For decades, software has been sold on a “per seat” basis, where each employee gets unlimited use, like the classic Microsoft 365 licence, but it is starting to look like that is going to change dramatically.
The “per seat” basis makes IT budgets predictable, keeps revenue recurring and turns switched-on users into a near-permanent annuity. Now, picture AI “agents” doing work autonomously, and the old unit of account looks daft.
Instead of users, the meter shifts to tasks completed, queries run, and data “tokens” burned. That makes the cosy software-as-a-service model less cosy, and it threatens the sticky predictability private equity loves when it wants to load a business with debt.
According to the FT, some outfits are already living in the post-seat world. Snowflake charges on consumption, Databricks does too, and Crunchbase puts the unlisted firm’s valuation at $134bn.
ServiceNow is among those pushing hybrids that combine monthly fees with pay-as-you-go extras.
ServiceNow product chief Amit Zavery said last month that “some customers aren’t ready for purely consumption-based pricing.”
Expect plenty of trial and error as vendors discover how quickly customers start moaning when every click feels like a taxi meter.
Salesforce began by charging $2 per “conversation” for its customer relations bot, Agentforce. Customers complained, and the menu became more complicated.
Now it offers pricing based on “actions” such as updating a record or summarising a case, plus upfront credits, billing in arrears, or a fixed fee for unmetered use.
Even with shifting prices, software will stay sticky because ripping out something like Workday or Salesforce is expensive and risky; however, the invoice is sliced.
What has changed is investor math, because predictability was a major reason software valuations became so lofty.
If revenue turns choppy, share prices may settle lower, and tech starts looking a bit more like retail, with peaks and troughs and less of that lovely smooth line.
The arrival of agents does not mean companies will spend less on software; it could mean the opposite once agents start appearing as employees on the org chart.
Goldman Sachs estimates software spend in the US will almost triple to $2.8tn by 2037 as automation drives productivity, creating a significant opportunity for vendors.
