Decoding Success, Usage-Based Pricing, and AWS's Strategy in 2023 Part 2 with Puneet Gupta, Founder & CEO of Amberflo

(Intro Narrator at 00:00:00) Today, we're talking to Puneet from Amberflo about the shifting tide in usage-based pricing and why it's crucial to work backwards from your successes. You're listening to Joel Beasley, Modern CTO.

(Joel Beasley at 00:00:17) Hey, Puneet.

(Puneet at 00:00:18) Joel, how are you doing, bud?

(Joel Beasley at 00:00:20) It's good to see you again, man.

(Puneet at 00:00:21) It's good to see you.

(Joel Beasley at 00:00:22) I just got back yesterday from a ten-day trip down to Florida, so it's good to be back in the studio.

(Puneet at 00:00:30) Cool. Family trip kind of thing?

(Joel Beasley at 00:00:33) Yeah. So it started as one of our family friends needed some help going through a rough moment. And then once we were down there, we said, well, it's my birthday that weekend, and family's here. All of our family's in Florida.

(Joel Beasley at 00:00:45) So we just said, let's just stay for a week or so. And then we needed our own bed. You know, you miss your own bed after you're gone for ten days.

(Puneet at 00:00:53) Yeah. But belated happy birthday.

(Joel Beasley at 00:00:55) Oh, thank you. Yeah, becoming an old man now. 35.

(Puneet at 00:00:58) I mean, you're at the top. Don't give me a start.

(Joel Beasley at 00:01:02) Do you feel the same in your mind as when you were 35?

(Puneet at 00:01:06) No. I have to say, you know, I talk about this. In fact, I don't know if I mentioned this to you last time, but I've got two boys. Older boy, he just started as a sophomore, turned sophomore in college this year. And, you know, so I'm starting, he and I are starting to connect at an adult level kind of thing.

(Puneet at 00:01:23) So I go back, I don't know, man. I think 35, I was just in a different zone. I just, I would say not even half as aware of things around me as I feel as I am now or in the last few years. You are way ahead, though. Yeah.

(Puneet at 00:01:38) I was in a daze. So don't use me as, you know, because, yeah, I just look back at that. I was in a different zone. I missed out, I want to say, almost.

(Joel Beasley at 00:01:51) What caused you to have the transition?

(Puneet at 00:01:55) Yeah. And, you know, I mean, this is at a personal level, but, you know, it was actually a professional experience, or a culmination of a series of professional experiences, all kind of packed into a little bit of a time frame that really, in the most profound way, I mean, just altered my thinking, both at the professional level and even at the personal level. What can I say? You know, for me, almost all, I want to use terms, sort of this awakening happened when I joined Amazon. And I've always been a little bit intrigued and, I wouldn't say I had fully understood, but I was definitely a little bit on the curious side of culture and values, but never quite experienced or had a framework to kind of bring it all together, boil it down, and crystallize it where you could say that, you know, I'm living my life on the backs of certain values and principles.

(Puneet at 00:02:51) The thought was always there. It was kind of sprinkled here and there, but, you know, like I said, so that experience, joining Amazon, and maybe perhaps just the role that they brought me in, and more importantly, perhaps the people that I interacted with, which was essentially the top leadership. What can I say? I mean, that really helped crystallize it in my mind. And not just in my mind, but actually then the implementation of it. The frameworks, the actual nuggets, the takeaways of, you know, decision-making, the right from wrong, short-term versus long-term. Right? I mean, these are the big vectors that can really influence and chart the course of, I guess, whatever you do in your life. So that was, for me, a great experience.

(Joel Beasley at 00:03:46) Well, yeah, it's lucky to be around those types of people. And I can totally see how that changes your perspective. For me, when I started to want to change in my twenties, I just started, you know, reading books or watching YouTube channels, and I stopped doing the negative behavior patterns that I was doing. And then I surrounded myself with these people who I just listen to constantly. It's why I like podcasts and YouTube and all of that, because it allows you to spend time with a certain group of people. It's probably why a lot of people listen to the show, right? They want to hear other great technology leaders talk about how they did difficult things and overcame, you know, challenges and achieved them. I've got a couple of questions for you. The first one is, what are the principles and values today that you're living your life off of?

(Puneet at 00:04:37) Yeah. I guess I could distill them out. There are a handful. And when I say there are a handful, I mean, these are essentially sort of the guiding posts, if you would, right? So there are a couple of things just on a day-to-day basis. The posture, sort of how I interact, how I process information, and how I sort of interact with that. So there's some guiding principles there, and I'll spell that out. And then the other is just really more sort of on a professional basis, because, quite frankly, quite a bit of our life is just at a professional level, at work. And then, particularly, you know, when you are doing what I'm doing, as a startup, now we're scaling, but my actions have direct impact on not just the company, but within that, you know, we're all basically made out of people. So it's direct impact to people's careers, their lives.

(Puneet at 00:05:26) So let's start there. I mean, I have a little bit of a guiding principle there at the professional front. It's something that's derived from, something I, like I said, first became aware of at Amazon. So Amazon is notoriously known for their leadership principles. You might have come across them. People now often talk about them. It can come across a couple of different ways. One is, you know, people first just kind of have a sharp view of it when they look at Amazon's leadership principles, because I think there's now 16 of them. There used to be 14 last I was there.

