Incumbent software vendors are likely to embrace a transition to consumption pricing sooner rather than later, as they stand to more than offset any cannibalised seat revenues. Salesforce GA'd Agentforce last week, priced at $2 per conversation (which aligns with how customers perceive value in customer service , h/t Kustomer). Kyle Poyar did a great breakdown of the current state of consumption pricing for AI, affirming that both incumbents and startups are accelerating the transition. Several second order effects emerge around forecasting, billing, pricing and packaging, software metrics, and more. https://lnkd.in/eVMBiaVP
William Lehmann
1mo
“As companies blitz past typical ARR growth rates, we’ll have to devise new software benchmarks for growth as we eat into services spend” 💯 agreed!! Great article Akash 👏
As you know we have been pretty vocal about this for a while. It's all about the degree of automation you bring internally. Very few justify the pricing if they are still used by the same people who were on the subscription pricing (90% of the offerings out there). CFOs will push back. A new era of clones in the smb segment is coming to the market to replace firms with this absurd pricing, it's like pricing an excel subscription for the number of tabs you create...
Akhil Gupta
1mo
I’m subscribed to the newsletter so got to read it yesterday. As someone who works with Startups of all sizes especially in the pricing and packaging domain, this is truly the next big change coming. As more and more customers start expecting to pay for outcome, conventional structuring of offering will need to change.
Chris Petzoldt
1mo
Agree Akash - can see this happening very clearly with clients
Marc H. Guirand
1mo
✍🏾
Kyle Poyar
1mo
Thanks for the shoutout, Akash!
Enjoyed reading it!
Principal at Earlybird Venture Capital
1moRead more analysis at the intersection of software and AI here: https://akashbajwa.substack.com/p/the-end-of-arr