AI Compute Costs Drive Shift To Usage-Based Software Pricing (businessinsider.com) 25
The software-as-a-service industry is undergoing a fundamental transformation, abandoning the decades-old "per seat" licensing model in favor of usage-based pricing structures. This shift, Business Insider reports, is primarily driven by the astronomical compute costs associated with new "reasoning" AI models that power modern enterprise software.
Unlike traditional generative AI, these reasoning models execute multiple computational loops to check their work -- a process called inference-time compute -- dramatically increasing token usage and operational expenses. OpenAI's o3-high model reportedly consumes 1,000 times more tokens than its predecessor, with a single benchmark response costing approximately $3,500, according to Barclays.
Companies including Bolt.new, Vercel, and Monday.com have already implemented usage-based or hybrid pricing models that tie costs directly to AI resource consumption. ServiceNow maintains primarily seat-based pricing but has added usage meters for extreme cases. "When it goes beyond what we can credibly afford, we have to have some kind of meter," ServiceNow CEO Bill McDermott said, while emphasizing that customers "still want seat-based predictability."
Unlike traditional generative AI, these reasoning models execute multiple computational loops to check their work -- a process called inference-time compute -- dramatically increasing token usage and operational expenses. OpenAI's o3-high model reportedly consumes 1,000 times more tokens than its predecessor, with a single benchmark response costing approximately $3,500, according to Barclays.
Companies including Bolt.new, Vercel, and Monday.com have already implemented usage-based or hybrid pricing models that tie costs directly to AI resource consumption. ServiceNow maintains primarily seat-based pricing but has added usage meters for extreme cases. "When it goes beyond what we can credibly afford, we have to have some kind of meter," ServiceNow CEO Bill McDermott said, while emphasizing that customers "still want seat-based predictability."
Just wait until they add in the (Score:1)
water bill [slashdot.org].
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LOL! (Score:2)
Mainframe model coming in hot this time. LOL!!
Correct answers $100 (Score:4, Funny)
Answers, $0.01. Answers with thought, $1. Correct answers, $100. Snide remarks are still free.
(There was a poster something like this in the 1980s, but I can't find any reference to it. I don't remember how the saying originally went.)
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SARCASM
Just another of the free services I offer.
(sign behind the counter of my local pet store).
Another good one, is an urn behind the counter that is labeled "Ashes of Difficult Customers".
That's fine (Score:2)
Haven't we heard these same arguments for everythi (Score:2)
Why have western states adopted decoupling, unless they want you to think energy is scarce when it's really massively oversupplied?
Remember when we were told bandwidth was scarce so you had to pay per kilobyte except now unlimited plans are ubiquitous?
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Remember when we were told bandwidth was scarce so you had to pay per kilobyte except now unlimited plans are ubiquitous?
It's a bit of a digression from the point, but I worked for a local ISP back in the mid 2000s during said time when we were told bandwidth was scarce. Depending on where you lived it was true. The network infrastructure did not support providing every user the maximum their plan allowed at all times of day, and in particular during evening hours when everyone was home from work/school the network genuinely became congested. Network upgrades, new tech, fiber all over the place generally alleviated this probl
Re: Haven't we heard these same arguments for ever (Score:2)
Anyone else remember an interview with some ISP or cellphone company CEO where he said they adopted pay-per-use plans to train customers to think of bandwidth like energy payments, which is rich because energy too is only expensive because government regulators (again, please research decoupling) raise the price explicitly independently, by law, of supply and demand?
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California's experience with deregulating electricity is laughing its ass off at you.
Re: Haven't we heard these same arguments for eve (Score:2)
How much are utilities profiting from deregulated wholesale energy trading with surplus energy states such as Washington, while still lobbying for higher retail rates from government utility commissions, cynically pushing the scarcity narrative?
ARGH (Score:3)
Stop making bloated shit, with features I don't use, then charge me more
Fuck you
Signed: The World
Going back to mainframe practices (Score:2)
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I remember logging off, and the system telling me my session cost.
I remember not caring because I paid a flat fee for computing resources, not "a la carte."
It was kind of interesting that compiling, linking, and running a C program was many times less "expensive" than doing the same with an ADA program.
And this is why it will die (Score:2)
Nobody other than AI companies want this.
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Depends on what you mean by "this." The pricing model, everybody (among software companies) wants, and has for years. It's the next (greedy, abusive) step beyond "software as a service."
Bruh... (Score:2)
"with a single benchmark response costing approximately $3,500, according to Barclays"
At which point do these kind of numbers make any financial sense other than to someone renting you a data center?
prices will decline (Score:2)
I use AI for coding assistance every day, and I do pay for usage but its cheap. About a nickel per prompt, and one good prompt can save me hours of time. If I didn't articulate my request very well and have to make a few tries to get what I want its no big deal.
But these are early days. The AI companies are racing for dominance at this point and expense be damned. Soon they will optimize the tech to reduce compute costs, and already you can get access to cheaper but somewhat less effective models if that's
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They will just use their AI to figure out the most they can take you for.
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Perhaps It's Because We Don't Trust You (Score:3)
The problem they're facing is that while their costs are now genuinely rising; prices have also just gone up in the past for the same stated reason. The difference is before where we didn't really know what costs were increasing...they have this magic black box called AI they can point to.
I went to an industry conference recently and sat in on a talk because it happen to be where the food was. The guy that was giving the talk was pretty well known for acquiring failing businesses, turning them around, and overall just making a ton of money. It basically boiled down to this:
'Everyone raises prices 1 or 2% every year? Why? Well, growth; but really, it's because they can. Because it's less hassle for the client to pay the increase then move their business over to someone else. So why not a 20% increase? If you can increase your pricing by 20% without any additional expenses...then that all goes right to the bottom. Now the reality was if you called and complained, we'd negotiate down; we only got an additional 5% out of some people. But the vast majority just paid. The next year, when everyone else is talking about the yearly 3% increase, you just don't. You think about the longer term. You wait an additional six months, or even skip the whole year; and then you do 20% more. Same deal...you'll have some smaller clients get angry and leave, most of those probably cost you more in man-hours. The big ones you'll negotiate down. The majority...just pay the increase."
They've never operated on usage-based pricing in the past; this guy pretty much proved it. Some of us aren't believing it now. Given how poorly this stuff performs until you cough up some money...well I have no incentive to cough up any money to start with.
But look...magic AI machine go brrr and cost many monies. Since they kept asking for tons of money when it was just for greed....perhaps now that they have an actual crisis they need to feel the crunch.