We had the opportunity to attend a presentation in late November by Silicon Valley Software Group (SVSG). It explored trends in AI as we approach 2025, particularly as relates enterprise software. An interesting perspective given at the beginning of the presentation was how GenAI is being adopted by business function, based on a recent study of executives by The Economist. (See bar chart diagram.) Not surprisingly, IT leads the way, followed by marketing, sales, operations, supply chain, and HR. The laggard functions, as can be seen on the chart, are R&D, finance, and legal.

Perhaps the most significant insight offered by SVSG was their notion that the business of software is being expanded — “disrupted” was their term — to include services automation and incremental human labor displacement. Specifically, SVSG noted, the current total addressable market (TAM) for cloud software, which is $863 billion, will grow to more than $4 trillion “as AI unlocks these additional services and human labor spend.”

A major trend noted was the move to value-based pricing for software because, “AI aligns product with value.” It noted that pricing models are already catching up. Per-seat models, such as for Salesforce, have been commonplace. But consumption and outcome-based pricing models are coming into vogue, from such vendors as Databricks, OpenAI, Anthropic, and Snowflake. The movement to the next stage — “the future to come,” they say — is the human labor augmentation model, which they label “Services As Software.” In this model, “Pricing is directly tied to the cost of displaced human labor, making ROI clear by linking the cost of the product to the headcount savings achieved.”

Want to better understand how AI will affect your business in 2025 and beyond? We can help. Reach out to start a conversation: hi@timmarongroup.com.