on the cost of enterprise software that they require both tactical and strategic solutions. In the experience of Rates’ financial consultants, the use of multi-currency accounts and international vendors with flexible currency terms can go some way to solving the problem. But that’s not enough. Here’s what can strengthen your strategies:

• Exchange rate monitoring

Monitoring allows you to analyze and forecast currency fluctuations in order to choose the most optimal moments for international transactions. The currency rates’ relevance also enables a transparent pricing policy in the face of price changes, which increases customer confidence. Monitoring currency volatility allows you to optimize costs by selecting software suppliers and partners in countries with more favorable exchange rate ratios.

• Enter into long-term fixed-price contracts 

Although the effectiveness of such a strategy can vary, long-term software contracts can reduce currency risk by an average of 50 to 70 percent, according to Investopedia. The most common method for long-term deals is to use forward contracts, which lock in the exchange rate for a period of time — from 3 days to 1 year. 

Price localization can also help — this involves setting prices in local currency; hedging — a tool of futures and options that also allows exchange rates to be fixed; and income differentiation — a tactic of spreading income across different currencies and geographies to reduce reliance on one currency and thus reduce overall risk. 

Technical aspect

The common denominator of the various currency risk mitigation strategies is the relevance of the information. Ideally with a historical review and future projections. This does not only apply to software purchases. The most effective solution is API integration of spreadsheets from financial portals so that you can automatically adjust your budget for software purchases and other digital products. Integrate with API:  

• Websites and online platforms such as financial news, travel portals and online shopping.
• Mobile applications — these can be digital financial assistants like e-wallets. 
• Financial management systems — these are accounting and ERP systems used by companies doing international business.
• Google Sheets or Microsoft Excel — best suited for small businesses or individual needs. Here’s how it works:
• Get an API Key: Sign up for an API platform and get an API key.
• Install an extension for Google Sheets, such as API Connector; or use Power Query for Excel.
• Configure the query: In Google Sheets via API Connector, configure an API query using your API key. Example, to get current exchange rates:
• URL: https://api.rates.fm/latest?base=USD&apikey=YOUR_API_KEY

API integration requires access to the API documentation, which describes the methods and parameters used to retrieve data. Data is usually provided in JSON or XML format, which makes it easier for users to process and integrate with different systems. For a more in-depth volatility analysis, you can select any currency pair. 

Licensing and subscription optimization strategies

Most popular business solutions (e.g., Microsoft 365, AWS) are expected to see price increases of 10-15% over the next 12 months — Microsoft 365 Blog. Businesses using cloud platforms, subscription services and CRM systems are most vulnerable. Solutions:

1. Evaluate current contracts, analyze currency risks and look for opportunities for long-term pricing.
2. Negotiate discounts and special terms.
3. Move to SaaS — the pay-as-you-go solution allows you to pay only for the resources you use.

Use open source solutions or alternative software vendors as a temporary measure to reduce costs. Either way, preparing for and anticipating software price increases today can help you save your budget tomorrow.

Outcome

Are you ready to see your software costs skyrocket? Currency swings can drive up your IT expenses by as much as 20% in a year. What happens if your critical licenses jump 15% next month? Protect your budget: lock in rates, monitor exchange trends, and consider pay-as-you-go options. Don’t let unexpected costs derail your IT strategy — prepare now!