Blab Tech
SaaS Companies Face Reckoning as AI Drives Shift to Outcome-Based Pricing, CEO Warns
When Dheeraj Pandey, chief executive of DevRev, stepped onto CNBC‑TV18’s set, he delivered a warning that feels more like a forecast than a threat: the SaaS industry is on the verge of a pricing overhaul that could force many public companies to go private.
Pandey explained that enterprises are increasingly questioning the logic of paying for unused software seats. "You sell me 100 subscription seats, I barely use 30 and the other 70 are wasted. Consumption‑based and outcome‑based pricing are the answer," he said. He added that artificial intelligence is accelerating the shift, because AI‑enabled software can deliver measurable results with fewer users.
The CEO traced a pattern he sees in the software industry: every fifteen years the risk balance between buyers and sellers flips. The first shift came with the move from mainframes to client‑server computing. The next followed the transition from perpetual licences to subscription models. Pandey says the current phase will see customers demanding pricing that reflects the outcomes they achieve rather than the number of seats they purchase.
"SaaS is now looking like perpetual software all over again, or IBM mainframes," Pandey said. He cited Adobe’s 15‑year‑old shift away from perpetual licences and Nutanix’s own move to subscriptions as examples of companies that successfully navigated a change in business model.
However, Pandey cautioned that not every company will find the same level of investor support. "If you can explain to the Street what the next three years are going to look like, well and good, like Adobe did 15 years ago and like we did at Nutanix eight or nine years ago. But markets don’t always have that kind of patience," he said.
The CEO described the current environment as a “reckoning” for public software firms that need to overhaul pricing structures and operating models to stay competitive in the AI era. He said many companies will have to go private to make the transition, because public companies are often unwilling to endure the short‑term revenue volatility that accompanies a shift from seat‑based to consumption‑ or outcome‑based pricing.
Pandey’s remarks come amid a broader industry trend. Recent reports indicate that hybrid pricing models—combining subscriptions with usage and outcome fees—are driving higher net revenue retention for leading SaaS firms. Analysts note that AI is reshaping the economics of software by decoupling value from headcount, making outcome‑based pricing more attractive.
The CEO did not mention any specific regulatory actions or court proceedings related to the pricing shift. He also did not discuss upcoming product launches or funding developments. Instead, he focused on the strategic implications for public companies and the need for a patient capital base.
In summary, DevRev’s CEO has warned that the SaaS industry is entering a new pricing era driven by AI. The transition to consumption‑ and outcome‑based models may force many public companies to consider going private, as the public market may not tolerate the necessary multi‑year restructuring. The industry will need to balance the benefits of outcome‑based pricing with the financial realities of existing business models.
Pandey explained that enterprises are increasingly questioning the logic of paying for unused software seats. "You sell me 100 subscription seats, I barely use 30 and the other 70 are wasted. Consumption‑based and outcome‑based pricing are the answer," he said. He added that artificial intelligence is accelerating the shift, because AI‑enabled software can deliver measurable results with fewer users.
The CEO traced a pattern he sees in the software industry: every fifteen years the risk balance between buyers and sellers flips. The first shift came with the move from mainframes to client‑server computing. The next followed the transition from perpetual licences to subscription models. Pandey says the current phase will see customers demanding pricing that reflects the outcomes they achieve rather than the number of seats they purchase.
"SaaS is now looking like perpetual software all over again, or IBM mainframes," Pandey said. He cited Adobe’s 15‑year‑old shift away from perpetual licences and Nutanix’s own move to subscriptions as examples of companies that successfully navigated a change in business model.
However, Pandey cautioned that not every company will find the same level of investor support. "If you can explain to the Street what the next three years are going to look like, well and good, like Adobe did 15 years ago and like we did at Nutanix eight or nine years ago. But markets don’t always have that kind of patience," he said.
The CEO described the current environment as a “reckoning” for public software firms that need to overhaul pricing structures and operating models to stay competitive in the AI era. He said many companies will have to go private to make the transition, because public companies are often unwilling to endure the short‑term revenue volatility that accompanies a shift from seat‑based to consumption‑ or outcome‑based pricing.
Pandey’s remarks come amid a broader industry trend. Recent reports indicate that hybrid pricing models—combining subscriptions with usage and outcome fees—are driving higher net revenue retention for leading SaaS firms. Analysts note that AI is reshaping the economics of software by decoupling value from headcount, making outcome‑based pricing more attractive.
The CEO did not mention any specific regulatory actions or court proceedings related to the pricing shift. He also did not discuss upcoming product launches or funding developments. Instead, he focused on the strategic implications for public companies and the need for a patient capital base.
In summary, DevRev’s CEO has warned that the SaaS industry is entering a new pricing era driven by AI. The transition to consumption‑ and outcome‑based models may force many public companies to consider going private, as the public market may not tolerate the necessary multi‑year restructuring. The industry will need to balance the benefits of outcome‑based pricing with the financial realities of existing business models.
