AI Customers Negotiate a SaaS Escape Hatch

Businesses used to feel locked in to their enterprise software providers, but some now say they can cut and run if they need to.

Companies such as insurer National Life Group, for instance, have negotiated “opt out” provisions that let them exit their software contracts or reduce their subscriptions, even in the middle of a contract term, if the vendors don’t introduce AI features at the pace or capability they’ve promised, I reported Wednesday.

The idea is simple: Businesses don’t want to be wedded to providers that end up falling short in AI. They’re also negotiating shorter contracts with enterprise app providers than they used to.

And increasingly, when businesses do sign contracts with traditional software providers, they’re getting written promises that new AI features will help them automate white collar tasks, said Malinda Gentry, an executive at Ernst & Young’s strategy and M&A advisory arm EY-Parthenon. 

“They want to ensure the financial commitments match the pace for innovation,” she said.

Customers’ newfound leverage with legacy enterprise app providers includes some parts of the security industry too.

Susanne Senoff, chief information security officer at contract-software firm Conga, said she’s seeing steeper discounts than ever from security sellers asking her to sign long contracts, but says she’s turning them down in favor of one-year contracts. The shorter terms are necessary because she thinks AI developers such as OpenAI and Anthropic will soon be able to replace software scanning tools that automatically check companies’ software for bugs and recommend fixes.

“Vendors really hate that, but at the same time…what else are they going to do?” she said.

Intuit Joins Shift to ‘Consumption-Based’ AI Pricing

Amid all the noise surrounding Intuit’s big layoffs and stock plunge Wednesday, the CEO of the $100 billion firm also told investors in a call that the company will soon change the way it charges customers for upcoming AI features that link them to experts such as accountants. 

Intuit customers can currently use its AI features as part of their flat-fee subscriptions, but chief executive Sasan Goodarzi said the company will switch to consumption-based prices for the new AI features set to be released in August. The company declined to specify details about the new features but said they will be embedded across its apps.

Numerous enterprise software firms have already made the switch to usage-based pricing, given the relatively high cost of using models from providers such as Anthropic to power their AI apps.

Whether this change will reignite Intuit’s revenue growth, which has slowed considerably, isn’t assured.

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