After seeing some more folks on LinkedIn talking about being let go, I started thinking about the business of trying to sell Enterprise CMS in a market where folks aren't sure if they can afford their groceries. I decided to quickly jot down a few thoughts on a Friday and work through this a little in my head.
Anybody who has been going through LinkedIn regularly has seen the shifting of the workforce as so many companies have struggled to find what is going to work for them in today's economic climate. It's not that customers aren't doing projects anymore or don't need to modernize their software, but in the conversations that I've been involved in it feels like the focus is on being more efficient, having more focus, and optimizing. "DO MORE WITH LESS".
I always hate the "do more with less" philosophy. If you have less, you are going to do less. You might be able to optimize on some inefficiencies and do the same output with less. Or maybe, you could cause a job market shift that ultimately forces your workers to feel pressured into doing more without getting more compensation. (That might be too spicy a take for today, though!) Ultimately, though, without investment of some kind you are not going to shift your business to doing more than it was before. If you want to actually grow and do more, that's going to cost you something.
Contrasting this, though, is everybody's favourite chatbot: ChatGPT. Artificial Intelligence (AI), or at least the LLM systems that are currently the rage, appear on the surface to give you more than you had before while putting in less effort overall. Just yesterday, I dropped a bunch of my meeting notes into a private ChatGPT session and I had it collect the notes together for me into a more reasonable categorization that could be easily scanned. I definitely did more with less, right? That didn't cost me anything at all.
So we start looking at the other tools in our stack and we start wondering if they are delivering the value we expect for our cost. We have these comparison points where we start having a false sense of the ratio. Something like ChatGPT seems free, but the actual cost is extremely high. Even the previous subscription model doesn't cover their costs. They are operating at a loss to gain users. So subscription prices need to go up, but even at $200/month OpenAI is losing money with their $700,000/day spend. Some advanced queries are costing $1000 each.
"During such tough times, in response to these financial pressures, OpenAI is actually considering raising the subscription prices and restructuring its operations to attract new investments, noted Futurism. While OpenAI has already risen around $20 billion since its inception but on the other hand, achieving profitability actually remains pretty elusive as it navigates the complexities of scaling AI technology."
ChatGPT owner OpenAI is losing money like anything and this is its biggest problem, The Economic Times, January 8, 2025
Even though we know this is what's happening, it still sets the frame of mind for a customer on what the cost is for value delivered by SaaS software. This warps the playing field and leads to a question:
How can an organization justify spending more on a content management system every month than on ChatGPT which is, arguably, a necessary tool in their stack in the "do more with less" economy?
The Enterprise CMS space think that adding AI is the answer. All of them are embedding these AI services in now, thus increasing the perceived value delivered to the customer for the same, or slightly increased, cost. Everybody's hyped on AI in their solution, so ticking this box is almost a must-have just to be at the table. However, this actually means the cost of running these systems gets even higher. As the costs per API query go up over time, the vendors are either going to have to eat the cost or pass it along to the customer.
I think you know which one is going to happen. 😉
So we start to see Enterprise CMS software like Sitecore getting amazing AI-driven functionality, but with an increased cost to the customer on a price tag that was already seen as pretty high. Can the current market actually accommodate this?
Probably not, or at least, something is going to have to give in the cost to make it palatable enough to get that extra shiny bit. I will say that in most recent conversations I've had, it seems that pricing for all sorts of software in the Enterprise space does seem to be coming down. Businesses are demanding a more cost-effective way to start into these solutions and this type of software is now more affordable for customers that are on the lower usage end of the spectrum. That gives room for these folks to do add-ons and get extra bells and whistles and feel like they got a deal.
I don't know how long it will last, but at least right now, it seems like a really good time to invest in your Enterprise CMS stack. All the vendors are feeling the pinch and you might be able to get a deal today that you aren't going to get once businesses start feeling more stable in their revenue growth. I think if you are looking at something like Sitecore and starting to think it won't be a fit on price, you might want to take a closer look right now. My colleague Dan Cruickshank wrote about this pretty extensively and it's worth a read!
Credits and References
- Cover Image: Office Space meme, pulled from an ESO Fund article: https://www.esofund.com/blog/may-2024-report-start-ups-are-doing-more-with-less
- Title/Concept: Credit where credit is due, while I wrote everything in the article, including the title, the idea for this topic did come from ChatGPT.
- ChatGPT owner OpenAI is losing money like anything and this is its biggest problem (The Economic Times): https://economictimes.indiatimes.com/news/international/us/chatgpt-owner-openai-is-losing-money-like-anything-and-this-is-its-biggest-problem/articleshow/117063725.cms?from=mdr
- High Usage Drives OpenAI's $200/Month ChatGPT Pro Subscription Into Loss (The AI Track): https://theaitrack.com/chatgpt-pro-subscription-losses/
- Understanding Sitecore XM Cloud Pricing: https://www.getfishtank.com/insights/sitecore-xm-cloud-pricing
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