Corporate CFOs Struggle To Track AI Costs As Token Expense Accelerates

As if the exponential rise in AI token use - and related expenses - were not  troublesome enough for putative corporate customers, the Chief Financial Officers (CFOs) of those organizations are finding that just tracking  usage is difficult. An underwhelming 26% admit to having a 'comprehensive' view of their AI costs. Some are probably asking AI to estimate it for them. 

And in a related challenge, determining whether - and how - those investments generate returns for the customers - and, in turn, for their customers - is equally hard. At some point, as systems for monitoring and measuring catch up with the technology, there will be greater clarity. In the meantime, which is to say, in time for the next quarterly earnings call with Wall Street analysts, there will be a lot of optimistic hemming, hawing and corporate finance doublespeak. JL

Kristin Broughton and colleagues report in the Wall Street Journal:

The shift to pricing based on usage, as measured by AI tokens, is creating new challenges for even experienced finance teams. CFOs used to paying flat amounts for technology are finding costs more unpredictable and harder to model as they build agents and embark on ambitious AI investments. 26% of companies have a comprehensive view of their AI costs, 50% have some visibility and 22% report no visibility. Charging per token helps AI firms manage the risk that customers could cut their subscriptions, but usage-based pricing shifts risk to customers, forcing them to track consumption. Many CFOs “are going to see their Anthropic bill and freak out this quarter. I don’t want everyone using tokens and setting up AI agents or AI processes that don’t have long-term scalable benefits.”

Finance chiefs are trying to get a better read on how much AI their companies are using to avoid a sticker shock moment as vendors begin charging for the technology by tokens.

The shift to pricing based on usage, and measured by tokens—the basic unit of measurement for AI computing—is creating new challenges for even the most experienced finance teams. CFOs used to paying flat amounts for technology are finding costs more unpredictable and harder to model as they build agents and embark on ambitious AI investments. 

Twenty-six percent of companies say they have a comprehensive view of their AI costs, while 50% have some visibility and 22% report no visibility or visibility after billing, according to an as-yet-unreleased survey from KPMG. “It’s a new resource that needs to be managed that didn’t exist quite that way, and we’re seeing exponential growth,” said Steve Chase, KPMG’s global head of AI.

KPMG is working with companies that have blown through their annual token and cloud computing budgets in a matter of months, according to Chase. Another KPMG client has seen its token usage explode sixfold, he said.

Life360, a company that provides location sharing and digital safety services, has taken steps to manage AI spending by implementing tools that reduce token consumption and redesigning AI agents.

Russell Burke, Life360’s finance chief, said the company doesn’t yet have a real-time monitor of its token spending, but he hopes to have one soon. “We hope that’s right around the corner,” he said. 

AI firms and software companies have implemented metered usage as a component of their enterprise pricing as customers have boosted investments. Charging per token can better align revenue with costs, and can help software companies manage the risk that enterprise customers could cut seats from their subscriptions, analysts said. Usage-based pricing can also provide customers with more flexibility. 

AI providers including Anthropic and OpenAI, and software companies such as Microsoft and Salesforce, charge enterprise customers, at least in part, by usage.

Usage-based pricing shifts risk to the customers, because it forces them to track consumption, said Gil Luria, head of technology research at financial services firm D.A. Davidson. While some big companies have pushed employees to tokenmaxx, many other CFOs “are going to see their Anthropic bill and freak out this quarter,” Luria said. Tokenmaxxing refers to using as much computing as possible to be seen as AI-forward.

Token spending was a focus during Affirm’s annual budgeting process, which wrapped up last month, said Rob O’Hare, the company’s finance chief. The company during its March quarter significantly increased the amount of code that it writes using agents, which boosted productivity of its software development teams. “We saw this almost overnight step-function change in token consumption,” O’Hare said.

Affirm monitors AI usage on a near-real-time basis, and reviews costs including through weekly reports to the company’s leadership team. The company said it has increased productivity on its engineering team, and is seeing a strong return on its investments.

Reckitt CFO Shannon Eisenhardt. Qilai Shen/Bloomberg News

Reckitt, the U.K. consumer-goods giant, is scrutinizing how employees are using AI and adjusting spending where needed, Chief Financial Officer Shannon Eisenhardt said. For example, when Reckitt rolled out 12 AI solutions for its marketing team, it noticed usage for some tools dropped off after a few weeks as employees reverted to old habits, she said.

The company found that one of the marketing solutions led to inaccurate and insufficient data and slowed its rollout to ensure the data were reliable, Eisenhardt said.

“Have the ROIs adjusted down a bit? Yes, because, of course, as you push out the savings, that has an implication of it’s coming in a bit slower,” Eisenhardt said. “But it’s not in any way where it starts to make you think, ‘Oh, I’m not sure if we should be doing this.’ ”

Analysts and executives drew parallels between the surge in AI costs and companies’ investments in cloud computing during the pandemic. Companies at the time invested heavily in enterprise software as corporate employees worked from home, but later pared software spending, citing a need to control costs. The rush of investment into AI could face a similar pullback, they said.

Corning, the glassmaker that now supplies fiber optics for data centers, has limited the number of AI tools employees have access to, and focused its AI budget on a smaller number of major projects, CFO Ed Schlesinger said.

The company, at the same time, wants to encourage employees to experiment with the technology and use in their roles daily. “We’re limiting ourselves in total, but we’re not preventing employees from learning and experimenting,” Schlesinger said.

Sporting brands owner Amer Sports is considering potential uses for AI, from processing invoices to closing the books and account reconciliation, finance chief Andrew Page said. But the company behind brands including Arc’teryx and Salomon is moving slowly, in part to avoid ballooning costs for AI usage, he said.

“I didn’t want everyone going out, you know, using tokens and setting up AI agents or setting up AI processes that didn’t have long-term scalable benefits for the entire back-end process,” Page said.