AI Disrupts Traditional SaaS Pricing
Key Points
- SaaS pricing has traditionally been a “chicken‑like” model—standardized, predictable revenue that appeals to private‑equity firms seeking low‑risk, high‑valuation exits, which drove the B2B SaaS boom of the 2010s.
- The emergence of AI is disrupting that dynamic by giving companies the tools to replace or supplement off‑the‑shelf SaaS solutions with custom, AI‑powered stacks, as illustrated by Clar’s shift away from Salesforce and its swing to profitability.
- Even market‑dominant SaaS vendors such as Salesforce are feeling the pressure, because AI‑enabled customers now expect more tailored functionality and cost efficiencies, eroding the “one‑size‑fits‑all” pricing model.
- As businesses increasingly leverage AI to cut SaaS spend and demand more bespoke solutions, the once‑reliable, chicken‑style SaaS revenue model faces fundamental challenges to its pricing power and long‑term sustainability.
Full Transcript
# AI Disrupts Traditional SaaS Pricing **Source:** [https://www.youtube.com/watch?v=uB-4OJD_73E](https://www.youtube.com/watch?v=uB-4OJD_73E) **Duration:** 00:09:41 ## Summary - SaaS pricing has traditionally been a “chicken‑like” model—standardized, predictable revenue that appeals to private‑equity firms seeking low‑risk, high‑valuation exits, which drove the B2B SaaS boom of the 2010s. - The emergence of AI is disrupting that dynamic by giving companies the tools to replace or supplement off‑the‑shelf SaaS solutions with custom, AI‑powered stacks, as illustrated by Clar’s shift away from Salesforce and its swing to profitability. - Even market‑dominant SaaS vendors such as Salesforce are feeling the pressure, because AI‑enabled customers now expect more tailored functionality and cost efficiencies, eroding the “one‑size‑fits‑all” pricing model. - As businesses increasingly leverage AI to cut SaaS spend and demand more bespoke solutions, the once‑reliable, chicken‑style SaaS revenue model faces fundamental challenges to its pricing power and long‑term sustainability. ## Sections - [00:00:00](https://www.youtube.com/watch?v=uB-4OJD_73E&t=0s) **SaaS Pricing Model Under Scrutiny** - The speaker explains how SaaS’s “chicken‑like” predictable revenue attracted private‑equity funding and drove B2B growth, but recent market shifts are destabilizing that once‑reliable pricing framework. ## Full Transcript
so the SAS pricing model is
fundamentally in trouble but it's not
the way most of the critics say and we
need to talk about it I'm going to start
by explaining how SAS is typically
priced for people who don't understand
software as a service is priced like
chicken that's the joke is that software
as a service tastes like chicken to
private Equity firms because it's all
the same and it's super consistent
Revenue just like good white chicken
meat and the reason why that matters is
because you want predictable revenue
streams to build business valuations and
the reason why so much of tech pivoted
to B2B SAS in the 2010s is because
fundamentally if you have valuations
that sticky because they're built on
highly predictable business Revenue it's
really easy to exit it's a lowrisk play
it's easy to build a business revolve it
turn it around and sell it and VCS love
the low risk and so they're happy to
finance that all day because they see
that exit to private Equity I've been in
B2B SAS companies that had exit to
private Equity I've seen it play out it
really is a heyy this tastes like
chicken let's roll it up we have the
same revops we have the same building
model we have similar pricing and
packaging structures we have internal
operations we can make consistent and we
can just make this an extremely
efficient machine that churns out high
quality business Revenue that was the
2010s that was the dream into the early
2020s call it 2021 no longer the case as
clearly few factors changing that we've
talked about on this channel number one
AI is changing the pricing power Dynamic
AI is giving companies that want to
shift more pricing power to argue Clara
publicly embarrassed sales force by
moving off the Salesforce stack and
building their own thing internally with
AI now clar is going public and you know
what they're calling out that they are
now profitable to the tune of $180
million instead of like $43 million loss
last year and part of that is that they
cleaned up their software stack and
they're paying less in SAS this is what
is enabling them to go for an IPO in
very uncertain macroeconomic situation
like we have right now I other companies
are going to pay attention to that other
companies are going to notice that and
so that's that's piece one is that like
fundamentally SAS is under pressure from
AI but piece two is that even if you
have great distribution even if you have
great brand arguably Salesforce has both
of those things even if you lean
aggressively into AI again Salesforce is
also doing that Salesforce the original
SAS so it's like a nice comp here um you
are still in a situation where companies
are going to change their expectations
of you so even if you keep the
relationship you're going to expect more
custom work so part of what's going on
is that AI is enabling everyone to do
more and everyone to expect more and so
when you're in a vendor relationship you
know internally that your teams are more
efficient with AI and you can push and
expect more yeses from software vendor
you're purchasing from who will then use
their teams to use AI to build
customization that wouldn't have been
profitable to build without AI 10 years
ago and if they don't do it you're going
to go down the street to an AI native
company and they'll do it for you and so
we have this pressure for Mass
customization which leads to a it's
workable but it leads to a less
efficient footprint for SAS businesses
so that pressures their margins the last
thing I'll call out is that pricing and
packaging is fundamentally changing so
SAS has been priced per seat per unit
for a long time or you buy it you have a
setup fee it's so much per seat you
price that out annually you lock them
into a three-year contract or a two-year
contract and off you go and the margin
