Wednesday, July 5, 2023

Yelling At Clouds: Companies Want To Pay For Results, Not For Computer Time Used (AMZN; GOOG; MSFT; SaaS)

From the Wall Street Journal, July 5:

Companies Look to Pay Tech Vendors Based on Business Outcomes, Not Usage
Tighter tech budgets and pushback against cloud bills are leading CIOs to question the traditional pay-what-you-use model

A growing number of technology providers are pricing their products and services based on a promised outcome rather than charging customers set subscription fees or on a per-user basis. 

While still far from the norm, the uptick in such pricing models has put pressure on those vendors to offer more flexible pricing options to attract and retain increasingly budget-conscious customers, analysts say.

Outcome-based pricing models charge customers some percent of reaching a business goal like increased revenue or cost savings.

Value-based models, which can overlap with outcome-based models, are also becoming more widely adopted as alternate pricing systems. They include things like growth in registered customers or the amount of data for artificial intelligence.

Recent interest in outcome-based pricing—which has been around for decades but not gained widespread traction in technology—is being driven by tighter technology budgets and customer pushback against big cloud-computing charges, analysts say. Most cloud providers charge customers based on the amount of computing power they use, on an as-needed basis, but that can lead to huge, unexpected cloud bills when usage surges....