The AI pricing conundrum — it started as a nightmare, now it’s worse. – Computerworld

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by Evan Schuman

Contributor

The AI pricing conundrum — it started as a nightmare, now it’s worse.

opinion

Jun 2, 20266 mins

Is there a good way for IT to pay for AI? Not really, but there might be some slightly less horrific ways.

Credit: Rob Schultz / Shutterstock

Enterprise IT leaders have always struggled with AI pricing, especially the need to pay for AI in a way that delivers ROI. But the typical IT exec may not be right person to decide how a company uses AI — and how it tries to deliver ROI — because so many line-of-business workers and partners are now experimenting with the technology on their own.

And if IT leaders don&rsquo;t have a grip on how they want to use AI over the next year or two, it&rsquo;s impossible to figure out how they want to pay for it. They likely hate the current method of paying per token. And other options, such as SAP&rsquo;s push to charge per AI task completed, aren&rsquo;t any better.

To use a sales analogy, IT doesn&rsquo;t want to pay a lot of money for leads, because there&rsquo;s no way to know if those leads will generate any revenue — let alone how much. What IT leaders want is the tech equivalent of paying commission, where they only pay when a lead converts into a paying customer. And even then, they only pay a percentage of the final sale. That guarantees ROI for the enterprise.

The problem: no AI vendor would ever go for it because that approach puts too much risk on them.

Finding a pricing model that works for both enterprise IT and AI vendors is all but impossible as long as IT is trying to deliver ROI.

Irfan Khan, president of SAP Data & Analytics, said the problem is challenging for both sides. &ldquo;Everyone is scrambling to justify their investments,&rdquo; and &ldquo;the day one cost is not necessarily the day one value,&rdquo; he said.

The problem is one of sequence. Pricing has to be negotiated and locked in long before a project starts. But with technology as new and experimental as agentic AI, there&rsquo;s almost no solid information about what benefits it will (or will not) actually deliver.

Beyond that, generative AI (genAI) and agentic AI systems might well deliver benefits that are harder to jot down in a spreadsheet. Let&rsquo;s say the CFO wants to see a sharp rise in order fulfillment. But what if AI &ldquo;manages to fulfill those orders more efficiently,&rdquo; Khan said. &ldquo;And what are the likely ripple effects of bringing more efficiencies into the process?&rdquo;

Justin Greis, CEO of consulting firm Acceligence, frames the AI pricing disconnect in terms of market economics:

&ldquo;The market is trying to force-fit AI into infrastructure-era pricing models, when AI is fundamentally closer to labor augmentation and business process transformation than compute consumption,&rdquo; Greis said. &ldquo;The core disconnect is: Enterprise IT buyers want pricing aligned to realized business value. AI vendors want pricing aligned to resource consumption and platform utilization. Those are very different economic models.

&ldquo;Token pricing is attractive to vendors because it is measurable, scalable, and predictable. But from the enterprise perspective, tokens are almost meaningless as a business metric. Nobody on the CFO side cares how many tokens were consumed if the process improvement never materialized.&rdquo;

The competing pricing strategies overwhelmingly rely on just two factors: what delivers the most profit and which is the easiest to execute. Given human nature, the latter is usually the path most often taken.

It&rsquo;s like one of my favorite jokes. A guy is heading to his car when he sees a man with a flashlight intently looking at the ground right next to a streetlight pole.

&ldquo;Can I help you? Are you looking for something?&rdquo; the guy asks.

&ldquo;Yes, I lost my car keys.&rdquo;

&ldquo;Silly question, but where do you last remember having them?&rdquo;

&ldquo;I was standing over there in that dark alley up the street. A cat screeched and I dropped my keys.&rdquo;

&ldquo;Wait a second — if you lost your keys over there, why are you looking here?&rdquo;

&ldquo;The light&rsquo;s better over here.&rdquo;

The lesson: taking the easy route usually beats realizing the actual...