Who’s to Argue with Frank Slootman on Consumption Pricing?

Consumption-based Pricing

this-week-in-startups-frank-slootman-consumption-pricingThe Backdrop

Here at Kinetic Data, we’re big fans of podcasts. Recently, one hit our ears, and we took note.

On March 2, 2023, This Week In Startups (hosted by Jason Calacanis and Molly Wood) featured Frank Slootman, CEO of Snowflake, and covered a range of topics relevant to software companies.  We’ve long admired Mr. Slootman from afar, going back to his CEO days at ServiceNow. 

What struck us in particular was a conversation on consumption-based pricing. Perhaps an admission even. We’ll let you be the judge of that. 

Around the 57:00 mark, Jason Calacanis makes a comment worthy of our attention: “You seem to think that the ultimate honesty is consumption pricing. Explain…”

Frank Slootman’s answer (paraphrased): “..When I was at ServiceNow for all these years, I always felt there was an inherent inequity between us as a vendor and the customer. The customer would often buy tons of licenses, and they wouldn’t even be using them yet. And I’m like, ‘This isn’t right. This is not equitable.”

We Couldn’t Agree More 

Consumption-based pricing models align value to cost, reduce bloatware, and allow for both customer and vendor to work together on adoption and usage growth.  Here’s how we see it:

Align Value to Cost

From the customer perspective, aligning costs with value received simply makes sense. With our pricing model, customers pay only for the workflows used, rather than committing to a fixed number of licenses or seats. This scale-in use means more agencies and branches of the military can benefit from the increases in speed, efficiency and readiness without incurring expensive and unnecessary upfront license costs. And this pay-for-what-you-need approach is more flexible than other pricing models, as it will allow the military organizations we work with to adjust usage as needed, rather than paying for software which ends up on the shelf. Speaking of shelfware…

Reduced Bloatware

Consumption pricing also removes the bloatware issues commonly found with large, sprawling software vendors. When customers ask us for a Built-for-Mission application specific to purpose X, we deliver X (and a little bit more for good measure). All to often we find other, established large vendors, bundling or ‘tossing in’ an entirely different software product that solves a problem no one is asking for or needs.  Bloatware is difficult to remove, pre-bundled and confusing to the user. The way we see it, when a user is focused on completing their task at hand, the last thing they need is distraction.

Importantly, customer satisfaction increases when the application designed and built meets the needs of the user. When our customers know we’re aligned in our objectives,  there’s no real desire to sell something they don’t need, don’t want, and have little expectation of trying out in 4 years. 

Working Together

For both vendor and customer, understanding which processes are associated with usage and cost means greater transparency and visibility into the flow of work. Our Automation Maturity Model helps customers pinpoint which processes are best suited for iteration and improvement, and we enable the user to improve their processes on their timeline, not ours. 

When the goal is to convert traditional processes into digital outcomes that matter, communication between the customer and the vendor improves. The focus is on solving the pain, not selling more seats. It means shared success. And that means accountability increases based on expectations, which we believe leads to growth the right way.

When Consumption-based Pricing is Best for Government

Understanding the consumption pricing dynamic is key for procurement, business leaders and other buyers in the Federal Government and our Military. Naturally, exploring this option leads to a better understanding of the true value and costs of using the Kinetic Platform. Because our goal is to enable agencies to make more informed decisions about their usage and investment. It’s important to ask questions about who benefits most from a per-seat license model. Just like Frank Slootman says, ” It’s not equitable.”

To learn more, one of our Kinetic Data experts is ready to answer your questions; contact us today.