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Now that all those generative AI enterprise software beta programs are underway it's time to talk money. What pricing changes can enterprise technology buyers expect from their vendors?
The latest round of earnings conference calls gave a few hints about what buyers can expect. Vendors mentioned new generative AI features and analysts quickly followed up with monetization comments. For now, generative AI features are largely freemium with the understanding that you'll pay up at some point.
Microsoft kicked this generative AI monetization parade off with its announcement that it'll charge $30 per user for various copilots. Microsoft 365 Copilot will run you $30 per user per month for Microsoft 365 E3, E5, Business Standard and Business Premium customers.
Some companies will take that approach, but there will be a lot of experiments underway. The big question: When will customers push back? Here's a look at some of the monetization themes for generative AI.
The add-on approach. Microsoft is charging extra for generative AI. Salesforce said July 19 that it will include Sales GPT in Sales Cloud Einstein at $50/user/month and includes a limited number of Einstein GPT credits.
Service GPT is included in Service Cloud Einstein at $50/user/month and includes a limited number of Einstein GPT credits. Salesforce also raised prices across its clouds.
Freshworks CEO Girish Mathrubootham on the company's earnings call outlined the company’s generative AI strategy across products. The AI tools, called Freddy AI, are being used across the product line. "We plan to introduce at a later date a Freddy Copilot add-on, that provides access to our AI capabilities, starting at a price of $29 per agent per month. Our goal is to put the power of AI in the hands of as many customers and employee facing teams as possible," said Mathrubootham.
The new SKU. ServiceNow CEO Bill McDermott was upbeat about new "premium plus" offerings across its product lines in September. Product chief CJ Desai said:
"Customers believe that Generative AI, in context of ServiceNow, will deliver higher productivity. And I stay consistent that we are going to monetize only when we get higher value that are delivered for our customers and get a fraction of that value, whether it's 10%, 90% or whatever. So, if a customer gets 100 points of value, ServiceNow keeps 10%, customer gets 90% of the value."
Raise prices at some point. Harley Finkelstein, Shopify's President, said customers reacted well to a recent price increase. "We are seeing our merchants continue to remain on the platform rather than using the price change to move off-platform and largely remain on monthly plans versus moving to annual," he said.
Shopify Magic is a suite of free-AI features integrated across the Shopify platform. Shopify has an AI capability called Sidekick to tackle time-consuming tasks, be more creative and make smart decisions. "By integrating AI directly into Shopify, we are providing businesses with the most modern tools that will enable them to make data-driven decisions, optimize their operations and ultimately achieve greater success from first sale to full scale," said Finkelstein. The takeaway is that generative AI can provide value and lift prices across the platform.
Yamini Rangan, CEO of Hubspot, had a similar take. Hubspot, which caters to SMBs, but is moving up in company size, has launched a series of generative AI tools including ChatSpot and Content Assistant. Rangan explained the approach:
"We have a very clear first principle when it comes to monetization. And our principle is that we focus on delivering customer value first, and from there, monetization will follow. And we're going to apply that same first principle to AI.
We'll likely democratize AI features and make it available in our freemium and starter tiers to drive adoption, you've seen that play out. And then the second part of what we'll likely do is drive higher value ASP with more specialized features. And this can certainly come in the form of adding certain features to higher additions like pro and enterprise. It can also come from packaging AI features into more specialized add-ons. So, we're certainly thinking about all of that. But the first priority for us is to move fast, iterate fast and add a ton of value for our customers specifically within the SMB segment."
Data for a discount? I'll take a leap that at some point vendors will swap discounts for training data. Zoom's recent move to utilize customer content as training data (assuming users approve) is notable since it may create a new monetization model. In the consumer space, it's well understood you swap data for allegedly "free" content. Zoom's new terms of service may indicate that there's potential for a data for discount swap. In addition, companies are licensing proprietary data and likely get technology in return.
Consider: