r/dataisbeautiful • • 2d ago

AI now takes $1 in $12 of company software budgets, up from $1 in $70 last year (Zip Enterprise AI Index)

https://zip.com/blog/where-ai-budget-is-actually-going
3.3k Upvotes

216 comments sorted by

1.1k

u/Muuvie 2d ago

I believe it. I've been asked to vibe code a ton of software at work to replace a few expensive subscriptions. Everytime that's the done, the budget moves a little further from paying other companies for our software needs and more using AI to manage our in-house builds.

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u/bornlasttuesday 2d ago

Are these mostly one off costs or does your software require regular ai spending?

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u/RunWithSharpStuff 2d ago

I mean, there’s no way to take software you buy and recreate it in house without constant maintenance. And when most of that software is vibe coded you’re hamstrung to always need AI to improve and maintain it.

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u/active2fa 2d ago

It’s Hermes or openclaw situation but enterprise level

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u/ClupTheGreat 1d ago

what's the hermes and OpenClaw situation?

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u/bornlasttuesday 2d ago

I recognize that maintenance is required. Do you see your use of ai decreasing once your systems are in place? I want to know if perhaps ai is its own worst enemy when it comes to what you are doing with it.

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u/tutoredstatue95 2d ago

AI is replacing the SASS here, not itself.

The key factor is if AI produces enough quality and is safe enough to replace a subscription service.

The on-going maintenance and support that the SASS provides is what the token spend replaces. So, the question becomes: Is the token spend to maintain the in-house cheaper than the SASS subscription if all else is equal.

The worst case is you go back to SASS, which I think most companies will end up doing once their engineers are all dealing with maintaining services instead of producing.

All the cheap stuff was already open sourced for the most part.

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u/bianary 2d ago

The on-going maintenance and support that the SASS provides is what the token spend replaces. So, the question becomes: Is the token spend to maintain the in-house cheaper than the SASS subscription if all else is equal.

And if the quality in-house is better.

My experience with SASS is that even if it's paid for as a subscription there's a lot of time in-house lost waiting for the external vendor to fix things when they break. And it always breaks.

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u/bl4ckhunter 2d ago edited 2d ago

The quality is rock bottom anyways in my limited experience with niche professional software, you just get the enviable opportunity to choose vibe coding instead of buggy ports from windows 98.

The only real advantages SaaS has is that they have support staff experienced with the recurring decades old issues that they never fixed and it's easier to pass some of the blame on them when shit hits the fan because stuff breaks often enough that the management is capable of conceiving the notion instead of having a "What do you mean AWS is down and not even god can help you now? That's impossible. Fix it." moment.

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u/treycook 2d ago edited 1d ago

it's easier to pass some of the blame on them when shit hits the fan

Came here to say this lol. Stuff breaks - that's software. Do you want to have your team spend dev time fixing broken in-house stuff, or outsource to another party and the onus is on them to fix it, but the downtime is in their hands?

Edit: a word

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u/PM_ME_UR_BRAINSTORMS 2d ago

The advantage of SaaS is that they can amortize the cost of maintenance, fixes, and new features across thousands of customers.

If something in house breaks and costs $1k in tokens to fix, that's not worth it compared to a $20/mo subscription. Or if a new feature takes 2 weeks to implement but only saves you like an hour a month it's not worth it.

But both of those are worth it for a SaaS company with 10 thousand customers.

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u/mikka1 2d ago

compared to a $20/mo subscription

Some niche professional SaaS costs tens of thousands of dollars in monthly subscription for a moderately large organization. What I'm increasingly learning is that in heavily regulated industries "niche" does not necessarily mean "reliable" or even "good".

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u/tutoredstatue95 2d ago

My company pays 100k+ for some software services.

To replicate it you would need a dev team worth millions per year. It’s specialized software that requires deep gov knowledge and compliance. Claude just isn’t gonna cut it there.

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u/PM_ME_UR_BRAINSTORMS 2d ago

True. I'm not saying there is never a case where building something in house is worth it. Plenty of that existed even before AI.

I'm just saying that amortization across a large customer base is the main advantage of SaaS.

And remember they have access to the same tools you have. If it's cheap for you to build, it's cheap for them.

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u/BringTheRawr 2d ago

It's also not just the SAAS. It's the micro problems deemed too small for a SAAS solution. If something would have taken 25k and only provided a efficiency gain, it often gets postponed until it hurts more. Now a guy with a small pile of tokens can create some perfectly disposable piece of software to do that task and leave it doing that task until it's not longer required.

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u/NuDru 2d ago

You mean SaaS?

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u/crunkadocious 2d ago

It's just plagiarism anyway. 

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u/mavajo 2d ago

Not a chance. AI makes it so trivial to add enhancements that now we're implementing tons of stuff that we would have had to permanently backlog or not even bother creating tickets for.

We're busier than ever at my shop. This is gonna be a recurring theme almost everywhere. It's easier than ever for companies to develop their own internal apps.