(Puneet at 00:05:59) And then, you know, just people kind of can't even wrap their head around that, you know, 16. I mean, who keeps track of this? All that. But anyways, if you have to kind of live there to really understand and appreciate that thesis. One of those principles is called "as a leader, you are right a lot." Just by itself, it's a little bit of a mouthful. You know, you can't quite even unpack it. It's sort of almost confusing. But to me, it's one of the most profound frameworks that, if you get behind it, my God, man, it is liberating. It will steer you in the right direction. So what is it? "Leaders are right a lot."

(Puneet at 00:06:39) What they're telling you is, if you're operating as a leader — and by the way, of course, the first reaction is, leader, do you have to be in a management role or do you have to have people reporting to you? Leader can be really anybody. An individual contributor can be a leader. So what does it mean as a leader? You have to be right a lot. It simply is asking you to do some introspection and say, you know, in the fullness of time, and within that, take a slice of time, the decisions that you have made — and everybody's making decisions — when you tally them up, have you made more wrong decisions? Have you made more right decisions than wrong? Okay, that's it.

(Puneet at 00:07:15) And so you decide, pick that time slice, do some introspection, and ask yourself, of all the decisions you've made, have you been able to make more right decisions than wrong decisions? So as leaders, you are right a lot. And you would think, you know, well, yeah, I never thought of it that way, because, you know, as leader, as manager, CEO, you are making decisions every day. So you pause and you try to bring some kind of a measurement metric to it. And then really what it's leading you to think is, how do you get better at it?

(Puneet at 00:07:52) How do you get better at making more right decisions than wrong? Well, what it's really telling you is, look, just because you are in a management role or in a CEO role does not cut you slack that you don't have to continuously also uplevel your own skills, to continuously learn and get better, whatever your job is. Just because you are at the top doesn't mean that you've already gotten everything. So I wake up every day and, you know, I have a bar for myself that, what am I doing to keep my skills up? You know, as our company scales, where are areas for me to improve? Forget about everybody else.

(Puneet at 00:08:31) You know, of course, ultimately, I'm responsible for everybody's performance review. I have to do my own performance review. I have to ask myself every day, what am I learning? And then, you know, within that, not rushing to judgment. You know, all of these, as you said, whether now, and then you work your way backwards from there, and then it will lead you to seek out information, new books, categories, right? I have to continuously, every day, day in, day out, first and foremost, uplevel my skills so I can be a better, effective leader and manager. So that's one.

(Puneet at 00:08:54) The other is, you know, it's sort of a culmination of a few other things about, sort of a play on customer obsession. You know, and just this thesis that I learned — again, you kind of have to be there — short-term versus long-term. It's talked about a lot. But, again, one of those things where if you are in a position to step back and whatever the thing that you might be dealing with, if you suddenly look at it from the long-term lens, you'd be amazed the level of clarity that it can immediately bring to whatever issue you might be dealing with on hand, right? And I know I'm saying, I'm not saying that, you know, just throwing the long-term lens at any old problem can get rid of the problem or can solve the problem. But it immediately puts you into the right framework where you are not rushing to judgment or having a knee-jerk reaction to something.

(Puneet at 00:10:04) So that's, again, a little bit of, it takes a little bit of a while. I think it took me certainly a while to kind of develop that muscle. But that's also a framework that, you know, I apply to things, particularly that, you know, when you get encountered with something and you are just, your body wants to react, mind wants to react right away. You know, it's helped me to kind of draw a pause and kind of analyze the things with a cool mind.

(Joel Beasley at 00:10:24) That's the hardest part. That's the challenge right there.

(Puneet at 00:10:27) It is. And that's the thing. But, you know, so you have to enforce, you have to live, you have to practice. And, believe me, yeah, I still, you know, falter, but I can tell you, Joel, it has helped and it has improved. And I can see it even within my family and my personal relationships. It has helped.

(Joel Beasley at 00:10:50) One of the things that has helped me a lot is I heard a leader talking about how, if you show me your calendar, I'll show you your future. And I thought, well, I have a pretty active calendar, but it's mostly my team and reactive. So for this year, I decided to be much more intentional about taking my list of the things that I want for the year and then making sure that there's dedicated time slots on a repeating basis so that those things actually get done.

(Puneet at 00:11:21) Yeah.

(Joel Beasley at 00:11:22) And so I'm about, you know, six weeks into this, and I'm surprised I made it as far as I have without this tool. It's been incredibly helpful. Do you schedule time? How do you consistently improve?

(Puneet at 00:11:35) Yeah. Very cool. Again, you know, again, sort of a lesson learned by watching some of the other folks. Sure thing. Yeah.

(Puneet at 00:11:42) For me, I call it thinking time. There are blocks on my calendar every week that is thinking time. And, you know what? It's probably one of the most important parts of the week for me. And that thinking time, again, some of these things that I just talked about, sort of my own values and principles, it's time for me to a little bit reflect, play back some of the things. Then, of course, also strategic company vision, values, analyze things, look at things. I need that time. If I don't get that time, it's, I just don't feel whole, to be honest with you.

(Puneet at 00:12:30) So, in fact, I probably have a lot more of that than perhaps any other senior or, sort of, you know, somebody who's running a startup. But I feel it is justified. I think it pays its dividends. More importantly, I think it has a hugely compounding effect to everything that I do.

(Joel Beasley at 00:12:39) Is that in the morning time or the afternoon?

