LLMs will make usage-based consumption hot (2024):

Gone are the days of installing software from multiple CD-ROM discs; the Software as a Service (SaaS) subscription model, where users pay per user, has taken over. The evolution continues with a shift towards consumption-based pricing, especially in the new AI era. Prasana Krishnan, Senior Director of Product Management at Snowflake, notes that this trend will significantly impact pricing models. While straightforward, the user-based model is deemed inefficient, especially as applications leverage models trained with diverse data sources. Paying for data and applications based on actual usage is appealing, but the transition poses challenges for organizations unfamiliar with pay-as-you-go models.

Facilitating this transition on Snowflake, Krishnan emphasizes the need for visibility into costs, budget establishment, and controls for true usage-based models. Yet, she sees this shift as empowering innovation, particularly in the rapid prototyping phase of AI experimentation. This dynamic pricing approach allows experimentation without hefty upfront costs.

This transition doesn't signal the end of the subscription model. Usage-based pricing may serve as an entry-level tier, enabling the shift from prototype to production. As a developer's idea gains momentum, Krishnan suggests it could evolve into a flat fee subscription, catering to sustained, high usage.