Tech vendors switch up pricing models to offset rising cloud costs

Core Insights - Rising demand for AI is prompting technology providers to rethink their pricing structures to manage increasing cloud expenditures, which enterprise executives are also aiming to reduce [3][4] - Public cloud spending is projected to quadruple over the next three years as IT leaders adapt to generative and agentic AI workloads, with 54% of respondents in a survey expecting an increase in cloud usage [3][7] - The escalating costs associated with deploying AI products are impacting tech vendor profits, with 70% of technology executives acknowledging this challenge [7] Cloud Spending and Infrastructure - Increased cloud spending is leading IT leaders to consider purpose-built infrastructure to better align with the rapid adoption of AI [4] - New pricing models are being explored by tech vendors to alleviate the financial burden of rising cloud costs, which are seen as a significant barrier to increasing annual recurring revenue [4][7] Pricing Models and Monetization - Current primary monetization for AI by vendors relies on subscription models, but this approach is expected to decline as usage-based models gain traction, with nearly 75% of suppliers moderately adopting usage-based pricing [5][7] - Only 36% of companies report strong alignment between pricing and value for customers, indicating a need for better usage data to enhance customer experiences and outcomes [6][7] - More than half of the surveyed product leaders anticipate an increase in usage-based revenue by 2027, highlighting a shift in the software economy driven by AI [7]