(Puneet at 00:12:42) It is usually, I try to have it on Fridays for sure, a little bit. Because, you know, it's one thing to put time on the calendar, I found. The other thing is, you know, there are emergencies and fires that crop up anyways. So despite the fact, okay, well, this is my thinking time, when, you know, if a customer calls or something happens, yeah, I'm going to have to drop the thinking time in favor of that because, you know, customer obsession is one of our principles.

(Puneet at 00:12:59) So I found, anyways, you know, by Friday, things are starting to kind of taper off. So rather than maybe trying to cut off, cut off work early or whatever, I actually pack in, you know, good Friday afternoons. And then the email volume is low. There's fewer interruptions. And rather than, you know, rushing off home or going off with friends or something for a beer, you know, that's my time. And so that really works well, that particular slot on a Friday. But also during the week, I'll have it, you know, maybe on a Wednesday or Tuesday. I kind of see, you know, how the calendar is shaping up.

(Puneet at 00:13:45) So what I have is, yeah, I have sort of set blocks, you know, on my calendar. So Friday usually is the one that never gets moved because there's usually not some competition for that time slot. But during the week, I sometimes move things around. But the time window is always there. I have to have a few hours a week.

(Joel Beasley at 00:13:59) So also in this year, I'm trying this new concept. I did a show with a guy who has spent basically his whole professional life researching attention spans and psychology and the biochemistry behind it and all of those things. And what I found was when I put things after work has started or something like that, that it has the opportunity to get interrupted. So I was searching for a system that would remove the opportunity for interruption. And so the only thing I came up with, and it's been working pretty well so far as long as I have the discipline, right, is to wake up and then have my phone, not touch my phone until after I've done my breakfast, my workout, my prayer and thinking time, all of that. And then I open up the world that is chaos, right?

(Puneet at 00:14:52) Yeah.

(Joel Beasley at 00:14:53) It's not really that chaotic, but because it always, it always starts with something simple. What was throwing me before was someone just say, hey, can you just really quickly do this? And I'd be like, yeah, it'll take five minutes. But then your mind sort of shifts into this work mode. And then to get back out of that, you have to wait until your sleep cycle happens and you reset. Yeah. What's your morning like?

(Puneet at 00:15:12) Yeah. You know, I mean, I've heard of that, and I think, I don't know, you might know better if that's one of the popular frameworks, because I do hear that, and I have others also talk about that, that, you know, a little bit of this sort of uninterrupted prep time or whatever it is, you know, in the mornings. I don't know. I've tried that. It has not worked for me. And I'll tell you maybe a little bit of a contrarian view of why perhaps it has not worked for me. You know, I love what I do. Okay?

(Puneet at 00:15:44) So I understand that, you know, others don't. But for me, there are many aspects of my job that I just absolutely love. I consider myself one of those lucky ones. I like to say to folks, you know, when I first meet somebody or whatever, I'm one of those lucky ones walking on this planet for whom my work and hobby collide in a good way. You know? I'm sure there are many out there. And if you're one of those, you know, I'm just lucky, right?

(Puneet at 00:16:07) So I'm always seeking, you know, for me, technology, trends, you know, you and I chatted about ChatGPT. I had no idea we were going to chat about, you know, ChatGPT. No pun intended. But, you know, there you have it, right? So for me, that is a little bit of the draw.

(Puneet at 00:16:28) So I'm not looking every day to kind of make it really prescriptive. And therefore, I talked about this thinking time. Guess what? A lot of that thinking time is really just thinking about technology, thinking about where things might be headed. And I draw inspiration from that.

(Puneet at 00:16:48) I draw energy. It's invigorating for me. So one, you're right. Sometimes you wake up, so I get on to my phone.

(Puneet at 00:16:55) You know, I'm not one of those early ones that will get up at 5 or 6. I need my sleep, and I'm happy to say so far, I love my sleep. I get good sleep. I get at least I take in seven hours of sleep.

(Puneet at 00:17:08) And if I'm not catching my seven hours at least, sometimes even eight, then I will make up for it over the weekend. You know? So that's my view. When I do get up, I kind of get on my phone. You're absolutely right.

(Puneet at 00:17:20) There are things that you like in the morning that you want to see, but more things that, oh geez, really? Okay. I'll come back to this later. So I'm able to look sort of a little bit compartmentalized.

(Puneet at 00:17:30) But yeah, so for me, that's kind of the reason why perhaps I have not been able to draw those boundaries as much.

(Joel Beasley at 00:17:38) Yeah. Now I get up at 5 a.m., 6, 5:30.

(Puneet at 00:17:41) Good for you.

(Joel Beasley at 00:17:42) But I go to bed at 8. So I'm getting like eight and a half hours of sleep.

(Puneet at 00:17:45) Okay. Yeah. Yeah. Yeah. Cool. Well, yeah. No, that's good. That's a healthy habit.

(Puneet at 00:17:49) You know, something I need to work on, but just given the startup, I mean, I only get home sometimes by 7:30, 8. So...

(Joel Beasley at 00:17:57) I know. Yeah. I know. I've just got these little ones under five. Right?

(Joel Beasley at 00:18:01) So...

(Puneet at 00:18:02) Yeah.

(Joel Beasley at 00:18:02) If I try to stay up after they're in bed, that's, you know what it's like. You've had kids. You know, you put them all to bed, pajama time, all that stuff. Then it's like, well, then that's the time me and my wife have, and it's when we're completely drained. So we decided, hey.

(Joel Beasley at 00:18:17) These kids don't wake up until 8 or so. Let's get up at 5. Yeah. Go to bed right when we put them to bed. Get up at 5, and then we can have two hours in the morning where we can have our relationship and catch up and talk and all of that.

