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As the industry shifts to consumption and outcome-based pricing models, some companies are charging a premium for
AI products
, while many others are moving to
API-based billing
where the users are charged based on the actual use of the software. Some are also bundling services with other offerings.
Girish Mathrubootham, founder and executive chairman of SaaS company
Freshworks
, in a recent media interaction said that earlier companies bought software based on the number of people who would use it, say $50 per person in a 100-member team.
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But with
AI agents
that can act autonomously, this can be done with less than half as many people.
Monish Darda, cofounder and chief technology officer at Icertis, a contract lifecycle management firm, told ET that with AI agents replacing users, the business model is evolving to how many agents and how many workflows as opposed to how many users.
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As a result, consumption and outcome-based pricing are currently seeing wider adoption. Shobhit Jain, managing director and head, enterprise technology and services at Avendus Capital, said for most companies 40-50% of the work has moved away from the per-user, per-transaction model. He added that many are taking the risk of output-driven pricing, where the cost hinges on the outcome delivered.
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Some are creating separate pricing for
GenAI services
.
ETtech
Premium for GenAI service
Venk Krishnan, CEO of NuWare and managing partner at
NuVentures
, said that they are charging a 20-25% premium for AI services. 'If we were charging $25 per hour before, we are now charging $40 now because customers also understand that we need to hire domain experts in the AI and
LLM
space, which results in increased cost for us,' he said. But he cautions that with the rapid pace of technology, customer expectations are changing and the premium tag might not last long.
Raghu Malpani, chief technology officer at UiPath, a robotic process automation company, said for the GenAI services, they have created in some cases, an AI unit, where customers are charged based on the number of (LLM) model calls they make. 'They might also buy in bundles, like buying a million AI units,' he said.
Limitations of consumption-based pricing
Darda of Icertis said some enterprises do not like the uncertainty in budgets and are seeking fixed prices upfront. 'That is where consumption-based pricing takes a hit,' he said.
He explained that in case of per-user pricing, 'you know how much you are paying for', but that is not the case for consumption-based pricing. 'If I make 50 more queries today, I'll pay more, yes. So, they say 'we don't want this uncertainty, because it's very hard for us to budget'.'
So Icertis is bundling multiple services. 'We will give 10,000 API calls and if this exceeds, we will make it up next year.'
Krish Subramanian, cofounder and chief executive of ChargeBee, which offers billing software to companies, concurred.
When a customer is trying out a new product, pay-per-use makes a lot more sense. But as they become regular users, their expectations are also changing, he said. 'They want a clear budget on how much they will pay every month or a year. One way to do it is the credit model that breaks the subscription to see how much the customer actually used,' he said. 'What I believe is that the future is going to be a hybrid model where you use pricing for different purposes at different stages.'
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