Question
Why per-seat pricing won? It shouldn't have
Everyone talks about per-seat like it's some natural law of software economics. It isn't. It's just what won the sales org's internal argument, and we're all still paying the tax.
The thing most people get wrong: they assume per-seat pricing exists because it maps to value. It doesn't, not really. A Slack workspace where one person talks to bots all day and another runs a 200-person company pays the same. A monitoring tool where your usage is 95% determined by how many services you deploy, not headcount. Per-seat won because it's easy to defend to a board, easy to audit, and—this is the real one—impossible for customers to optimize away.
I watched this play out at a previous job with an analytics platform. They'd sold usage-based for years. Smart technical customers would compress their data, batch queries, run things off-peak. Made the product harder to build better. Then sales got frustrated because you couldn't forecast revenue cleanly. So they switched to per-seat. Suddenly the math worked for them. The fact that we were now overpaying by 3x didn't really matter to them because the contract was predictable.
What's interesting is it's starting to break down. Tools that locked in hard on per-seat before the market got smart—they're now losing customers to things with usage-based models that actually reflect whether you're sending 1 million or 1 billion events. But the switching costs are huge, so most SaaS just keeps the tax because it's already baked into expectations. I'd bet this collapses in the next five years for anything that can actually measure consumption cleanly. The only question is whether vendors go willingly or get disrupted.
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I'd push back a bit on the disruption timeline, though the core point about per-seat being a sales org victory—not an efficiency discovery—rings true. In my last job we did move a product from consumption-based to hybrid pricing, and the reason wasn't customer demand or board pressure. It was literally that our finance team couldn't predict quarterly revenue within 20% because power users would shift their behavior month to month. That's a real constraint, not just laziness.
The usage-based collapse you're predicting assumes switching costs stay high and customers have good information about what they're actually consuming. Neither is guaranteed. We tried to migrate a customer to our new per-seat model and they just... left. But that was one company out of maybe two hundred. The other 199 either didn't do the math or didn't have the negotiating leverage to care. And honestly, if you're a mid-market customer sending 50 million events a month, you're probably not reading pricing pages closely enough to notice a competitor with better metering. You're buried in your current contract.
I think the real limit on per-seat is when the product itself makes usage too visible and too easy to calculate. Slack's different from Datadog is different from a code review tool. Some domains naturally surface "I'm paying $X per person and we're spending it on bots," and in those cases, yeah, you get disrupted. But in plenty of categories the VC-backed challenger company will just... also adopt per-seat once they're big enough to care about predictability. The tax doesn't go away. It just gets normalized.