Usage-Based AI Pricing: Why MSPs Must Own Consumption Records Before Renewals

[00:00:02] In Fresno, one company-run McDonald's sold a Big Mac for $5.69, and another two miles away charged $6.89. Reuters couldn't say the AI set that gap, but the engine recommending those prices weighs what each store's customers will pay. On November 2nd, new co-pilot licenses your clients buy through you start arriving with a meter already running.

[00:00:29] This is the Business of Tech. I'm Dave Sobel. AI is getting cheaper by the unit and more expensive by the invoice. Start with Microsoft changing how co-pilot is sold through its cloud solution provider program, the channel MSPs use to resell Microsoft. As Channel Insider reports, beginning November 2nd, new Microsoft 365 co-pilot business licenses bought through CSP

[00:00:57] and the new license includes usage-based billing by default. That applies to standalone licenses and to bundles. Each new license comes with a preset pay-as-you-go limit of $10 per user per month, and the customer can adjust it or add prepaid credits. For a 25-person client, that's up to $250 a month that didn't exist on the old invoice.

[00:01:22] The usage that counts against it includes co-pilot co-work, the WorkIQ APIs, and GitHub co-pilot harness. Microsoft is direct about the purpose. It says the default is meant to reduce setup friction and open a path toward more consumption and more upsell conversations. And since September 1st, it has run an activation incentive that rewards CSP partners whose customers activate and consume more.

[00:01:50] So the seat is still sold at a fixed price. What a customer actually pays now depends on what that customer does with it. Now look at the same thing from the buyer's side. McKinsey studied American government entities, a large and fast-growing buyer of enterprise AI, as Semaphore reports. Its finding the per-token price of AI is collapsing, but the total bill is rising because agents need far more compute.

[00:02:19] Tim Ward, who leads McKinsey's global public sector practice, told Semaphore that for many governments, using AI may have been close to free until now. Very soon, he said, it won't be. Put the two side by side. The vendor publishes a falling price per unit. The buyer receives a rising bill. The gap between those two numbers is decided by consumption, one customer at a time.

[00:02:47] Two customers buying the identical product can now pay very different amounts. The price list no longer tells either of them which one they'll be. So who decides which one you'll be? If you're listening to this and haven't hit follow yet on Apple Podcasts, search Business of Tech. It takes five seconds and you'll get the next episode automatically. This episode is supported by ScalePad.

[00:03:14] There's an argument going around that customer success isn't a department you add to an MSP. It's the operating model. And that most shops are running service delivery and calling it the same thing. ScalePad rebuilt Lifecycle Manager around that idea. Bringing the information you have about a client into one place. So instead of piecing together the story across different tools, your team can understand the whole client, plan what comes next, and manage the relationship more strategically.

[00:03:44] The idea is to make customer success something your whole team can actually operate around. And give your clients a complete view of how your work connects to their business goals. You don't have to buy the software to find the argument worth an hour of your thinking. ScalePad.com backslash MSP Radio Every price is a guess about what the buyer will pay.

[00:04:10] AI makes that guess cheap and it puts the guess in the seller's hands. Look at how it works when it's pointed at consumers. McDonald's uses an AI pricing engine to recommend what each of its nearly 14,000 restaurants should charge for every item. As Reuters found and TNW reports. The engine analyzes millions of daily transactions.

[00:04:34] One factor it weighs is an estimate of how much each store's customers are willing to pay. It also pulls prices from the online menus of nearby Wendy's and Burger King restaurants. McDonald's calls it a tool, not a mandate. But Reuters found a June franchisee document showing the company records in detail when owners deviate from what it recommends. McDonald's disputes the reporting.

[00:05:01] The reaction to that kind of pricing in consumer markets has been sharp. Walmart's chief executive, John Ferner, wrote to customers ruling it out. We price the product, not the person. The Federal Trade Commission has published a draft policy statement on it. In business, there's no net letter like that. Different customers paying different prices is called negotiation. And it's normal. What AI changes is how much each side knows when it sits down.

[00:05:30] The fight between hospitals and health insurers shows the business version. The Blue Cross and Blue Shield Association says hospitals' use of AI tools to code insurance claims added $942 million in spending over two years. That's the insurer's own analysis, so weigh it that way. They argue the coding changed while the care didn't. The New York Times reports that AI is now on both sides of that fight.

[00:05:59] One side got better at reading the record, the number moved, and the other side had to build its own analysis to argue back. Now put a buyer on the usage-priced side of that table. McKinsey says the cost of an AI agent completing the same task can vary by as much as 30 times, as Business Insider reports. Picture a task that costs $1 one time and $30 the next, with nothing on the invoice to tell you why.

[00:06:28] The seller meters every run. The buyer usually can't predict its own bill. In plain terms, in a usage-priced market, the advantage goes to whoever holds the better record of what the buyer actually consumes. Right now, that's the vendor. And for most of your clients, it isn't close. Which raises the question of who's in a position to close the gap.