(Joel Beasley at 00:18:31) Yeah. So, you know, we don't hit it...

(Puneet at 00:18:33) Yeah.

(Joel Beasley at 00:18:33) Every day. We don't get it perfect all the time, but it's most of the time.

(Puneet at 00:18:36) No, that's awesome. You know, it's a personal goal. Hopefully, I can turn things around or just adjust my timing. I love mornings.

(Puneet at 00:18:47) I love dawn. I love the break. You know? I mean, I have a little bit of almost a little bit of a philosophical view of that. I think we have limited time on the planet and to see a morning every day. I mean, you know, that's just godsend. You know? So the more you can see that...

(Joel Beasley at 00:19:03) Snap a picture on your phone. Snap a picture. Tag me on LinkedIn or send it to Josh or something. I want to see what you see in the morning because... Yeah. It's so prevalent because I love the morning stuff as well that my iPhone has, you tell me if your smart albums created this thing called Golden Hour, and it's classified and created a smart album because my phone did that because I took so many pictures right at that sunrise time.

(Puneet at 00:19:26) Yeah. Yeah. You know, actually, so just since you asked, so I'll kind of throw this out there. The meaning behind the Amberflo? No.

(Puneet at 00:19:33) Okay. So it's a little bit of a spin now. There's a word in Sanskrit called Amber, which is sky. And if you look at sort of the morning sky, the morning sun, it's glowing orange as you just said, golden. Right?

(Puneet at 00:19:52) And then I guess also in English, the color of amber is that orange glow. That's sort of the little bit of the original genesis of how I thought of Amber.

(Joel Beasley at 00:20:03) Let's talk about Amberflo, and then let's also give the audience some background. So I had Puneet on, I think, last week or two weeks ago to talk about the company, Amberflo, them raising money, their experience, their journey, what problems they're solving, all of that. And we just got off on a ChatGPT tangent and spent an hour talking about that and then said, hey, let's do a second episode. So this is that episode.

(Joel Beasley at 00:20:27) And honestly, it's crushing it because the leadership advice that you gave in this first half is just, I'm loving it. But let's talk about Amberflo. Can you tell me a little bit about what it is, why it got started?

(Puneet at 00:20:39) Yeah. Sure thing. So Amberflo, we're about a two and a half year old company, venture backed. We just closed a Series A round, so $20 million in venture funding. What we do, and I'm sure I would love a chance to unpack it some more.

(Puneet at 00:20:52) We are enabling businesses to shift to usage-based pricing. Right? So more and more businesses are sort of following in the footsteps of largely, again, what AWS and other cloud providers, the public cloud providers pioneered, this concept of consumption-based pricing or consuming services as you use them and then pay for them as you use them. Almost, you know, you pay only for what you use, pay as you go. So this is a new and emerging business model, and we are providing a platform for companies who are wanting to shift from a traditional business model like old school subscription to a usage-based or hybrid pricing plan.

(Puneet at 00:21:37) We provide the underlying technology. We call it a cloud metering and usage-based pricing and billing platform. That's what Amberflo provides. It enables companies to charge and track on usage.

(Joel Beasley at 00:21:49) That's awesome. And so are a lot of companies using this? Who are some of your big clients?

(Puneet at 00:21:54) Yeah. You know, so I'll kind of give you a little bit of a sort of a lead in, and then we'll talk about some of the amazing customers that we've got and what the traction is looking like right now. I think coming into 2023, we can definitively say that this is one of the big transitions that is happening out in the industry, pretty much at a macro level. So much so that I think these kinds of shifts don't happen very often, but when they do happen, they have a huge ripple effect. So we'll unpack that, but it's happening.

(Puneet at 00:22:26) And a little bit of this is sort of intertwined in this whole narrative and debate about PLG slash usage-based pricing. So we'll talk about that. So today, we have many customers. We have ourselves a PLG-based self-service platform that we put out to our website. We invite customers and prospects directly on our website to come in, log in, and use the product.

(Puneet at 00:22:50) And we have customers today, companies like LaunchDarkly, Firebolts, SupportLogic, Coherence Global, many others who are using our platform end to end from beginning through to the end of this lifecycle of doing usage instrumentation, metering, tracking what is being used by whom, when, what, where, how much, then building a pricing plan on top of that, again, using Amberflo, rating that pricing plan, generating on-demand metered invoices so they can present to their customers in real time so customers can see what they are using from the vendor and then collect those invoices and do the billing and payments. So that's the full loop, what we provide as a charity platform. And several customers, the traction is growing. We have a healthy funnel on the backs of PLG. But having said all of that, I want to say it's still early days.

(Puneet at 00:23:47) It's early days relative to the market transition. We are certainly seeing the signs. Market shift in this direction. I think the tsunami is yet to come.

(Joel Beasley at 00:23:57) So you think we're still on the earlier part of the curve for usage-based pricing?

(Puneet at 00:24:01) I believe so. I think we're still in the early part of the curve. And maybe 2023 is the year where I think we get to that inflection point. And I might just say that I think just because there's a lot more activity now. The awareness is a lot more.

(Puneet at 00:24:19) So I think we may be right around at the cusp of that inflection point.

(Joel Beasley at 00:24:24) I'll push back on that maybe a little bit or provide something from my unique world. I think 95% of everything I pay for for my business is usage-based pricing.

(Puneet at 00:24:37) Yeah.

