The predictable era of per-seat software budgeting is ending. The shift to consumption pricing is accelerating faster than most leaders anticipate.
Vertice’s latest benchmark report tracks the shift in vendor pricing models over recent years. The dominant user-based payment model has dropped dramatically; as of 2026, only 35% of vendors still use pure per-seat pricingsharp decline of 24 percentage points. Consumption-based and hybrid models are rapidly taking over. The report projects that consumption and hybrid pricing will become the most dominant models by the second half of 2026. The driving force behind this shift is AI: the rise of AI capabilities and new AI-native vendors has forced pricing models to adapt and reflect providers’ own fluctuating compute costs.
Snowflake CEO Sridhar Ramaswamy recently gave pointed pricing advice. Arguing that usage-based pricing is better suited to AI economics than traditional subscription models, he said: “It’s important to understand that all software companies are not the same. We have to show value to make money”. Snowflake has built its business around charging based on actual usage rather than fixed software seats, a model he believes aligns revenue with customer outcomes.
Ramaswamy predicted that companies dependent on seat-based pricing could face challenges as AI agents enable employees to complete more work with fewer resources. “When AI agents start handling work instead of people, companies that rely on pricing based on the number of employees will lose the justification for their premium,” he stated. His comments come as agentic AI increases pressure on traditional enterprise pricing models that charge based on user counts. A consumption-based strategy aligns revenue generation with actual customer value, a principle he believes will become increasingly important as AI changes how software is consumed.
Snowflake’s recent quarterly performance supports this approach, with reported revenue growth of 33% year‑over‑year in the first quarters fastest pace in two yearsandits shares jumping more than 50% in five days.
The shift was starkly illustrated on June 1, 2026, when Microsoft transitioned GitHub Copilot from a flat‑rate subscription model to token‑based billing. The move affected 4.7 million paid subscribers, who now face charges for every token used in each interaction. The change reflects GitHub’s view that the product has evolved from an in‑editor assistant into an agentic platform capable of running long, multi‑step coding sessions, which brings significantly higher compute and inference demands.
The economic consequences are dramatic. One developer on a $10 monthly Pro plan documented a 20-to-30-minute session refining existing code burning 16% of their entire monthly credit allowance in a single sitting. A viral enterprise dashboard showed a team whose historical monthly usage previously billed at $500.35 recalculating to an estimated $5,290.92 under token metering. Microsoft determined that the cross‑subsidy from light to heavy users was no longer sustainable. Internal Microsoft documents obtained by journalist Ed Zitron indicated that Copilot’s running costs had nearly doubled week‑on‑week since January 2026.
GitLab unveiled a different consumption model on June 10, 2026. GitLab Flex is one annual dollar commitment drawn down from platform seats, GitLab Credits, and eligible usage‑based capabilities across their entire ecosystem. The model was built to address the uncertainty of the agentic era: enterprise contracts lock in seats, AI usage, and capabilities up front, but these three variables cannot be predicted six months out. GitLab Flex allows teams to reallocate budget from unused seats toward AI usage or new capabilities without renegotiating contracts. Consumption draws from the annual commitment at a published rate, with usage above the full commitment billed on‑demand to prevent surprises. The critical difference: with Flex, seats and usage live under the same commitment, allowing organizations to move budget between categories rather than keeping them in separate locked buckets. Eligible capabilities released after a customer signs land on the same rate card, meaning new features can be turned on using the existing commitment without re‑procurement.
The Vertice report highlights the speed of the change: consumption‑based models have grown by 35% in the last two years and are already favoured by 23% of software vendors. However, this new pricing architecture carries hidden risks. Consumption‑based models offer 29% lower discounts than previous models, and 35% of consumption is effectively invisible to buyers. The report notes that some vendors have seen their annual contract values increase by more than 50% as a result. While seat‑based pricing is a flat ‘all‑you‑can‑eat’ model, usage‑based models charge for every action. This leads to higher costs, especially when power users are testing new features and typical users are being encouraged to experiment more. A hybrid approachcheaper user‑based model with consumption pricing layered on topers the impact, but pure consumption models are driving costs beyond budgets by as much as 40%.
The evidence is clear. The consumption‑pricing wave is not a future trend; it is already here. For revenue operations leaders, the new era demands urgent action:
The subscription era gave finance predictable budgeting. The consumption era demands a new discipline: measuring, governing, and pricing actual value. The shift is accelerating. SaaS vendors have little choice but to follow AI costs and RevOps leaders must be ready.
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