[00:06:55] For an MSP, that gap shows up in two places at once. You buy from these vendors, and your clients buy through you. Either way, somebody sits down to talk price, and the question is who brought the numbers? Start with how few buyers have them. KPMG's Global AI Pulse surveyed more than 2,000 senior leaders across 20 countries, all in organizations with more than $50 million in annual revenue.

[00:07:22] KPMG sells advisory work on exactly this problem, so keep that in mind. 35% said their AI operating costs are fully visible and actively monitored. 13% said they only see the cost once the bill arrives. And the ones with full visibility were five times more likely to report an established return on their AI investment. 15% against 3. Those are companies big enough to have finance departments.

[00:07:52] Your clients sit below that line. The large buyers have noticed, and they're buying the record. AI procurement firm Vertis acquired software pricing company Vendor, as DNW reports. Vendor's chief executive, Ryan New, framed the deal around the company's founding premise. Buyers signing big contracts had far less information than the vendors across the table.

[00:08:16] According to Vertis, the combined data covers more than $75 billion in spend across 32,000 vendors, drawn from 250,000 negotiated contracts. It feeds an AI agent that negotiates renewals on the buyer's behalf. So the enterprise is closing the gap by buying data. A 25-person accounting firm isn't buying Vertis.

[00:08:41] The only party in its world positioned to keep track of what it actually uses is the one that already administers its tenants. That's you. And notice who's paying you to drive that consumption up. So here's the choice. Track each client's consumption yourself on a schedule and keep the history, so you walk into every renewal and every pricing conversation already knowing what that client uses.

[00:09:08] Or find out at renewal when the vendor shows you its numbers and pay what its data says your clients will bear. The first test of that choice won't be a renewal. It'll be your client's first metered bill. Are you and your clients tired of the time-consuming ticket tennis of coordinating meetings and help desk calls? Wouldn't it be better to automate this process with a tool that connects directly to ConnectWise Manage or Autotask?

[00:09:38] TimeZest offers scheduling automation that gives you complete control of your schedule and eliminates the hassle of calendar ping pong. As the only service designed specifically for MSPs, it integrates into your workflow and makes scheduling appointments easy on you and your clients. Plus, you can try TimeZest for free.

[00:09:59] Visit TimeZest.com slash MSP Radio and use the code MSP Radio to get 10% off your first year of TimeZest. In events, Ninja One has a free on-demand webinar on making your security hygiene work visible to clients, what to measure, and how to show it at a QBR. Link is in the show notes. Why do we care?

[00:10:26] Because your clients are about to get an AI bill that changes month to month. And the first thing they'll ask is whether it's right. Before November 2nd, sit down with every client on Copilot, explain the $10 per user default that comes with new licenses, and ask who they expect to use it most and for what work. That conversation starts the consumption history. At renewal, the same history becomes the basis for pricing your own AI line per client,

[00:10:54] with the record behind the number on the table. So what to consider? Export before the window closes. In the Microsoft 365 Admin Center, the Copilot Usage Report can be viewed over the last 7, 30, 90, or 180 days. That's the longest it looks back. A year of a client's consumption at renewal exists only if you exported it and kept it, monthly and per tenant.

[00:11:23] Map where each meter lives. Even inside Microsoft, AI spend reports in more than one place. The Copilot Cost Management Dashboard covers Copilot Credit Spending. A Copilot Credits Usage Report under Reports Usage shows metered Copilot chat consumption. Agents built in Microsoft Foundry are billed as ordinary Azure consumption, not through the Copilot billing policy at all.

[00:11:50] For every AI tool you sell, write down where its usage shows up per client. Otherwise, your record will have gaps exactly where the bill grows. Set the ceiling with the client, not for them. In cost management, a spending policy can be set to limit monthly spending, which caps the credits it can spend each month. Agree that number with the client in the same meeting where you explain the November change.

[00:12:17] A ceiling the client shows is one they can check the bill against, and your consumption history is what tells both of you whether it was right. If this trend continues within a year, as more Copilot features move onto credits, the renewal conversations that matter will be about the metered line rather than the seat count. The MSPs negotiating from their own numbers will be the one who started keeping them before November 2nd.

[00:12:45] This is the business of tech. Want to go deeper than the news? The Small Biz Thoughts community is where MSP owners and operators work on the business, not just in it. Member meetings, a deep resource library, and courses through IT Service Provider University. Everything you need to run the practice you actually want. Join us at smallbizthoughts.org. Interested in advertising?

[00:13:13] Head to mspradio.com slash engage. The Business of Tech is written and produced by me, Dave Sobel, under ethics guidelines posted at businessof.tech. Thanks for listening. I'll see you on the next episode. Part of the MSP Radio Network.