(Joel Beasley at 00:24:37) There's one or two that aren't, but I mean, I feel like we're already there. Now, yeah, that's, I'm a small company. Right? We're 20 people.

(Joel Beasley at 00:24:49) We do media. We're in this very specific area, and that's what I'm revolving around. Right? So there's obviously massive industries and all of these other things. So because I'm in this bubble, that is my industry and my specific size of company, which is a fairly small bubble.

(Joel Beasley at 00:25:03) Right? And it's pervasive there. It's 80-plus percent for sure of the products are usage-based pricing. Is there a lot of other markets where they're not really usage-based yet that they're going to become usage-based?

(Puneet at 00:25:17) Yeah. I, you know, and maybe we should unpack some examples, like maybe in your domain, what are some of the companies? And maybe the fact that you are sort of media-oriented. And I think within that realm, in that vertical per se, yes, definitely, there's a trend or always has been to some kind of a consumption-based model. I say that because, you know, we're a startup, but I can tell you even as a startup, we must already have 30, 40-plus vendors, companies that are providing a service.

(Puneet at 00:25:51) Everything is SaaS these days. Right? So we must have at least 30, 40-plus SaaS vendors that we are subscribed to for all kinds of different services from collaboration to wikis to web meetings to whatever you have. My view is most of them are still on a per seat user-based model.

(Joel Beasley at 00:26:13) Oh, that's a distinct... that, yeah. Because that my mind said that usage-based pricing is per seat, so we're not. We're going to draw a line there.

(Puneet at 00:26:21) Oh, yes.

(Joel Beasley at 00:26:22) Explain that.

(Puneet at 00:26:23) Oh yeah. For sure. Okay. So that is the big draw. So in our view, user-based, if you are pegging your value vector, your price on user, number of seats.

(Puneet at 00:26:37) So take a step back. So why, you know, why that is starting to fall flat? And really that is the crux. The whole motion around usage-based pricing, the whole narrative is to decouple the value vector from the number of users. Okay.

(Puneet at 00:26:53) And here's why. So what started this whole trend about usage-based pricing? So, you know, till about 5, 10 years ago, the classic model was Salesforce. Right? You go, you buy CRM and they tell you, okay, how many users are going to use it?

(Puneet at 00:27:08) And let's just say, you know, $100 to use it for a month. Now what's happening, Joel, is as things move to the cloud, right, the thing that we take for granted, but we never sort of pause to think about or talk about, you know, and it almost sort of gets forgotten in the grand scheme of things are something that we used to talk a lot about at AWS and the tech world: looking at things from first principles. And so what do we mean by looking at things from first principles? Basically, try and boil it down to the root cause or try to boil it down to the core fundamental truths, so to speak.

(Puneet at 00:27:50) And then sort of work your way upwards from there, reason your way up from there. Right? Okay. So what is cloud?

(Puneet at 00:27:57) We know, of course, everybody knows what cloud is. But if you were to summarize cloud in one word, as cloud is the one word, what might be a euphemism for cloud? One word.

(Joel Beasley at 00:28:10) You're going to make me guess?

(Puneet at 00:28:11) No. I'm not going to make you guess.

(Joel Beasley at 00:28:13) Give me the answer, teacher. Yeah.

(Puneet at 00:28:16) So you want to take a guess? I mean, it's the idea.

(Joel Beasley at 00:28:18) No. No guess. No guess today. I opt out.

(Puneet at 00:28:24) Fair enough. So, and you know, I'm happy to be challenged on this, but this was a little bit based on experience and actually sort of living the life, right, in the early days of cloud computing. If there's one word that would be a euphemism for the word cloud, it would be the word elastic.

(Joel Beasley at 00:28:40) I agree.

(Puneet at 00:28:41) That is the fundamental building block, the core primitive of the primitives, as we call it, of cloud computing. So as you nodded your head, if you believe that that is true, then now what you're saying is when we talk about move to the cloud, lift and shift to the cloud, companies going to the cloud, companies building in the cloud, cloud-native companies, whatever you have, what you're saying is that the foundational infrastructure that I'm on is elastic. That is the starting point. Okay. So if your, quote unquote, back-end infrastructure is elastic, then you have to measure and track because it's elastic.

(Puneet at 00:29:22) It goes up. It goes down. And what makes it go up or down? What makes it go up or down is the workload. And then what makes the workload change?

(Puneet at 00:29:31) Well, the workload, it's the consumption. It's what is being used. Okay. So this is the first principle. This is why, in place in my mind, you know, as you think, as I said, from first principles, from root cause and the fundamental truths, and you work your way up from there.

(Puneet at 00:29:51) Why we are seeing today this talk about PLG, usage-based pricing, shift from subscription to usage-based pricing? Okay. So there's a lot more to unpack right in the middle here, but let's fast forward. Okay. So now back to per user pricing versus usage-based pricing. If you're in the cloud, you're running a, you build a CRM product, and you're going to price it by $100 per user per month.

(Puneet at 00:30:20) Clearly, different people are going to, and different users are going to stretch your product in different ways. You know? I'm one of those unlucky sales guys who's just not getting enough leads. And, you know, I just don't have a lot going on. So but the guy next door to me, you know, he's crushing it.

(Puneet at 00:30:37) Right? Obviously, he's banging more on the CRM tool than I am. Usage profile is different, user by user, company by company. Right? However, you know, we got through this whole aberration period where somebody invented the fact, okay, well, let's just charge a number of users.

