PagerDuty CIO on the shift from seat-based to usage-based pricing for AI

2026-05-11 · Source: Tech Monitor · Field: Business & Management — Corporate Strategy & Leadership, Operations & Process Management, Project & Product Management · Depth: Intermediate, quick

Summary

PagerDuty CIO Eric Johnson discusses the industry-wide shift from seat-based to usage-based pricing models for SaaS, particularly driven by the integration of AI into business processes. Traditional seat-based models become less profitable for vendors as AI enables individual users to trigger significantly more actions, increasing per-seat production. Foundational AI providers are moving towards token-based or API call pricing to better reflect the computational intensity and underlying infrastructure costs of large language models. This shift is also influenced by market drivers like AI-driven automation and tighter budgets, pushing buyers to demand pricing aligned with measurable outcomes. While usage-based models offer benefits like lower barriers to entry and easier scaling, they necessitate transparency, predictability, and clear guardrails from vendors to manage cost volatility and prevent customer churn.

Key takeaway

For AI Product Managers evaluating monetization strategies, consider transitioning from traditional seat-based models to usage-based or hybrid pricing. Your customers will increasingly demand pricing tied to actual consumption and outcomes, especially with AI-driven automation. Ensure your pricing models are transparent, predictable, and supported by clear dashboards and alerts to help customers manage costs and prevent unexpected bills, fostering trust and reducing churn.

Key insights

AI integration is driving a shift from seat-based to usage-based SaaS pricing for better value alignment and cost reflection.

Principles

• Unit of software value is changing.
• Pricing must align with measurable outcomes.
• Transparency and predictability build trust.

Method

SaaS providers should offer clear guardrails, dashboards, alerts, and billing guidance to customers using usage-based AI services to manage consumption and spending effectively.

In practice

• Pilot AI in specific areas like customer support.
• Scrutinize AI use cases for efficiency and economy.
• Implement hybrid pricing models for predictability.

Topics

• Usage-based Pricing
• Seat-based Pricing
• AI Integration
• SaaS Monetization
• Operational Workflows

Best for: Executive, AI Product Manager, Product Manager, CTO, VP of Engineering/Data, Director of AI/ML

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Editorial summary, takeaway, and curation by AIssential. Original article published by Tech Monitor.