How and when to charge for adding AI to your enterprise software

1 year ago 174

Nvidia’s blockbuster quarterly results make it plain that the race to build generative AI products is well and truly afoot. The GPU giant crushed earnings expectations in the second quarter and forecast a monster future. Investors, already content to value Nvidia north of $1 trillion, added tens of billions more to its market cap after the report.

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The hardware story is simple enough to write: Many tech companies are buying hardware to train their own AI models, and major cloud providers are also bulking up, both for their own purposes and to offer a service on their public platforms. Nvidia, meanwhile, is minting cash while taking orders.

But what about the software side of the equation? How are software companies faring in the generative AI era? There’s some hope that AI-related revenues can boost growth, but the real question is just how and when tech companies should charge more for AI-powered software tools, in addition to their current products.

Microsoft has taken big strides in monetizing AI. Not only can you pay for generative AI services on its public cloud platform, Azure, you can also pony up for GitHub Copilot, which can generate code for you for $10 to $19 per month, per user. And, the company is rolling out a $30 per user, per month add-on to its Office suite as well.

We’ve touched on how companies may charge for AI products. In May, we noted that some tech companies were planning to offer paid add-ons, which has become the Microsoft model to a degree. In contrast, some tech companies appeared content to bake new AI-powered tooling into their existing software for no extra fee. In June, we reported that a number of tech shops were waxing poetic about the power of proprietary customer data as a way to make their own AI projects more valuable.

Recent conversations with Amplitude and Appian, both public software companies, gave us much needed clarity on this crucial question of AI pricing. Amplitude CEO Spenser Skates, in an interview with TechCrunch’s Equity podcast, differentiated when to charge and when not to along the axis of new functionality versus accelerated functionality. And Appian CEO Matt Calkins had an interesting take on how companies can earn more from their existing software products with AI but not have to even raise prices. Let’s talk turkey.