Inflation the Feds don’t see nor care

Almost exactly a year ago, I posed a playful quiz on pricing strategies in one of the first pieces in the series (geninnov.ai/s/OMcQLS). One scenario involving a 100% price hike and a 40% demand drop was deliberately absurd – a trap to highlight the perils of short-term revenue grabs. Little did I know that such tactics would soon become a reality in the AI era.

Canva's recent 300% price increase for its Teams subscription is a stark example. Justifying this leap with new AI features seems disingenuous when countless software firms, from Microsoft to Adobe, have witnessed little business pick up despite announcing a slew of new products and features at competitive or no price hikes. The charitable explanation – a pre-IPO revenue boost – seems flimsy, even though it could be true in the case of this company.

There is a deeper trend. We have been witnessing substantial pricing increases directly or indirectly from many monoliner, small software companies. Across the board, the focus is not as much on locking users for the long term as for near-term revenue maximization. Companies are trying to charge more than what Netflix used to charge just some quarters ago for providing services as straightforward as digital cards and web link shortening. And these are products without even pretense of any additional “AI” or non-AI features.

Of course, the cost of doing business has soared, and the pressure to generate revenue is more intense because of the drying up of venture funding. The rapid commoditization of features further fuels this urgency. When one can’t differentiate on features and foresees a future where their services or products become obsolete, one is left with the only option of trying to squeeze out as much revenue as possible. GenAI’s coding abilities will make many categories of software join the list of messengers, RSS readers, or file-sharing platforms – apps that were extremely popular and useful for their users before they became irrelevant.

Those raising prices sharply under the XaaS model are spurring the search for alternatives, which, in the most straightforward use cases, require as much build time and effort as writing a few of these articles. At GenInnov, with a small number of talented young programmers and a few days' efforts, we've built our own CRM, web link shortener (the proof is the example in the weblink in the first para!), and a digital card platform. This DIY approach allows us to sidestep inflated software costs and maintain control over our tools. Our youth have been able to do this, of course, because of their absolutely incredible talent but also ably supported by the GenAI tools while spending most of the time developing our proprietary Generative Research Analysts (GenRAs). We continue to be amazed by the ongoing productivity boom in software development for small businesses and the possibilities of micro-scale innovations that would reduce costs even if not raise revenues.

But while it’s possible for smaller companies like GenInnov to innovate and find cost-effective solutions in software, there are limits to this DIY approach. We might be able to avoid the unaffordable services of software giants, but won’t be able to replicate things done by the likes of TSMC!