Key facts
- Legora CEO Max Junestrand believes software companies will abandon traditional seat-based pricing.
- The shift is driven by the variable computing costs associated with AI usage.
- Legora has transitioned new customers to a pay-as-you-go pricing model.
- Some law firms have responded positively, linking software costs to specific tasks.
- Other firms remain cautious, assessing AI's role in their operations before committing to new pricing tiers.
Legora CEO Max Junestrand is betting that the traditional software pricing model, based on per-user licenses or 'seats,' is becoming obsolete, particularly with the rise of artificial intelligence. Junestrand argues that the economics of software are being reshaped by AI, which requires significant computing power that can vary greatly depending on user activity.
Legora, a legal tech startup, has experienced this tension firsthand. The company's release of Legora Agent, designed to automate tasks for junior lawyers, led to higher computing costs for some users, even though they occupied a single software seat. Junestrand stated that it no longer made sense for light users to pay the same as those who heavily utilized the software's full capabilities.
In response, Legora shifted its pricing strategy. While existing customers can maintain their current contracts for the core product and opt for AI agents on a usage basis, new customers are now on a pay-as-you-go model. This change has elicited a mixed response from law firms. Some appreciate the ability to directly link software expenses to specific matters, allowing for cost comparisons with external counsel. Legora has introduced a dashboard for usage tracking and a calculator for spending forecasts.
However, other firms are more hesitant, especially those still exploring how AI fits into their operations. These firms are testing Legora's standard AI agents under existing contracts before considering upgrades. Junestrand noted that this pricing shift is crucial for survival for some startups, as heavy AI usage can lead to escalating costs from model providers without a corresponding increase in revenue.
Legora is not alone in moving away from seat-based pricing. Coding startups like Cursor and Lovable have also adopted usage-based models. However, Legora's competitor, Harvey, plans to continue offering seat-based pricing, citing transparency and predictability, while also exploring options for additional usage charges.