(Puneet at 00:30:55) And that generally seemed to be sort of a high watermark where, fair enough, you know, we'll just randomly price it, the per user seat, at a price point where we know our costs are covered and there's a healthy margin, and then the world goes on. But what's happened now is because your cloud is elastic, you're finding that some users are not as profitable as some of the other users. And inside that, you really kind of take a closer lens to it. Some users might actually be not profitable for you. Right?

(Puneet at 00:31:23) But because you sort of have the one size fits all, you've never had the need to kind of do this instrumentation. But the more and more everything is running in the cloud and cloud is becoming elastic, you're finding yourself that, you know, there's some variation here. I need to optimize. I need to drive a greater operational efficiency lens to sort of balance this front-end usage that is coming in to how that's translating to my back-end cost and the usage that I do on the cloud infrastructure side. So for the first time, as you know, Joel, that is the genesis of this whole movement of usage-based pricing.

(Puneet at 00:32:02) Companies are trying to align the usage on the front end and map that per unit usage to per unit cost on the back end. Not always a one-to-one map, but the sooner you get onto this track, the better you are positioned for the long term for living and growing and competing in the cloud.

(Joel Beasley at 00:32:27) I love it. You sold me. I'm good. Yeah. First of all, thank you for helping me understand because you're correct.

(Joel Beasley at 00:32:32) A very small percentage of the tools I use are usage-based. I would call things that are per se usage-based because there's still things that are, I guess, like larger contracted. I guess it's still per seat, but I in my mind, and this might help you as you're marketing and approaching people, I had correlated usage-based with per seat because some of the softwares I use make me do contracts that are very hard to change when you have new users, and they'll say, oh, if you've got eight users and you're going to go to nine, that's great, but you're going to be locked in at nine for two years, and you can't go back down to eight. I love you, ZoomInfo, but it's frustrating.

(Puneet at 00:33:14) Right? That's

(Joel Beasley at 00:33:14) right. Like, right? And so I'm like, look, my business is expanding and contracting. I could hire two or three salespeople, drop them off, and, like...

(Puneet at 00:33:22) However, the company grows.

(Joel Beasley at 00:33:22) Right? In the past three years, we've gone from three to 20 people. So it's really hard if things go up and down, as you know, in a startup to sort of go back, and that happens to be one of the most expensive tools that we use. So...

(Joel Beasley at 00:33:36) I had, for some reason, connected those together, but you've very plainly explained the differences. And I've gotta admit, I agree with you. I have a three-month, a quarterly reminder on my phone that says revisit Elon Musk first principles because there's this great YouTube clip of him explaining it, and that was the first time I had heard it. And I said, I never wanna forget this.

(Joel Beasley at 00:33:57) But you're exactly right. The reason why my first company that had servers that were at a colocation data center back in the earlier two thousands, the reason why we switched to cloud was because of the elasticity. The ability for me not to have to call Rackspace. They'd be like, oh, there's a ticket, seventy-two hours, you'll have it up, and then you'll be able to do what you need to do. And I'm like, I don't wanna do that. Everyone's telling me about Amazon.

(Joel Beasley at 00:34:26) I'm gonna go over there and just, I can do it immediately, and now I've got an easier life, and then I only pay for what I'm using. I don't have to pay for all this equipment and these setup fees and all of that. And I agree with you. I would love it.

(Puneet at 00:34:39) Yeah.

(Joel Beasley at 00:34:40) So now I wanna talk about how this happens. So let's, we've got ZoomInfo, we've got Microsoft Teams, we've got Slack, we got all of these. You know, they're charging per seat often as far as I know. I know Slack has some cooler stuff, a little turn people off that are inactive, which is great. You know? But how does a competitor come in with a product that's equally as good but on usage-based pricing and then take, is that what's gonna happen? The competitor's gonna come in with usage-based, and then they're gonna have to adapt.

(Puneet at 00:35:11) 100%. That is what is happening. Yeah. This is one of those pivotal moments. I mean, I sit in one of those who've been around for a while. This is that classic Siebel to Salesforce shift in the industry. You better get on this train now because increasingly all the dominoes of reasons for why usage-based pricing is not right or there's friction, lacks visibility, predictability. Let me just kinda net all of that out, and it's just, you know, one simple sentence. Folks, all of those are not a limitation of the model. All of those concerns are the fact that you do not have right tooling in place.

(Puneet at 00:35:55) And let me just say that again. There is inherently nothing wrong with this business model. It is the most fair, transparent, forgiving, transparent even. It is the most high-hitting, high-value, high-return business model that's out there. Don't take my word for it. If there was any cracks in the foundation of this business model, Joel, anything, even remotely, AWS would have dialed it back many years ago. Okay. Forget dialing it back. They're doubling down on it. They're going into other areas. They're going farther up the stack.

(Puneet at 00:36:32) How are you going to categorize? They're going into traditional SaaS applications, core applications like CRM support, and they're throwing the usage-based pricing playbook at it. It's a gift that keeps on giving. If you get your company on the usage-based pricing and billing model, it's a gift that keeps on giving. It compounds.

(Puneet at 00:36:54) You never have to look back. You are going to increase your pace of innovation. You are going to drive organic growth. You're going to have happier customers. You are going to have a product that by nature of this business model becomes more sticky, exhibits a finer UI-UX alignment with your users' needs.

