Published: 06 June 2024
Credit- or token-based pricing is not new, but its use has exploded with generative AI offerings from software vendors. This research explains how sourcing, procurement and vendor management leaders can mitigate the risks of unclear pricing models, potential wastage and lack of fungibility.
Credit-based pricing models are not standardized across vendors, sometimes relying on unclear unit costs and multipliers, which makes forecasting difficult and can lead to overcommitment, wastage and unbudgeted costs.
Lack of negotiation for pricing of committed credits or tokens, tiers for different volumes and, often, higher cost overages — combined with poor usage reporting — results in significant overspend for buyers.
Lack of fungibility and flexibility (e.g., the ability to swap credits to alternative products with the same vendor) and no rollover of credits mean that a vendor doesn’t deliver on its promise to enable a consumption-based, flexible pricing model.
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