No SaaS! How AI Agents Will Change Software Pricing
In a world where AI agents are 2.5-3x as productive as humans, which would parallel mechanical robots, how does a software company price?
Building on yesterday’s post, pricing in software companies may change significantly when AI agents become the norm.
The SaaS business model of the last 20 years for SaaS is a beautiful one. Annual prepaid contracts are free loans to software companies ; seat-based pricing is a tangible metric for pricing ; as a client grows so does this account, producing good net dollar retention.
What does a software seat mean when a human is no longer operating the software?
There a few alternatives :
It will take time for both vendors & customers to grasp the implications for both productivity & expense.
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But for the first time since Slack started offering billing on active seats, new pricing models provide a strategic option to startups looking to compete with incumbents.
Salesforce made famous the No-Software mantra competing on pricing.
The now-classic seat based model disrupted the perpetual license model. Perhaps usage or performance pricing will be the catalyst for a new era of upstarts displacing incumbents.
Maybe we’ll see a No-SaaS rebel replicate Marc Benioff’s playbook.
1I imagine both usage-based pricing and pay for performance will be structured as a Two-Part Tariff with some base level of commitment to smooth revenue & cash flows.
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2 个月Brilliant topic, that hardly anybody talks about. It's a symptom of the fact that we're still struggling to define the use cases and the problem properly before jumping on the `AI transformation` train. If we had the `problem` and the `why` properly defined, then the pricing model would naturally flow from it. You can easly map what to charge for, when, how much, and how to scale it from there. We're currently in this limbo situation where Ai, particularly GenAI, is an amazing tool that everybody treats like a genie in a bottle. When we should be treating it like a piece of infra that enables us to augment our current processes, not replace them. This will allow us to define the value it creates, and subsequently define the monetization model more preceisely. The concept of `seats` might even become obsolete. Something new may emerge. Redefining this fundamental unit of value of our time. Thinking from first principles here, there are two axes you can pivot pricing on: time and money. - Are you giving folks their time back? - Are you making/saving folks money? Do we go full Dr. Evil and quantify the value of eliminated roles OR do we prize the liberaiton of human capital from mundane tasks? Interesting north-stars..
Founder & CEO at Techovarya | SaaS & Custom Software Development Expert | Helping Businesses Scale with Technology | 40+ Successful Projects
2 个月Tomasz Tunguz While AI may enhance productivity, it doesn't replace human creativity and innovation. Pricing should reflect the unique value of human intellect, not just productivity metrics.
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2 个月The usage-based pricing models will require a shift, but can be easily adopted from familiar consumer models in telco (phone plans, internet services, etc). What will be interesting is when this intersects with (1) expanse of the wave of FinOps into SaaS & AI monetization for spend management beyond cloud and (2) how personalized pricing for the efficacy of AI agents will be evaluated for your deployment vs. mine if you have an org with significantly better data / shared data / etc.
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2 个月I believe you're already describing this in option #1, but companies can create separate products for 'human seats' and 'AI agent usage.' One way to sidestep the problem of selling at a 3x higher price, is to make the AI agent product work and feel v. differently from the human product (work through an API, extra features, etc.)