on that is great because you're stamping
out consistent software well if your
margins are under threat because the
software is more custom so you have to
spend more maintaining it even if you
can do it because of AI if you have more
options to build it internally so you
have a lower cost of switching and
if the per seat pricing isn't attractive
to you you'll just walk and so per seat
pricing is something that's going to
shift especially if companies are going
to start to launch AI native features as
an attempt to keep customers which
everybody's doing come to us we're AI
native come to us we have an AI feature
every time I turn around and hit a web
browser I see an AI native feature for a
B2B SAS company and that's great but
what it really means is that at the end
of the day
I have to think about how you're pricing
for me if you're pricing AI native
features and you have ai agents are you
going to charge per seat for AI agents
are you going to charge per outcome the
way intercom does how are you going to
charge and and the B2B SAS companies
don't have good options here because if
you look at it you go back to taste like
chicken everybody loves the annual
contracts for software because they can
be valued so efficiently but if you're
doing custom work which we talked about
that's a service that's not software
can't value that as efficiently it's not
worth as much from a revenue
perspective and that's increasing in the
mix if you are pricing out agents and
you're pricing per outcome that's also
not software it's not as high a quality
Revenue
source and if you are trying to do
neither of those things and you're
trying to just price flat you can but
then You're vulnerable to people who are
undercutting you which has always been
the case but it's especially the case
now with AI
and so SAS companies sort of have a hard
they're in a hard spot like they they
probably need to adjust pricing because
AI is putting downward pressure on
margins they probably need to make press
pricing more outcom driven because if
they don't someone else in their sector
will but if you make it more outcome
driven you decrease the quality of that
revenue from a valuation perspective and
now SAS doesn't taste like chicken
anymore now SAS is different it's hard
to Value there's distinct Revenue models
there's different pric pricing
strategies it's not as attractive for
exits and if it's not as attractive for
exits the entire value chain for SAS
starts to get cracks in it the value of
funding assess is less now not
necessarily because the individual
company can't be successful not even
because it can't be profitable but
because at the end of the day the whole
model for how software as a service
works is not as consistent and the
industry loves consistency Finance guys
love consistency and it's just not as
consistent
anymore and we're going to see great SAS
companies we're going to see disruptive
amazing SAS companies in this cycle but
they are going to be Innovative across a
wider range of Dimensions than we're
used to including pricing and if they do
that
successfully even if they do very very
well they're going to find that the
purchase and exit pattern is different
than the standard SAS
exit the valuation is going to be
different than the standard SAS exit and
that is a new thing that is not
something that we've seen before we have
not yet seen a model of a SAS exit to
IPO for an aid driven company and we
probably won't for a few years in fact
one of the things that's interesting is
that AI is enabling companies to get
profitable and stay private for longer
and so as much as we talk about Clara
using AI to go public we might find that
that is a little bit of an edge case and
that more companies are going to look
like stripe where stripe has gone
through the alphabet soup of fun funding
rounds and are publicly saying that
there's a real chance that they never
ever ever go public and they just
provide liquidity in the secondaries to
uh their employees and they run a
massive private Corporation and why go
public well in in a sense stripe has
sort of broken the model there like if
you're processing over a trillion
dollars in
payments the the the world expects you
to be a public company and so the fact
that AI might enable such an efficient
team and an efficient profitability
model for an individual company that
like if they do a great job if they get
the pricing right if they figure out
like outcome pricing and a mix of agent
pricing and per seat pricing and
everything works out uh and by the way I
know stripe is not a sass but in this
case it's a great Counterpoint to Clara
that's why I brought it in but if you
figure all that out and you end up being
very profitable what's your incentive to
go public we now have a beaten path with
stripe and others of just staying
private and that in and that in turn is
not encouraging VCS to fund either and
so part of what I'm calling out with all
of this is that you need to understand
that when something as fundamental as
B2B SAS shows cracks in the revenue
model and shows cracks in the pricing
model and shows cracks in ultimately the
value
chain it doesn't matter if individual
companies can Thrive they will it
doesn't matter if companies can adapt
they will the fact that the standard is
changing means that there is less
opportunity on the table because there
is less commoditization in the software
space
disruption is happening and that's AI
driven disruption so that goes for SAS
it goes for pricing it goes for
packaging we're all living through it I
don't have a silver bullet answer for
how you price correctly um there's
problems with per seat because there's
pressure on agents there's problem with
outcome pricing because how do you
determine outcomes and how do you get it
right um it sounds attractive but it
probably has lower margins and it's less
valuable there's problems with custom
software and like customization and
service Revenue there's not an easy
answer here and I have confidence that
great businesses are going to figure
this out but it's going to be really
interesting to see how they do so there
you go SAS is changing and that is
changing everything along with it