Analyst(s): Keith Kirkpatrick
Publication Date: August 30, 2024
The News: Zendesk announced it is implementing an outcome-based pricing model for its AI agents. This model is designed to reflect the advanced capabilities of an automated solution that can deliver real value to customers. It focuses on results rather than seat licenses or consumption-based models, which are often better applied to human or human-adjacent functions.
Zendesk Announces Outcome-based Pricing Model for AI Agents
Analyst Take: Zendesk has been evaluating ways to link its services to value more effectively, particularly concerning delivering generative AI capabilities. The company has acknowledged that the traditional, human-centric pricing models are no longer relevant to mostly or entirely autonomous agents. As such, Zendesk has announced a significant shift in its pricing model that is focused on outcomes rather than on token-based consumption or via a seat-license model, which has little relevance to the actual economics of AI-powered agents.
AI Agents Represent a Paradigm Shift for CX
Zendesk AI agents are designed to resolve complex customer issues autonomously. Because of their increasing functionality and ability to solve issues without human intervention, Zendesk believes pricing models must reflect the actual value AI provides to a business. Furthermore, with pricing directly tied to outcomes, Zendesk says customers will only incur costs for issues that AI resolves autonomously.
Zendesk says that the new pricing model is designed to be flexible and allows businesses to incorporate AI agents in a way that aligns with their specific objectives, offering options to continue utilizing human agents where necessary.
The pricing for AI agents is designed to encourage utilization and scalability. A starter usage level is included at no additional cost with all Zendesk Suite and Support Plans. As AI agent usage increases, Zendesk’s pricing model scales accordingly, and a dashboard is provided to allow agent monitoring to ensure no pricing or usage surprises.
What to Watch:
Zendesk has made a name for itself by focusing on the development of AI technology that is not only designed to assist human agents but, in many cases, replace them. This technology enables human workers to be redeployed or refocused into roles where human attributes (empathy, ability to connect, etc.) can best be used to drive customer experiences.
As technology has evolved, AI agents can ingest relevant information and then make decisions or take actions, allowing organizations to deploy them in various CX roles, use cases, and scenarios to deliver excellent experiences. They can replace humans because they do the very things that humans find challenging, including finding, synthesizing, and acting upon information quickly, accurately, and consistently.
The shift to an outcome model provides vendors such as Zendesk with opportunities and challenges. First, shifting to a new model requires an education process. The company will need to clearly and transparently demonstrate how the pricing works and how it will provide more value to customers, particularly those that have directly tied spending on CX or support to human-based seat licenses.
A new outcomes-based model also requires the company to shift its internal financial benchmarks, particularly with respect to benchmarking against competitors. Internally, the business will likely need to focus on quickly driving the use of AI agents to counteract the potential reduction of seat licenses, particularly for organizations seeking to reduce the cost of CX through headcount reductions and a shift to AI.
For customers, a shift to outcome-based pricing for AI agents can be viewed as a positive step in better aligning the costs associated with providing good CX with actual ROI. In my conversations with Zendesk over the past year, executives made it clear that there will be transparent definitions around when an engagement or interaction is considered solved, in terms of both time and results, which is helpful to ensuring accountability and transparency.
What is less clear is how organizations will transition to this new model. It is unlikely that most businesses will shift 100% of their support or inbound inquiries to a fully automated AI-based system (though notably, Frontier Airlines did just that a few years ago, to mixed reactions).
Zendesk will need to provide counsel on which functions and use cases are the most likely candidates for being handled via an AI agent and which will still require a human. Internally, there should be (and probably is) an ideal migration schedule that enables Zendesk to continue growing its revenues, even as it helps companies transition to a far more transparent pricing model, which, in the short term, may impact the company’s overall revenue growth.
However, as I predicted back in December 2023, vendors are moving to consumption-based pricing models for generative AI services. Using an outcome-based approach mirrors the need for vendors to link their generative AI costs with revenue more closely. The outcome-based approach is both bold and commendable, as it clearly illustrates the high degree of confidence Zendesk has in its technology and the viability of the model as a business strategy.
As we head into the fall, I will be watching closely to see how this pricing model works in the real world, with real customers, and whether or not it delivers on its promises of greater transparency and value.
You can read the full press release at Zendesk’s website.
Disclosure: The Futurum Group is a research and advisory firm that engages or has engaged in research, analysis, and advisory services with many technology companies, including those mentioned in this article. The author does not hold any equity positions with any company mentioned in this article.
Analysis and opinions expressed herein are specific to the analyst individually and data and other information that might have been provided for validation, not those of The Futurum Group as a whole.
Other insights from The Futurum Group:
Enterprising Insights, Episode 22 – Zendesk and Avaya Analyst Day Recaps
Zendesk Unveils Comprehensive CX and Workforce Engagement Solution
Zendesk to Acquire Service Automation Provider Ultimate
Author Information
Keith Kirkpatrick is Research Director, Enterprise Software & Digital Workflows for The Futurum Group. Keith has over 25 years of experience in research, marketing, and consulting-based fields.
He has authored in-depth reports and market forecast studies covering artificial intelligence, biometrics, data analytics, robotics, high performance computing, and quantum computing, with a specific focus on the use of these technologies within large enterprise organizations and SMBs. He has also established strong working relationships with the international technology vendor community and is a frequent speaker at industry conferences and events.
In his career as a financial and technology journalist he has written for national and trade publications, including BusinessWeek, CNBC.com, Investment Dealers’ Digest, The Red Herring, The Communications of the ACM, and Mobile Computing & Communications, among others.
He is a member of the Association of Independent Information Professionals (AIIP).
Keith holds dual Bachelor of Arts degrees in Magazine Journalism and Sociology from Syracuse University.