(Puneet at 00:37:17) Okay. Just all-in, all around. Now I understand there's friction. Right? Because if you're coming and you've been if you've been sitting in the old model, this is a profound change. I understand that. I get that. Well, at some point, you'll have to do it. I'm sorry to say. I mean, you know, a shift is happening and back to what you said.

(Puneet at 00:37:37) So if you're not doing it, somebody else is already thinking in your domain, in your business, in your vertical. And if they haven't already launched, there's a startup that's actively working. Just simply, they're gonna take your exact same playbook. They're gonna not even have to out-innovate your features. Only thing they'll have to do is come to market even with slightly lesser product, but just do it on the back of the usage-based pricing and billing.

(Puneet at 00:38:03) And, you know, and here's the thing. Right? So, again, not talked about often and, you know, sometimes this comes across wrong ways and rubs people the wrong way. But I, yeah, I'd stick my leg out. I'd say, I don't know, I'd say at least one-third, Joel, maybe or at least one-fourth, right, of the tech's GDP today is shelfware. Thanks to subscription model. People have paid and have not used. People have paid and have not used the right amount.

(Joel Beasley at 00:38:33) Agree with that. I have had behind-the-scenes conversations with different companies and SaaS owners and stuff where their usage is, like, 20 to 30% of seats. And they're not small companies. They're household names, and I was, like, blown away. Right?

(Joel Beasley at 00:38:50) I don't actually, I've none of these people I don't think I've had on the podcast. I just do go to dinners and events and stuff, and I got to talk to some people. Obviously, when I was doing capital raises and all of that, I got some good information. But my mind was blown when I saw the usage rates of what people will pay for. And then I thought, well, I guess people pay because they like the ability to have access to it. Right?

(Puneet at 00:39:15) Yeah. Yeah. And so that's why, you know, I think it's now coming full circle. I think it was to say, you know, this kind of the chickens coming home to roost now. It's, I think customers are waking up and, you know, figure out, you know, if you can, you know, you can be on two sides of the fence. Either you can hold out and you can blame and you can try to say, you know, well, you know, subscription is still the right model, but no. Usage-based pricing and billing is the more fair and transparent. And if you look at it from that lens, you can actually draw out the dividends that it pays. Like you said, you know, and now there's a lack of research. Forget research. There's actually now plenty of data. Companies showing up on IPO on the backs of usage-based pricing are demonstrating that consistently they're driving greater retention rate, which is basically their frequency and renewal cycle. That people on usage-based pricing have higher renewal rates.

(Puneet at 00:40:05) Okay. Because it's organic. Like you said, it's a gift that keeps on giving.

(Joel Beasley at 00:40:08) What do you mean higher renewal rates? All you do is use it whenever you need it.

(Puneet at 00:40:13) Exactly. Yeah. Right?

(Joel Beasley at 00:40:14) It's always on.

(Puneet at 00:40:15) Yeah. Yeah. So, you know, the this whole subscription and, you know, we have a little bit of a sort of a deep hole and point of view on this that the whole subscription, because when you said earlier that, you know, a lot of my ways or services I'm consuming are usage way, but that's because we, you know, you had a little different lens of viewing users as sort of usage. But that's not it. See, however, Joel, I consider, you know, this whole subscription thing that quite frankly that Salesforce sort of pioneered.

(Puneet at 00:40:44) And I wouldn't blame them for it because when I first heard of subscription, as you can tell, I've been around for a long time, but, you know, when this shift to subscription happened, I think it's one of those things where it was well-intentioned. It never really materialized because, again, I think people short-turned it, short-tracked it. And here's what I mean. So the intention was good because when we first heard of subscription, I remember still it was under the banner of that, you know, vendors, companies will have to renew their mandate with their customers on a monthly basis. Subscription, monthly subscription price.

(Puneet at 00:41:17) Every month, these companies will have to renew their mandate with their customers that, hey. I'm still providing you value, so renew us for another month. Renew us for another month. Well, guess what happened immediately? Everybody went into this twelve-month or thirty-six-month sales cycle.

(Puneet at 00:41:30) Because I challenge you, find me one company. Maybe they're onesie-twosies, but I'd say I'd say 99.99% of the companies out there who are using user-based subscription model, they will always have, well, okay, per-month pricing of this, and there's a 20% discount if you sign up for twelve months.

(Joel Beasley at 00:41:45) Yes.

(Puneet at 00:41:45) Okay. So I sign up for twelve months. You take my money right up front for the whole year. You've gotten the money. There's no incentive for you to track anything because I already paid you for the whole year.

(Puneet at 00:41:57) Right? There's no incentive for me tracking anything because I'm already out of the money. It's not like if I track something and I go back to you, I'm only using this much. None of these contracts pay you money back, right, because nobody's really used to instrumenting in the first place. And then the renewal cycle happens in twelve months, and then you, again, renew for the same year.

(Puneet at 00:42:14) Okay. Well, how many employees are you growing? Then we signed up for more, but nobody's really tracking it. Therefore, this shelfware. Right?

(Puneet at 00:42:21) But the thing is, you know, this whole subscription thing is really an outlier in the grand scheme of things. I like to almost like, if you position in the entire spectrum of software life cycle from the dawn of software, whatever that was, nineteen-fifties, sixties, seventies, really, let's say. Right? To now, subscription is, you know, is really sort of an outlier event. Like, in the grand scale of things, everything about, you know, just planetary concept, you know, the life of Earth, you know, subscription's like this little blip that happened because it was never meant to be.

