Tech Cos Struggle To Price AI Tools At Levels Corporate Clients Will Accept

The core problem with tech companies trying to figure out how to charge for AI services is that their customers dont really know yet how to value the benefits they are receiving - or not - from them. 

As a result, there is a widespread perception in the client base that they are being overcharged, which is contributing to the slower adaptation by big corporate customers. Corporations get that AI is big and they are under pressure to demonstrate to their own customers and to securities analysts that they are in the game. But the reality is that no one really knows where this is leading and how big the commitment should be. To stimulate demand, big tech is now changing its prices, especially since DeepSeek has raised questions about the underlying cost. Companies may ultimately find that it is more cost effective to develop their own AIs - or hire others to do - rather than be overcharged by OpenAI, Google and others. So pricing remains more an experiment than a fixed strategy. JL

Isabelle Bousquette reports in the Wall Street Journal:

In the last couple years, vendors have charged a monthly fee per user for AI features, and assistants, much like they price other software as a service. But AI’s high compute demands meant they needed to charge eyebrow-raising prices to cover the cost of the service. Some clients balk at paying $30 per user per month to add Microsoft’s AI Copilot to its 365 suite, a 60% premium. “Most companies overestimated how we would be willing to pay for an AI feature.” Charged on a per seat basis, “We’re not ready to deploy it on a broad basis.” customers are still trying to make sure they have the right value equation.  Vendors are making changes to how they price to gain more users and adoption. “If they aren’t fair in how they price tools, they’re incenting me to build my own capability over buying theirs.”

More than two years after the public debut of ChatGPT, software companies still haven’t found a compelling way of charging for AI tools, chief information officers say. Now they’re trying new strategies.

In the last couple years, vendors have typically charged a monthly fee per user for AI features, assistants and copilots, much like they price other software as a service. But AI’s high compute demands meant they needed to charge eyebrow-raising prices to cover the cost of delivering the service.

For example, some chief information officers balked at paying $30 per user per month to add Microsoft’s AI Copilot to its 365 productivity suite, a 60% premium to the top level of 365 without AI.

“A year ago everything was way overpriced,” said Greg Meyers, chief digital and technology officer of Bristol Myers Squibb. “Most companies overestimated how much more we would be willing to pay for an AI feature.” 

The emergence of models like DeepSeek’s R1, which the Chinese company said it trained for a fraction of the cost of leading U.S. models, could help drive AI costs down over time. But in the meantime, CIOs remain in a tough spot.

Google said the Business Standard plan for its Workspace suite would shift to a $14 per person per month package with Gemini AI features baked in. Photo: Andrey Rudakov/Bloomberg News

“We’re in a place where prices are high and simultaneously companies are trying to understand how to drive value out of it,” said United Airlines chief information officer Jason Birnbaum. When it comes to general-purpose tools like Copilot that are charged on a per seat basis, Birnbaum added, “We’re not really ready to deploy it on a broad basis.”

Now vendors are making changes to how they price in an attempt to gain more users and more adoption. Google in January said its Business Standard plan would shift from charging $12 per person per month for its Workspace productivity suite, plus another $20 for access to its Gemini AI business tools, to a $14 package with Gemini AI features baked into Workspace.

And Microsoft introduced consumption-based pricing with its new Microsoft 365 Copilot Chat that gives users access to use AI agents. Depending on the interaction, customers might pay a few cents for each “use.”

 

To be sure, Microsoft said it is seeing accelerated customer adoption of the $30 Copilot offering. Chief Executive Satya Nadella said on Microsoft’s earnings call this week that customers who purchased Copilot during its first quarter of availability “expanded their seats collectively by more than 10X over the past 18 months.” 

But the goal with the new Copilot Chat is also to lower the barrier to entry for new enterprises using Copilot and build a broader user base that will ultimately use the $30 per month version, said Jared Spataro, chief marketing officer of AI at Work for Microsoft. 

“A per user per month charge can sometimes be difficult for them if they’re trying to go to broad scale because they’re just not sure how to value something,” Spataro said.

Kathy Kay, CIO of Principal Financial, said she plans to test the new Copilot Chat tool to determine its cost-effectiveness.“I do think this is an evolution of companies listening to their customers and understanding what they need and making it much more cost effective,” Kay said.

Microsoft introduced consumption-based pricing with its new Microsoft 365 Copilot Chat. Photo: Andre M. Chang/Zuma Press

But the vendors face another threat: Enterprises can access the same underlying models they do to build similar tools of their own. Kay said she built a tool that was able to replicate some of the capabilities of Copilot at a much lower cost. 

Amazon Web Services is in part betting on that strategy. Its Bedrock platform allows users to access models from companies like Anthropic, Meta Platforms and Mistral AI with either a no-commitment, pay-as-you-go pricing model starting at less than one cent per interaction or a time-based term commitment, starting at $25 per hour of commitment to use the Bedrock service. Although Amazon also provides its work assistant, Amazon Q, for $3 to $20 per user per month, depending on the tier. 

Software companies are also facing pressure to adapt their pricing to account for the fact that the actual cost of using the underlying models is going down. As that happens, CIOs don’t want to feel like their vendors are simply taking a bigger share of the profits. 

 

“If they aren’t fair and equitable in how they price those tools and transactions, they’re actually going to incent me to build my own capability over buying theirs,” said Nationwide Chief Technology Officer Jim Fowler. “And so my biggest concern is in this rush to AI, that they price themselves out of the enterprise.” Vendors and enterprises alike are still working to figure things out, he said. “It’s still the wild west.” 

 

Salesforce says it’s targeting more flexibility when it comes to their pricing options. Last September the company rolled out a pricing plan that allowed enterprises to toggle their spend minimums between per-month licenses for human employees and consumption-based agents. 

A lot of customers are still trying to make sure they have the right value equation, said Bill Patterson, executive vice president of Corporate Strategy at Salesforce, and for some of the AI investments companies have made over the last two years, the jury is still out. 

Meanwhile vendors continue facing the dilemma of making tools cheap enough that people will buy them but expensive enough so they’re not losing money in compute costs if people use it too much – a balance that’s hard to navigate with tools that are so new. 

Earlier this year, OpenAI CEO Sam Altman posted on X that the $200 per month ChatGPT Pro plan was losing money because people were using it more than anticipated. (The ChatGPT Enterprise plan is separate and typically comes in at about $30 to $45 per seat, OpenAI said). 

Going forward, CIOs anticipate more changes and experimentation with different pricing strategies from their vendors. 

“We’re in such an interesting and fluid time, it’s hard to say which variant is going to win,” said Don Vu, chief data and analytics officer at New York Life.