Recent data from Gartner shows a 10% increase in the datacenter market due to the deployment of AI servers by hyperscalers. While AI in enterprise systems is seen as a way to enhance productivity and efficiency, running AI workloads comes at a cost. The average cost of an AI server is $32,000, and a rack of AI servers can cost over $1 million. Hyperscalers like Microsoft and Google have the funds to invest in AI infrastructure, keeping the prices of AI services in check. However, SaaS providers may struggle with the cost of operating AI infrastructure.
Salesforce and NetSuite have acknowledged the costs associated with AI infrastructure and are assessing whether to charge more for AI services. SaaS providers are faced with the challenge of determining a reasonable price for AI functionality while also considering the potential business advantages it brings. The costs for SaaS providers are variable, as the long-term average usage of AI per user is still uncertain.
Gartner has identified competitive categories in the enterprise software market where SaaS providers may need to offer AI for free or as an optional add-on for customers to purchase. The costs for SaaS providers could vary greatly depending on usage and pricing strategies. Microsoft’s potential price increase for its Outlook email service, incorporating AI functionality, could prompt IT buyers to seek alternatives if Google offers free or lower-cost AI.
SaaS providers may need to adjust their corporate strategies to offer AI and survive in the market. Providers that previously focused on being low-cost may need to add AI as an add-on for customers willing to pay for the functionality. This could lead to a second tier of software that is not AI-enabled. SAP, for example, has made AI features available only on its Rise cloud platform and offered customers a 50% discount to switch from on-premise solutions.
NetSuite justifies the extra costs for AI-enabled modules by delivering tangible benefits through AI-powered analytics and predictive modeling. In competitive markets, SaaS providers prioritize customer retention and may need to incorporate AI functionality into their core products to effectively compete.
In conclusion, the deployment of AI servers in the datacenter market is driving growth, but SaaS providers face challenges in determining pricing for AI functionality, with the costs being variable and the long-term usage still unknown. Providers may need to offer AI for free or as an optional add-on, and some may focus on customer retention by incorporating AI into their core products.
