Usage/Consumption based pricing is not new, in fact in B2C it’s been the rave for the past decade with the likes of Uber. However its popularity in B2B is said to increase in the next years. We will continue to see four revenue models in B2B: - Ownership - Subscription - Consumption - and...a mix of the above. To learn more, check out Jacco van der Kooij's post that reads you in on the topic. Enjoy a spectacular weekend wherever this may find you.
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"Where is AI taking us?" "Is SaaS dead?" and "Will there even be a need for software?" I hope this post puts all the changes we are experiencing into context so we can navigate (and shape) this innovation landscape together. Having sold software for 30 years, I’ve had the privilege of experiencing the journey from on-premises software and data centers to cloud-based SaaS and now toward AI-based systems. This journey reveals a remarkably consistent theme: - Innovation reacts to inefficiency, - it is triggered by drastic changes in the market and - It proceeds at a very high pace, which is uncomfortable for most of us. To explore AI's revolution and anticipated impact, I’ve created a chart that maps the transformation of enterprise software, from the rise of servers and virtualization to the emergence of AI-agent marketplaces. Please trace the journey with your eyes (or finger), and you will see three trends emerge that will likely shape the future of GTM: i) Sustainable SaaS ii) AI-Led GTM iii) Consumption-Based Pricing As a side note, at Winning by Design, we have started using the term "PPX" as a shorthand to describe the various forms of consumption-based pricing, e.g., Pay Per Action, Pay Per Use, and Pay Per Outcome. It allows us to simplify the shift as SaaS --> PPX. Having said that, the next chapter in GTM appears to belong to autonomous GTM systems. These systems are AI-powered to enable durable growth from the get-go, and they are driven by PPX-based business models that will accelerate customer adoption. This is no different than subscription models did for SaaS over a decade ago vs. paying upfront perpetual software. In this, durable growth reflects a combination of GTM Efficiency and high GRR/NRR. The latter is governed by a new First Principle known to all 3,500 Revenue Architects out there (say it with me :-): Recurring Revenue is the result of Recurring Impact. Okay.. so where does that leave us? Well, let’s be clear: SaaS isn’t over—not even close! Many SaaS Scaleups and Grownups will simply evolve, powered by AI, into Sustainable SaaS Scaleups and Grownups. Some will fail, some will succeed. Meanwhile, Startups can choose to either pick Sustainable SaaS or embrace a PPX pricing strategy. And as they go to market, they can now opt for Product-Led Growth (low), AI-led growth (mid), or Human-Led Growth (high-end). Furthermore, AI-enabled GTM motions will democratize GTM, allowing companies from across the globe to compete with the existing SaaS juggernauts. These startups must show up with innovation, as today's buyers are more likely to side with a trusted brand. Simply put, there's something for everyone this holiday season. 💙 💙 💙 👉 What do you think will define the future of software?
Consumption based pricing has been around for a long time. Think energy bills and the original mobile phone plans that charged you after the fact , either for each call or for call duration. Even in B2B Tech, consumption based pricing has been around for decades. Sometimes maybe called by another name such as overages, and in some cases added on top of a flat license base fee. The point is we have lost of examples of consumption based pricing and hybrid models and I agree completely with Jacco van der Kooij and the Winning by Design team that we will see alternative pricing models quickly become the norm. AI is a driver of that but not the only one. Customers increasingly want to pay for outcomes. For impact. Not for tech in and of itself.
Many of the dates on that chart are wildly off.... And Adobe and Oracle transformed themselves - the former into a SaaS model and now into an AI-product company (although somewhat to the consternation of their userbase), and the latter into a reasonably performant Cloud, and putting real product offers on the table for enterprise AI. Neither "declined" (in the way that the chart gives the impression).