(Puneet at 00:42:53) It's an aberration because in economic terms and in human terms, the world revolves around consumption. You just, you went to Florida, you mentioned. Right? You pay for the nights you stay. You pay for the miles you travel.

(Puneet at 00:43:08) You pay for the amount of food you eat. Right? Everything is just, you know, quite largely usage-based, based on the value and how much of value you're extracting and you pay.

(Joel Beasley at 00:43:17) Except for at Disney. Oh, man. I was like, we gotta pay for breakfast again? It's like a mortgage payment. No.

(Joel Beasley at 00:43:28) That's...

(Puneet at 00:43:29) right. Disney is getting in the way of a burger. But, anyways, but that's what, you know, the world that's generally as we have known it and have we have experienced it has been in a consumption, you know, when you go buy grocery.

(Joel Beasley at 00:43:43) So sorry to interrupt you, but it's funny that you say that because the records I'm referring to was a buffet. And you can actually see in the restaurant business, the buffets are some of the worst models ever, and they're a pay-for-all-you-can-consume type model, which is like a per-seat type deal. Whereas, you know, 80%, 99% of the other restaurants, you're paying for consumption.

(Puneet at 00:44:05) Yeah. And I would I would even say, see, okay. So here's the, I think it's a good nuance. See, to me, from my lens, even to me, that is more consumption and usage than subscription because you could have different buffets right across the street at a lower restaurant, you know, the buffet would be $10 or $20, you know, at a, I don't know, you know, at a Bellagio or something, you know, it's $50 or a $100. Right? We, you, but you're getting for what you're paying in it. I mean, you look at the spread at the higher-end buffets. So, yes, while it is kinda sort of per-seed, but there is a value-based pricing, and it is based on sort of consumption on, you know, what you might consume. So there, I would still sort of consider that a little bit more sort of still on usage-based.

(Puneet at 00:44:51) Anyways, but that's, you know, that's...yeah. Yeah. That's sort of my take.

(Joel Beasley at 00:44:56) So I think there's a couple questions on people's minds that I wanna get through pretty quickly because we're coming up on time. The first one is you're discussing not just the technology, Amberflo. This is a massive change in the industry. Are you helping companies who want to move to this model understand how to do it, or are you only providing the tools to do it?

(Puneet at 00:45:19) We're doing both. And it's both side of our company that we are now scaling and building, because there's help needed on both the fronts. And quite frankly, because we believe we're still in the early cycle of it, then, you know, we're certainly here to help. We feel lucky. The fact we've spent time at AWS and have seen this model at scale.

(Puneet at 00:45:42) So let's just say, you know, just seeing what are their, so the curves on the elbow, so to speak. So they're just frameworks and best practices that we have drawn from that that we certainly engage with our customers, help them understand a lot of things. Some of the things, at least, we've talked about in this discussion about the value, how to think about it, how to conceptualize, how to draw the framework from shifting from subscription pricing to usage-based. And within that, what are the systematic ways, what steps you have to kinda go through? So that's kinda a little bit on the framework side, best practices side.

(Puneet at 00:46:21) We certainly outline that. And quite frankly, some of that, those best practices are also what's flowed into a product naturally. So when they engage with the product, the product experience is designed to then deliver on those best practices and take the those customers from step one to step two to step three.

(Joel Beasley at 00:46:39) Do you have material on your website where let's say people are listening to this, now they wanna go have this conversation with a coworker and they, you know, with, like, a PDF or something, talking points, do you generate material like that currently?

(Puneet at 00:46:55) Quite a bit. And so I would just first invite folks, you know, just wanna have a discussion, not sure about this, wondering about this, actively thinking about this, come on to our website, amberflo.io. Connect back to us. I'm happy to have a conversation with you, anybody on our team. We have several case studies, some of the customers that I mentioned, earlier, but look at some of those customer testimonials, how these companies have gone through.

(Puneet at 00:47:20) So most likely, whoever you are, whatever domain you're in, I think there's a good chance somebody else has already walked that path, that, you know, you can draw some lessons from or certainly extract some best practices. One of the things that comes up when people start thinking about this shift is right away, it may seem a little bit daunting. Now what, what ought to be my pricing plan, you know, on what vectors, what value vectors should I charge on? And how many should I charge on? Like, you know, should it be one, two, four, five?

(Puneet at 00:47:52) So all of that, I can, you know, just to your audience, I can tell you, don't be fazed by it. Don't be afraid. You know? Embrace it. This is, they are frameworks. They are blueprints. There is a methodology. Best thing I can again say to you rather than me just sort of pontificating is ask yourself the following, you know, everybody has seen the cloud providers, AWS, Google, Azure. AWS, I think today has upwards of 300 plus different services, whatever. I can guarantee you, if you were to go look around on the Internet, there's not one article where AWS had to retract their pricing plan for any one of the services where they said, mea culpa.

(Puneet at 00:48:33) Oh, we got it wrong. Let us take this back and fix it. Not a single one. So this is not an accident. This is not a hand-wavy. This is not, there's a process. There's a methodology. You will come out on the right side of it. You can get it right on the first try. So we'd love to share some of that if anybody's interested.

(Joel Beasley at 00:48:55) Thank you so much for listening. And if you found this episode useful, please share it with a friend or colleague who you think would get value from it. And if you have topics that you'd like to hear discussed on the podcast, either add me on LinkedIn or send me an email: [email protected]. Every time I get an email or LinkedIn message, it absolutely makes my day and inspires me to keep going.