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Dry Powder: The Private Equity Podcast

Game Changers in Generative AI w/ Hg’s David Toms

Dec 10, 2024
David Toms, Head of Research at Hg, dives into the transformative power of generative AI in the software industry. He discusses the shift from traditional per-user pricing to dynamic models based on customer value and usage. Toms highlights the complexities of results-based pricing through an insightful case study, emphasizing the need for profitability alongside value alignment. He also advocates for fostering competition and collaboration among portfolio companies, showcasing how benchmarking can enhance operational efficiencies.
13:36

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

  • Generative AI is revolutionizing software pricing models by shifting towards outcome-based pricing that enhances customer value and satisfaction.
  • Leveraging competitive instincts among portfolio companies fosters a collaborative environment that promotes knowledge sharing and drives innovation across the entire portfolio.

Deep dives

Transforming Software Pricing Models

The discussion highlights a fundamental shift in software pricing models due to advancements in Generative AI. Traditional per-user, per-month pricing is being reconsidered, with a focus on outcome-based pricing that reflects the real value provided to customers. By measuring the actual return on investment and aligning costs with the benefits delivered, software companies can create pricing structures that are more appealing to users. This results in a more effective pricing strategy that prioritizes solving customer problems over volume-based metrics, ultimately enhancing customer satisfaction and loyalty.

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