Software groups dismiss price premium for generative AI

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Top US software companies, such as Adobe, Salesforce and Zoom, have for now ruled out charging extra for the use of generative artificial intelligence, leaving the industry without an immediate revenue pick-up from one of the most significant technology shifts in years.

The pricing decisions have emerged in recent days as the groups have released new AI features in a number of widely used software applications, making it a part of everyday life for millions of workers.

The lack of an AI price premium shows that most tech companies remain uncertain about how valuable customers will find the technology, according to analysts. “It is still so new, nobody quite knows how to price this,” said Wayne Kurtzman, an analyst at tech research firm IDC. “Nobody knows what consumption is going to be. They don’t know where value will be perceived.”

Microsoft’s announcement two months ago that it would charge $30 a month per user for generative AI in its Office productivity software, raising subscription costs by as much as 83 per cent, fuelled expectations of widespread price increases across the software industry.

But most other companies, whose customers will be able to ask questions of “smart” conversational assistants, for example, or automatically generate emails or images for their work, have decided against following Microsoft’s lead, at least for now.

Companies embedding generative AI into their applications in recent days include video conferencing company Zoom and Intuit, maker of applications such as tax preparation software, TurboTax, and the QuickBooks small business accounting package.

Both companies said that their users would now be able to ask questions of AI assistants inside their apps free of charge, while Zoom’s AI will also produce summaries of meetings.

Meanwhile, Adobe on Wednesday released a feature called Firefly that automatically generates images in its applications for designers and graphic artists, including Photoshop and Illustrator. The technology, which has been in trials since March, is free for subscribers, though Adobe said customers would have to pay more or face slower processing speeds once they exceeded a usage “cap”.

Salesforce, whose software is widely used by sales and marketing executives, said this week that it would add an AI assistant to its applications free of charge, though it did not say when it would be available.

Ely Greenfield, chief technology officer at Adobe, said not charging extra for generative AI was the best way to get the technology “into as many of our customers’ hands as possible”.

Adobe later said that in November it would increase the price of a number of its most widely used subscription services by about 10 per cent. That rise, however, reflected features included over the past 18 months rather than specifically the addition of generative AI, it said.

For Intuit, the new technology is a significant step towards the use of AI to give financial advice, said Patrick Moorhead, an analyst at Moor Insights & Strategy, though he added that the company was acting cautiously by steering customers towards talking to a human expert in most cases. “I’m a little surprised they didn’t bump up pricing” to reflect the advance, he added.

Some companies claimed the new forms of AI would have other benefits. Adobe’s trial of its image-generating AI showed that it increased customer retention and encouraged more people to try its services, Greenfield said. Moorhead meanwhile added that Intuit’s adding new features “stems competitive threats from upstarts” that might use AI to try to lure customers from established software companies.

While revenue increases are likely to be modest in the short term, most face higher costs from generative AI, given its high computation demands. Even software companies that have to pay another AI provider, such as OpenAI, for the use of their generative AI models are choosing to swallow the costs rather than try to pass them on to users, said Kurtzman at IDC. He added, though, that they might look to charge for the new features once they had a better understanding of how people used them.

The generative AI services could leave some software companies facing other significant costs. Adobe said this week that it would start to make regular payments to everyone who contributed images to its library of stock images, to reflect the fact that the pictures were used to train its AI model.

Contributors will receive an annual bonus based on factors such as the number of pictures they contributed and how often these had been licensed in the previous year, Adobe said. It declined to say how much it would pay out, but Greenfield said the payments for AI training would be “material” for contributors.