Salesforce's and ServiceNow’s Business Models Are in Danger, Expert Cautions: What Does It Mean For CRM and NOW?
Key takeaways
- AI is challenging the traditional seat‑license revenue engine for Salesforce and ServiceNow, pushing them toward hybrid pricing to sustain growth.
- 65% of SaaS vendors have adopted hybrid AI pricing
- Salesforce top 10 AI‑heavy customers increased spend 1.5× YoY
- ServiceNow CEO said ~50% of new revenue comes from non‑seat models
What happened
Salesforce (CRM) and ServiceNow (NOW) face potential pressure on their seat‑license business models as generative AI lets companies increase productivity without hiring more staff, according to Parnassus Investments CIO Todd Ahlsten. Both firms are already adding usage‑based AI pricing to complement traditional per‑user licenses. Salesforce reported that its top 10 AI‑heavy customers increased total spend 1.5× YoY, while ServiceNow said about half of new revenue now comes from non‑seat models.
Why it matters
The link between headcount growth and software revenue has been a core driver for SaaS firms. If AI reduces the need for new employees, the demand for additional seats could weaken, potentially limiting recurring revenue growth for CRM and NOW. Their ability to monetize AI usage will determine whether they can offset…
Short-term and longer-term
Short-term. Short‑term traders should watch seat‑license renewal rates versus AI‑usage fee adoption.
Longer-term. Longer‑term investors should assess whether AI‑based revenue can sustainably replace seat‑license growth.