Impact of new generation of AI on monetization models

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The article “Noisy features” made me think about the money spent in features that are not worthy, adding fat to a product that works well.

The waste in terms of “too much functionality”. There are 2 types of companies:

  • The companies that will continue pushing their own inertia due to they have been successful “thanks to that approach”. And,
  • The companies with the will and ability to avoid “noisy features”, offer competitive delivered value at better price.

Soon, clients will adjust to get better efficiency of the use of the services they consume and those player delivering well at a better price will be able to increase their market presence.

How can we anticipate to this?

Let’s look first how the value chain is build:

  • Licenses continue to decrease their presence in the market.
  • Right now SaaS is the dominant way of selling and buying software.
  • “Pay as a Result” is an emergent monetization model that some companies are starting to use and/or announce.

Pay as a Result

I have called it “pay as a result”, right now I do not know what is the recognizable name for it. Some examples of this phenomenon:

Why do I think this is going to happen?

Every capability has a limit where by design you cannot cover all the scenarios. This constraint will show up once the market evolves from a perfect situation to that capability to a new scenario.

The capability can adapt to it, but sometimes there is a constraint that by design cannot adapt to the new context.

That constraint happened to the software distributed under license. The license limiting factor is the releases of the products are slow and expensive. In a context where the speed of delivery of new features increase exponentially, that limit by designed is killing slowly the monetization model.

My guess is that SaaS has a limitation factor, especially in the solutions that are highly success (past success models create inertia). The companies adding “noisy features” will be replaced by companies that offer the core functionality at better unit price.

Takeaways

I cannot forecast when this is going to happen, but I anticipate this will happen, and guess what? we all end paying more.

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