Published on October 23, 2023, 7:50 am

TLDR: Cloud industry leaders, including SAP, ServiceNow, Salesforce, and Oracle, are adopting different pricing strategies for their generative artificial intelligence (GenAI) capabilities. SAP is advocating for a 30% premium on GenAI-enabled products and offering customers a choice between a premium model or consumption-based pricing. This move is driven by SAP's extensive industry expertise and existing customer relationships. Meanwhile, other vendors like ServiceNow plan to charge up to 60% more for GenAI capabilities, while Oracle offers AI capabilities for free. The future of cloud pricing will be determined by customer demands and purchasing choices.

Welcome to the Cloud Wars Minute, your daily source of cloud news and commentary. In today’s episode, we’ll take a closer look at SAP’s rationale for introducing higher prices for offerings with generative artificial intelligence (GenAI) capabilities.

Is a price war brewing in the cloud industry? SAP CEO Christian Klein is advocating for a 30% premium on GenAI-enabled products, while ServiceNow plans to charge up to 60%. Additionally, Salesforce has announced a 7% price hike. On the other end of the spectrum, Oracle has decided to offer its new AI capabilities completely free of charge. These are all strategic moves by vendors trying to find the right pricing models that resonate with customers.

Klein provided insights into SAP’s approach, highlighting that they have developed over 100 different use cases and established a foundational data model within their neural network. The company is also offering advanced capabilities in sustainability and financial management. As part of their pricing strategy, SAP is giving customers a choice between a premium model with a 30% price tag or consumption-based pricing.

SAP has an advantage due to its extensive industry expertise and long-standing relationships with major customers built over several decades. It’s unlikely that Klein would propose such high premiums if he anticipated customers abandoning ship. Ultimately, it will be the customers who hold the power in this evolving landscape.

The cloud market is ripe with possibilities and various pricing models. Customers have the ability to shape these decisions through their purchasing choices. As this unfolds, we will witness how these competing strategies play out, but rest assured that customer demands will dictate the future of cloud pricing.

For more updates on cloud news and commentary, make sure to watch additional episodes of Cloud Wars Minute [link].

You can read more about this topic in “Generative AI Price War? SAP CEO Klein Makes Case for 30% Premium” [link].

That concludes this episode of Cloud Wars Minute—stay tuned for more cloud insights.

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