Consumption/usage-based pricing and licensing evolution

“The DPS contracting vehicle provides full access to the platform with a unified rate card for all our capabilities instead of purchasing on a SKU basis. You commit a dollar amount for a term and draw down based on consumption against this rate card, allowing you to utilize all platform capabilities.”

“We are still in the early stages of this, as it has been generally available since April. Expect to start seeing results within about a 12-month period.”

“Our DPS licensing model continues to see strong traction. We closed roughly 200 DPS deals globally in Q1, bringing total DPS customers to over 900, representing more than 20% of our customer base and over 40% of our ARR.”

“As we have shared in the past, we believe our simplified cross-platform DPS licensing model will further contribute to NRR over time as customers can immediately access newer solutions, encounter less friction in the buying process, and enjoy more flexible, predictable, and transparent pricing, all of which should lead to more consumption of capabilities on the platform and deliver more business value to customers.”

“It's a great question. And the answer is that we have higher expansion rates for DPS customers than non-DPS customers.”

“DPS continues to outpace expectations, to be honest. We have 30% of our customers, 50% ARR now on DPS. We launched it just in April of last year.”

“It gives customers much more flexibility to deploy more capabilities more rapidly and consume faster with less friction.”

“Our DPS licensing model is rapidly gaining traction. We closed roughly 250 DPS deals globally in Q2. Total DPS customers now represent nearly 30% of our customer base and 50% of our ARR.”

“We believe DPS customers with full access to our platform will trial more platform capabilities and adopt DynaTrace more broadly within their IT environments. This should lead to faster consumption, possibly an earlier expansion, and a future net retention rate accretion.”

“And we're seeing early signs of this playing out with DPS customers leveraging twice the amount of capabilities and growing consumption at two times the rate compared to our SKU-based customers.”

“On the DPS front, I think the main learning was that we were constraining our customers, and this is now dating back a few years ago to our legacy pricing model, where we were constraining our customers in growing based on a legacy pricing model that forced separate contracting across all the individual modules, and it wasn't providing them access with the comprehensive platform.”

“The result of this is a sales motion that's expanded quite broadly over these last couple of years to be more focused on end-to-end observability, more focused on cloud and AI native, which is a strong and emerging area of growth for us.”

“DPS customers with full access to all our platform capabilities adopt roughly twice the number of capabilities than those on a SKU-based model. They also consume at a much faster pace with consumption growth rates nearly twice those on a SKU-based model.”

“The big driver for us when we think about NRR is really customers consuming more and more of the platform, which is really them consuming additional products more so than more of any one product.”

“So full-on licensing of this AI agents to us actually come across this continuation of seat counts as well as compute consumption will continue to increase. So that's actually a massive coming opportunity when it comes to agentic AI deployments.”

“And while we have historically licensed by seat count, we anticipate moving towards a hybrid model that incorporates capacity-based and data volume pricing, especially as AI enhances productivity but retains user-driven workflows.”

“So today, we already have capacity-based licensing across products like migration, and also IaaS and PaaS data protection and governance. So we have extended very much into the compute infrastructure, not only just productivity workloads—that is, Office Cloud and Google Workspace—but the compute side, which is Azure, GCP, and AWS.”

“As technology evolves, we are enhancing our go-to-market strategy to prioritize bundle offerings, building on last year's successful launch of our Control and Resilience packages.”

“we believe the winners will offer the market two things: a true platform offering that provides pricing flexibility and ultimately leans on consumption-based and cost-saving-focused licenses, and end-to-end vertical organic integration ranging from development to go-to-market to best-in-class cloud ops and security to continuous enhancements and improvements.”

“In terms of licensing, we follow the market makers. In the productivity side, whether it's Office Cloud or Google Workspace, it's very much the whole market is seat-based licensing. On the compute side, whether it's GCP, whether it's Azure, whether it's AWS, that's very much consumption-based.”

“So GitLab does have consumption pricing for that. For us, it's not a material part of our revenue yet. We do allow people to bring their own runners, so to bring their own compute to bear for CI and CD.”

“Additionally, in April last year, we raised the price of our Premium tier for the first time in five years. Thus far, customer behavior has been in line with our expectations, and we expect to be $10 million to $20 million of incremental revenue in FY'25.”

“Customers who use our Premium and Ultimate tiers now have access to both Duo Chat and Code Suggestions. In addition, GitLab Duo Enterprise is now available for GitLab Premium customers.”

“By lowering barriers to adoption and expanding the serviceable market with more flexible packaging, we believe we will be able to unlock more Duo adoption in coming quarters.”

“Our Plus SKU saw more than a 30% price uplift over Pro in Q2. Furthermore, since launch, we're seeing a greater than 3x increase in average deal size versus the comparable Pro upgrade.”

“NowAssist co-generation capabilities within creative workflows remain a powerful productivity tool of choice as well, appearing in over 70% of our Gen AI deals.”

“the way we sell that today is in a hybrid kind of pricing structure. You buy a subscription to our analysis use case usage, and then you burn it down based on the number of calls you make.”

“Junaid, great question. Without giving too much away, we have a lot of work underway to make it super easy for customers to consume additional services and capabilities as they receive the core.”

“Our flexible platform pricing model, Q-Flex, contributes to our platform growth efforts. We beta tested Q-Flex in Q3 to accelerate customer adoption of the Qualys Enterprise TruRisk platform.”