Originally discussed on The Meg and Amy Show - Episode 4

Walking the streets of Paris in April, Meg ambushed me with a revelation that stopped me mid-stride: "Pricing changes signal business model changes. And we're about to see an even bigger shift in software than the move from on-premise to SaaS."

What started as a casual observation about AI pricing has evolved into a framework that explains why so many software companies feel like they're standing on shifting ground.

Here's the insight that kicked off our entire conversation: Your pricing model determines your business model. This isn't new wisdom - Jason Cohen wrote about this years ago in his Smart Bear blog. But in the context of AI transformation, it becomes the key to understanding why everything feels so unstable right now.

When software moved from on-premise to SaaS, it wasn't just about technology. The entire relationship between vendor and customer changed:

Now we're seeing the next evolution: from SaaS to agentic software. And just like before, the pricing changes are the canary in the coal mine.

Today's AI-powered software faces a fundamentally different cost structure. Instead of predictable infrastructure costs, companies are dealing with:

As one IT leader told me, implementing AI agents feels like "giving teenagers cell phones with usage-based data plans." The potential for runaway costs is real and it’s scary.

Looking at Kyle Poyar's framework from October 2024 on his increasingly popular Growth Unhinged blog, we can see the progression:

Each shift brought vendors and customers closer together in terms of shared risk and reward. Agentic software takes this to the extreme - customers increasingly expect to pay for results, not just access.

The move from on-premise to SaaS gave us velocity benefits, but we were essentially delivering the same capabilities faster. With agentic software, we're unlocking entirely new markets and capabilities that didn't exist before.

Take companies like Glean, which is reimagining knowledge management with AI. They're not just doing the old thing better - they're creating value that was impossible in the SaaS era. The result? Revenue per employee metrics that dwarf traditional software companies.

But here's what makes this transition fundamentally different from the last one:

We don't have a decade to figure it out. The pressure for results is immediate, from all directions - customers, investors, and competitive dynamics.

This leads to an uncomfortable truth: high revenue-per-employee businesses need fewer people. But this isn't about "AI taking jobs" - it's about business models that simply don't require the same organizational structures.

The roles that made sense in the SaaS era may not make sense in the agentic era. Not because AI can do those jobs, but because the fundamental business model no longer needs those jobs.

If you work in software, here's the hard truth: Your specialty probably isn't as special as you think it is. The business model shift means the work itself is changing, not just how we do the work.

But here's the optimistic flip side: You have experience in learning new business models. The skills that helped you navigate the on-premise to SaaS transition are relevant - you just need to apply them to an even bigger shift.

Start by understanding your current business model. Most of us work in our area of specialty without fully grasping how the business makes money. In a world where your specialty might become obsolete, that broader understanding becomes critical.

Ask yourself:

Use AI to help you learn. There's never been a better time to ask "stupid questions" about business fundamentals. Let AI be your tutor in understanding EBITDA components, competitive landscapes, and market dynamics. Use it to start asking better questions.

The biggest barrier isn't learning new skills - it's unlearning the belief that your current specialty will remain special. This is psychologically difficult but absolutely necessary.

We need to redefine career progression for a world where growth isn't measured by headcount. If it takes you 100 people to build something and it takes me 5, I should be more valuable as a leader. But our promotion criteria haven't caught up to this reality yet.

Why This Is Actually Good News

Yes, this transition is uncomfortable. But consider the alternative: staying locked in business models that are becoming obsolete while others capture the new value being created.

The companies and professionals who figure out agentic business models first will define entire industries. Those who wait for someone else to write the playbook will spend years playing catch-up.

We're not just witnesses to this transformation - we're participants in inventing what comes next. The future isn't happening to us; we're creating it.

The question isn't whether these changes will happen. The question is whether you'll help shape them or be shaped by them.

Start now. Understand your current business model deeply. Get curious about what the agentic version might look like. And remember: your experience in navigating the last big shift is exactly what you need to navigate this one.

The future of software isn't just about better technology - it's about better business models that create more value with fewer resources. And that future is being written today.

What business model shifts are you seeing in your industry? How are you preparing for the move to agentic software? Share your thoughts in the comments.

Prepared by Amy Wilson, former tech executive and current product strategy advisor. For more insights on leadership and the future of work, subscribe to The Meg and Amy Show.