AI Is Upending SaaS Pricing

This podcast episode explores the shift towards usage-based pricing in enterprise software, driven by the rise of AI and its impact on how software delivers value. Scott Woody, CEO of Metronome, and Martin Casado, a16z general partner, discuss the evolution from on-prem perpetual licenses to cloud-based seat subscriptions, and now to an AI-driven "value era" where software does work on the user's behalf. They delve into the challenges of implementing usage-based billing, including the need for real-time systems, handling complex enterprise contracts, and managing data at scale. The conversation also covers the strategic implications of adopting usage-based pricing, emphasizing the importance of aligning sales, product development, and finance teams around core value metrics, and the need for a strong central authority to drive these changes. The speakers also address whether all software companies will transition to usage-based billing, with a prediction of hybrid models becoming dominant, especially where humans are directly interacting with the software.