Just when we thought 2025 couldn’t get more exciting, President Trump decided to spice things up by putting a cover charge on the entire global economy. The administration recently rolled out sweeping tariffs starting with a 10% baseline on all countries.
For those of us running software companies (without physical goods or a global supply chain), it might seem like a distant problem. But, just because products are digital doesn’t mean software businesses exists in some tariff-proof parallel universe.
Why software companies should lean in
If you haven’t thought about international shipping rates since ordering swag for your last company offsite, now might be a good time to start paying attention.
First, the cloud. Physical data center costs will likely rise with tariffs. When AWS, Azure, or Google Cloud pays more, your bill increases too. For AI features, the economics are particularly concerning. Those already expensive GPU clusters just got pricier, potentially forcing teams to reconsider AI feature viability.
Second, the entire tech supply chain is under pressure. Hardware from developer laptops to testing servers may get costlier and less available. One founder told me her operational costs jumped nearly overnight, while previously eager investors now scrutinize her company’s runway and burn rate amid market volatility.
Lastly, customers are tightening budgets. That software sale might now require approval from multiple cost-conscious managers. Deals that are “ready to close” suddenly return to budget review, with customers requesting delays or deeper discounts as they manage their own tariff-related increases.
What to keep in mind
Here are several practical strategies I’ve seen work across different software segments that revolve around three core topics: pricing flexibility, software infrastructure, and customer communication.
Pricing flexibility
When costs rise unpredictably, rigid pricing models become a liability. Think of your pricing like a shock absorber. Sometimes it needs some give to handle bumpy economic roads.
First, value-based pricing shifts the conversation from “What does it cost?” to “What is it worth?” Instead of competing on price (a Pyrrhic victory in this environment), compete on value delivery. For example, in my experience I’ve helped teams add these complementary services to justify their pricing:
- Implementation consulting that helps customers see ROI faster
- Analytics services that identify savings opportunities or unlocks insights
- Customer success packages with guaranteed business outcomes
Second, tiered or consumption-based models give you more flexibility with pricing. Rather than one-size-fits-all pricing that you have to completely overhaul when costs change, create natural scaling mechanisms. For example, moving from a single pricing tier to a modular approach where customers pay only for the capabilities they use makes small price adjustments far less noticeable.
Lastly, consider tariff adjustment clauses in contracts for larger deals. These are all about transparency rather than surprising customers with fees. For instance, add a clause that if cloud infrastructure costs rise more than 15% due to tariffs, your company can adjust pricing by up to half that amount. Your customers will appreciate the predictability and that your business is shouldering part of the burden.
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Building software in this environment?
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Software infrastructure
If tariffs are making your cloud infrastructure costs unpredictable, flexibility and planning become your best defense.
First, multi-cloud strategies not only help with performance and resilience, but they’re also critical for managing financial risk. By spreading your cloud workloads across different providers and regions, you’re less vulnerable when tariffs hit one geography or provider harder than others. Think of it like not keeping all your eggs in one basket, especially when that basket just got a lot more expensive.
Second, infrastructure-as-code practices make these transitions possible. The “write once, deploy anywhere” idea is incredible when you see it in action. When building applications using containerization (technologies like Docker and Kubernetes) with microservices, your business can be moved independently across cloud providers or regions. When faced with cost increases with one cloud provider, migrating services takes weeks rather than months.
Lastly, negotiate better terms with your providers. Cloud contracts aren’t written in stone. A founder recently told me they added an exit clause to their agreement that triggers if infrastructure costs rise more than 20% due to external factors like tariffs. The provider agreed because they’d rather keep the business with slightly better terms than lose it entirely.
Customer communication
Finally, and perhaps most importantly, proactive communication can make the difference between customer frustration and deeper loyalty.
Early notification about potential changes is as strategic as much as it’s courteous. I know this firsthand, being blindsided with a price increase blamed vaguely on “market conditions”. If you can, give three months’ notice with specific explanations tied to tariff impacts. You’ll see higher retention and customer satisfaction despite the price change, because people appreciate transparency and time to plan.
In addition, think about how to turn a potential negative (price increases) into a positive (getting more value) through optimization consultations. Proactively reach out to customers with personalized recommendations for getting more from their existing subscription or service. In the past, I’ve identified unused features that could replace other software in the customer’s stack, creating net savings even with slightly higher prices.
Lastly, grandfathering loyal customers on current pricing for a transition period is another approach that pays dividends (while implementing increases for new customers). Yes, it may cost your business some margin in the short term, but your retention may actually improve because customers feel valued during a difficult economic period.
Building long-term resilience
While tariffs dominate today’s headlines, resilient companies focus on building products and providing services that transcend price sensitivity. Double down on features and services with direct bottom-line impact. If you prove 10x ROI to your customer, a 10% tariff-related price increase won’t matter. The math still works overwhelmingly in your customers’ favor. Have questions about navigating this environment? Reach out to me - I’d be happy to help.