Why some software companies may leave the stock market to adapt to AI
The shift from subscription-based software to outcome-driven pricing models could force many listed software companies to undertake painful transformations, with public market pressures emerging as a key challenge, according to Dheeraj Pandey.
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Software-as-a-service companies may have to go private to successfully reinvent themselves for the AI era, according to DevRev CEO and Nutanix co-founder Dheeraj Pandey, who believes the industry is heading for another major business model reset.
Speaking exclusively to CNBC-TV18, Pandey said the software industry has repeatedly reinvented itself over the past three decades and is now entering a new phase where outcome-based and consumption-based pricing will replace traditional subscription models.
According to Pandey, enterprises are increasingly questioning why they should continue paying for unused software licences, creating pressure on software vendors to shift towards models that tie pricing to outcomes rather than seat counts.
“You sell me 100 subscription seats, I barely use 30 and the other 70 are wasted. Consumption-based and outcome-based pricing are the answer,” he said.
Pandey said such transitions are difficult for listed companies because public markets often lack the patience required to support multi-year business model changes.
“Many companies won’t do this as public companies. They may have to go private to make this transition,” he said.
He pointed to previous industry transformations, including Adobe’s move away from perpetual licences and Nutanix’s own shift towards subscriptions, as examples of companies that successfully navigated change.
But he warned that not every company would find the same level of support from investors.
“If you can explain to the Street what the next three years are going to look like, well and good, like Adobe did 15 years ago and like we did at Nutanix eight or nine years ago. But markets don’t always have that kind of patience,” he said.
Pandey said a “reckoning” is approaching for many public software companies that need to overhaul their pricing structures and operating models to remain competitive in the AI era.
He noted that every 15 years the software industry has witnessed a redistribution of risk between buyers and sellers, beginning with the move from mainframes to client-server computing and later from perpetual licences to subscriptions.
The next phase, he said, will be defined by customers demanding measurable outcomes rather than paying simply for access to software.
“I think there is a reckoning coming for a lot of public companies that have to change their business model,” Pandey said.
According to Pandey, AI is accelerating that shift and forcing software companies to rethink not only how they build products, but also how they monetise them.
Speaking exclusively to CNBC-TV18, Pandey said the software industry has repeatedly reinvented itself over the past three decades and is now entering a new phase where outcome-based and consumption-based pricing will replace traditional subscription models.
“SaaS is now looking like perpetual software all over again, or IBM mainframes,” he said.
According to Pandey, enterprises are increasingly questioning why they should continue paying for unused software licences, creating pressure on software vendors to shift towards models that tie pricing to outcomes rather than seat counts.
“You sell me 100 subscription seats, I barely use 30 and the other 70 are wasted. Consumption-based and outcome-based pricing are the answer,” he said.
Pandey said such transitions are difficult for listed companies because public markets often lack the patience required to support multi-year business model changes.
“Many companies won’t do this as public companies. They may have to go private to make this transition,” he said.
He pointed to previous industry transformations, including Adobe’s move away from perpetual licences and Nutanix’s own shift towards subscriptions, as examples of companies that successfully navigated change.
But he warned that not every company would find the same level of support from investors.
“If you can explain to the Street what the next three years are going to look like, well and good, like Adobe did 15 years ago and like we did at Nutanix eight or nine years ago. But markets don’t always have that kind of patience,” he said.
Pandey said a “reckoning” is approaching for many public software companies that need to overhaul their pricing structures and operating models to remain competitive in the AI era.
He noted that every 15 years the software industry has witnessed a redistribution of risk between buyers and sellers, beginning with the move from mainframes to client-server computing and later from perpetual licences to subscriptions.
The next phase, he said, will be defined by customers demanding measurable outcomes rather than paying simply for access to software.
“I think there is a reckoning coming for a lot of public companies that have to change their business model,” Pandey said.
According to Pandey, AI is accelerating that shift and forcing software companies to rethink not only how they build products, but also how they monetise them.
(Edited by : Prashant)
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