SaaS Licensing Models

📣To the vendor partner community: 📣 Let’s move from ‘how many seats you will need’ ➡️ ‘how much value you can actually derive, and we won't get paid until the outcomes are achieved and value is created.' The smart vendors are quietly shifting from traditional per‑seat licenses to outcome‑based models and winning more deals due to: ✅ Less focus on logins and MAUs, more focus on cost saved, revenue created, or time back to the business ✅ Contracts that tie their upside to your KPIs, not just your headcount ✅ Hybrid structures (small base + upside for results) are becoming the norm, especially in AI and SaaS On paper, this is exactly what your CIOs, CTOs, and tech leaders have been asking for: aligned incentives and clear ROI. In practice, it raises new questions: ☑️ Who owns the data and instrumentation required to prove the outcome? ☑️ How do we attribute impact when multiple tools and teams touch the same metric? ☑️ What guardrails keep “success fees” from blowing up the budget when things go better than expected? As an operator, I’m less interested in vendors who talk about “AI agents” and more interested in vendors willing to carry real performance risk with me. If you want buyers' attention in 2026, don’t show me another seat matrix—show me: 🎯The one or two outcomes you’re willing to get paid on. 🎯How you’ll measure them in my environment without creating a science experiment. 🎯The cap, floor, and escape hatches when reality doesn’t match the model. Outcome‑based pricing won’t replace every subscription, but it will separate “software I rent” from “partners I trust.” Curious how others are handling this: ❓What vendors are actively pivoting to this model? ❓What tech leaders are you actively pushing vendors toward outcome‑based deals, or are the complexity and attribution risk still a non‑starter in your world? #leadership #software #AI

I studied 100 fast growing SaaS companies with hybrid pricing. Here are the 3 most common pricing models 👇 🚀 Flat-rate + overage pricing: customers pay a recurring flat fee that includes a set amount of usage for certain features. If they exceed this limit, they pay an overage fee for additional use. ⚡️ Flat-rate + metered pricing: customers pay a recurring flat fee. Some features are charged separately based on how much they are used. 🎯 Seat-based + overage pricing: customers pay a recurring fee for each user (seat). This includes a set amount of feature usage, either per seat or for the whole account. If they go over this limit, they pay an overage fee for additional use. The combination of the recurring upfront license fee and in-arrears usage fee continues to grow, as it provides revenue growth and predictability. Are you moving to a hybrid pricing model?

𝗔𝗜 𝗶𝘀 𝗞𝗶𝗹𝗹𝗶𝗻𝗴 𝗧𝗵𝗲 𝗟𝗶𝗰𝗲𝗻𝘀𝗲 𝗠𝗼𝗱𝗲𝗹. (...and it might not be coming back)   The biggest players are proving that pricing tied to outcomes and usage wins, and it’s creating billions in enterprise value.   1️⃣ Usage-Based Pricing OpenAI, Anthropic, Cohere, AI21 are all priced per token or per API call. Instead of locking you into seats, you pay only for what the model actually processes. That’s why OpenAI is now valued at around $300B, they made AI accessible for everyone.   2️⃣ Outcome-Based Pricing Afiniti only charges if its AI actually improves call center outcomes. Decagon charges per customer issue resolved. If the AI doesn’t deliver, you don’t pay.   3️⃣ Freemium & Community-First Models Hugging Face, Mistral, and Stability AI made the tech free first, then monetized compute, enterprise SLAs, or Pro features. This creates massive user bases before revenue kicks in (land-and-expand strategy).   4️⃣ Subscription-Plus-Usage Hybrids Midjourney, ElevenLabs, Cursor blend predictable monthly plans with overage pricing for heavy use. Casual users stay engaged. Power users can pay for more.   The trends seem to be going towards: >> Make it easy to try >> Tie cost to actual value delivered >> Let usage (not contracts) be the growth engine   Do you think every SaaS company will be forced to abandon per-seat licenses in the next 5 years?     Follow me for weekly updates on the latest tools and trends in UX and productivity.

As a buyer, this was a situation where the seat-based license model drove me crazy. (Big take-away from this post is that I’m seeing a trend of companies moving away from seat-based license model in general. And I expect it to continue.) This was a few years ago (pre-Tropic) and I purchased a tool to help manage the company spend. It was impractical (and financially irresponsible) to pay for a seat for everyone in the company. A power user like me was in the tool every day. Analyzing spend, reviewing requests, etc. But in order to spend any money, you had to get a purchase request approved. And in order to submit a purchase request, you needed a license. Some users might generate requests a few times a month. Some once or twice a year. Others once or twice (or not at all) in their tenure at the company. Knowing how many licenses were needed was impossible. The value for one group was massive and yet for another was non-existent. And everyone paid the same amount. Talk about friction. The model actually encouraged less adoption. So it’s no surprise that usage-based pricing exploding. Think about these reasons: - The value derived by role continues to be a sticky point. - Paying for what you use feels more natural thanks to contracts like AWS and GCP. - The rise of AI is costly. Inference isn’t free and usage protects both sides better (the cost of unprofitable customers is just as real as my situation with the licenses). - Visibility has improved dramatically (better visibility means better tracking, utilization, attribution, etc). The market is shifting fast. While seat-based still exists, many SaaS companies are using or experimenting with usage / hybrid models. What’s crazy is that while ssage is becoming more of the norm, I believe that performance based costs are on the horizon…