Pricing isn’t a moat. Or is it?

Pricing as a moat is quite the oxymoron since pricing structures are anything but proprietary. However, we argue that pricing is a wedge that AI-native challengers might collectively use to gain a headstart vs. incumbents in the B2B software landscape.

For over a decade, SaaS has enjoyed the financial luxury of ARR and seat-based pricing. Subscription-based pricing conveniently places the burden of proof on the user. Software is a tool: users pay for access, and it is up to them to extract value. Investors love this: predictable revenue, high margin subscriptions and juicy multiples.

But here is the thing: Software is no longer just a tool - it is becoming the worker. AI is shifting the game, automating entire workflows, executing tasks, and even replacing labor and denting into payroll. This fundamentally alters value creation and pricing methods, which are no more than a reflection of underlying economics. As software moves beyond enabling users to directly deliver outcomes, the logic behind seat-based pricing starts to wobble. 

The next big software pricing change in paradigm is unfolding before us. From perpetual licenses to subscriptions - sprinkled with usage-based pricing - to tying cost directly to value delivered. Welcome outcome-based pricing! 

So, what are the implications of this new pricing model for the overall SaaS landscape?

The discussion has been ongoing for months and is a treacherous one. Thinking about pricing in ceteris paribus terms can turn out to be a big fallacy when value creation is evolving at neckbreaking speed. As an industry, who cares if pricing becomes more volatile if the net new value unlocked by SaaS were to be 10x’ed? Nevertheless, let’s put value unlocked aside for the remainder of the article for argument's sake.

Focusing strictly on pricing, many see a downgrade in this in that outcome-based pricing is less predictable than subscription models. If revenue is tied to actions or results, is SaaS losing some of its stickiness?

Well, the short(-term) answer is yes and the long(-term) answer might be no.

At first glance, yes. As the burden of proof shifts to vendors, customers no longer bear the risk of extracting value from the solution. In the short term this introduces volatility and uncertainty. Companies must consistently prove value and revenue comes less predictable.  

But in the long run, this might not be as big of a shift as it seems. The forces of upsells and churn will always push pricing toward equilibrium. Any discrepancy between price and value is temporary - even in SaaS. If a vendor is delivering more value than it charges for, it will eventually increase pricing. If it’s charging too much relative to perceived value, customers will churn. 

The difference is that outcome-based pricing tights the feedback loop and accelerates the time to market equilibrium. And just as subscriptions lowered the capex barrier to entry in the dawn of SaaS, outcome-based pricing will further lower the perceived risk of adoption.

Is this an opportunity for challengers in an incumbent-heavy B2B software landscape?

Legacy SaaS vendors are in a delicate balancing act. Their ARR multiples are still the foundation of their valuations, and shifting to full outcome-based pricing could send shockwaves through public markets. They cannot afford to undermine their own financial narratives. So, they are testing the waters, adding outcome-based pricing incrementally while hoping AI efficiencies justify price hikes. SaaS is becoming expensive - stacking new fees per result on top of ARR. Take Salesforce, for example. Their new AI-powered AgentForce charges $2 per conversation on top of a $250/month per-seat license. 

But this approach is risky. It assumes that customers will be willing to pay a premium for AI enhancements on top of existing high-cost seat licenses. As AI continues to automate core E2E workflows, the deflationary forces of technology could push pricing downward, making the dual-pricing model unsustainable in the long run. 

Meanwhile, challengers see an opportunity to use pricing as a short-term strategic wedge against incumbents. While legacy players remain constrained by investor expectations and the need to protect ARR multiples, new entrants have the flexibility to fully embrace outcome-based pricing - aligning price with value from the get-go and leveraging it as a tool for rapid distribution. VCs are more likely to embrace this business model bet than their public market counterparts.

Pricing alone is never a defensible long-term moat. But in industries where switching costs are high and vendor inertia is strong - like CRM, customer success, or sales automation - it could be the opening needed to establish a foothold before the broader market fully recalibrates. 

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The debate between seat-based and outcome-based pricing cannot be viewed in isolation from the broader economic forces reshaping SaaS. The industry is evolving from selling access to selling value - aligning pricing more closely with outcomes. While this shift introduces volatility and forces vendors to prove their worth continuously, it also unlocks TAM expansion and gives SaaS companies a clearer stake in the value they deliver. The transition will not be seamless, but in the long run, it won’t be that different. And in the meantime, challengers may seize the headstart that a complex incumbent pricing model transition may offer them.

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