Abstract:
Enterprises are shifting some of their traditional software spending toward Anthropic and OpenAI. Procurement software service provider Zip’s report “Where Does the AI Budget Go?” provides further evidence of this. In the past 12 months through August, AI service providers such as OpenAI, Anthropic, Cursor, and Sierra accounted for 8% of Zip's total customer spending; compared with only 1.4% in the previous 12 months. The median total enterprise software budget rose 13% during the same period.
This study covers dozens of customers with an average employee size of 2,400; these customers have invested a total of US$18 billion in software fields including AI in the past four years. Zip's customers include Snowflake, OpenAI, Datadog, Cloudflare and AMD.
This kind of budget shift has put pressure on traditional and established software manufacturers, forcing them to improve their product competitiveness. Many enterprise software vendors such as Workday and HubSpot, as well as cloud service providers such as Microsoft and Amazon, have launched discounts or free trials on AI products to retain customers.
But while established companies are throwing out these free benefits, they are also launching a more costly pricing model: they no longer package unlimited AI usage rights into subscription packages, but instead charge based on the actual usage of AI by customers. Once the free benefits expire, some businesses may decide that these tools are more trouble than they are worth.
Pay-as-you-go billing costs continue to rise
Despite some discounts, some customers' bills are still rising after switching to a pay-as-you-go model.
For example, this summer, software service provider Pegasystems' monthly expenses on Microsoft's AI coding tool GitHub Copilot soared from US$20,000 to US$260,000. The reason was that Microsoft adjusted pricing and switched to a consumption billing model.
David Vidoni, chief information officer of Pegasystems, said: "What bothers me very much is that AI service providers have put a lot of burden on companies like us, asking us to figure out how to use these tools to achieve cost-optimization." (Pegasystems provides fraud detection and customer bill automation services for banks and telecom companies, and annual software procurement expenses including AI are in the range of 10 million to 15 million US dollars.)
After Pegasystems management expressed difficulty in accepting the high bills, Microsoft provided the company with a credit worth $10,000 and a total of 1 million points to try out another tool, Copilot Cowork (an AI assistant that benchmarks Claude Cowork, valid for one month). However, this report pointed out that this incentive is a drop in the bucket compared to the discounts Microsoft has given to other customers.
However, this incentive also has a certain effect: Vidoni plans to expand the scope of testing of Copilot Cowork in the financial and marketing teams. At the same time, he is cutting costs on GitHub Copilot and other AI tools by setting employee usage caps and other means. (In addition to GitHub Copilot, Pegasystems also uses multiple Microsoft products, which also raises the threshold for switching vendors; however, the company does not deploy customer-facing software on the Microsoft Azure cloud platform.)
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