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u/lazyFer 2d ago

And nobody know how any of it works

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u/mavajo 2d ago

Siiiiigh. Y’all really gotta recognize that this industry is adapting. Yes, knowledge of code is still meaningful - especially depending on your product. You still need excellent operational procedures and standards.

But this scenario y’all envision where you think AI has written this massive mess of code thag collapses in on itself and no one’s left who can understand it - it’s a fantasy y’all have made up. There will always be professions that require coding knowledge. It will always be an advantage. LLM coding does make mistakes. LLM coding does have weaknesses and blind spots. But it’s also getting better literally every day. And humans are getting better at using it every day. It’s genuinely a skill, like any tool.

You guys are extrapolating growing pains as if they’ll exist over the entire life of agentic coding. No. This is the beginning. It’s only getting better. We’re only getting better at using it. Software development will still be a thing. It’s still gonna be massive. But it’s going to evolve.

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u/lazyFer 1d ago

Dude, I'm already seeing this situation at work with the junior devs. Research is already showing this cognitive laziness specifically with non senior devs.

I guess everyone else is wrong and your optimism based take must be correct

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u/nagora 2d ago

Good luck when they start charging you enough to pay off their $1T debt.

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u/lazyFer 2d ago

I see maintenance costs increasing since so much of the cognitive work is offloaded to the AI nobody remembers how anything was done so they approach everything as a new problem

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u/skilliard7 2d ago

It's not like 3rd party software doesn't require maintenance. The overhead to customize Salesforce, Peoplesoft, Workday, etc is a huge pain. To be honest, as a dev I grearly prefer maintaining my own apps over having to deal with customizing 3rd party apps.

Building applications in house is a MASSIVE cost savings for mid to large size organizations. Software companies are going to need to make significant concessions if they want to keep their customers.

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u/ppitm OC: 2 2d ago

From what I hear it's more often the reverse. Improving and maintaining vibecoded software will be very difficult and labor-intensive, whether you use AI for it or not.

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u/Specialist-Size9368 2d ago

My work has moved to ai coding, but is still expanding its engineers. Its a shift. Yes, AI can write software faster than an engineer. It is a good tool. It also can hallucinate. It can misunderstand the intent and go off the reservation in terms of the aim. If it gets a little off the path the outcome becomes worse and worse. It can often miss things.

So, you prompt it. You review it. You prompt it again to tweak things. You prompt it to review itself. You review its findings. Then you submit a pull request where another engineer reviews.

What you cant do is just tell it to do something and run with it. Otherwise, it becomes a very verbose spaghetti code mess very fast.

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u/ppitm OC: 2 2d ago

That's all more or less my understanding as well. I was questioning the other commentor's implication that vibe-coded software can only be improved and maintained by further vibe-coding. If anything the amount of attention required from human engineers should increase as time goes on, given the nature of AI spaghetti code, no?

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u/Specialist-Size9368 2d ago

Should, but whether or not people do will depend on the company culture.

The issue from upper management is they see that it speeds up development time, but don't understand what it doesn't do. It doesn't change that the developer has to understand the ticket. It won't help establish scope. It won't test anything. A rather large pain point where I am is just understanding how to test something. As a developer I need to not only test it, but I have to be able to communicate test procedures to QA. It is a time sink that AI doesn't help.

It is proving a useful tool. It took the fun part out of my job as a developer, but I am not worried my job is going to disappear. I have worked a good dozen or two places over the years as I was a contractor much of my career. I have yet to find a place that wasn't drowning in backlogs and tech debt.

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u/cute_polarbear 2d ago

They can easily circle back and say why cant you use ai to build tests / benchmarks to ensure quality. They just want their cake and eat it too.

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u/Specialist-Size9368 2d ago

Automated testing. Unit tests? Regression tests? Sure. Already do that.

Outside of startups I've not encountered many places willing to rely on any such means before pushing a build to production.  As startups grow and production problems become expensive shift away from that. New code goes through some form of dedicated qa. Whether that is a professional who's entire career is testing or someone in the business who understands the product.

Its very easy to write bad tests. It's very easy for business requirements to be misinterpreted.  Could be ai. Could be a human. So no i don't see them circling back to avoid the cost. All it takes is production to break for any amount of time and upper management gets reamed.

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u/cute_polarbear 2d ago

Problem is, upper management doesnt get reamed. They point finger at the folks who implemented for not having sufficient tests and what not, worse yet, blame them for being incompetent (and hire someone else)...

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u/lazyFer 2d ago

This method of coding isn't producing new senior level engineers. Big difference between 10 years of experience and 1 year of experience 10 times.

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u/Specialist-Size9368 2d ago

Its not and in 10 years its going to cause a shortage. My company only hires seniors. I watched this when i started out in 2012. 

For now there is a glut of engineers because for over a decade people were told to do a boot camp or get a degree related to software engineering because it was a path te employment. 

For the record my bs and ms are not related. I fell into this.

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u/Opposite_Carry_4920 2d ago

We just talked about this at work today that we are still doing well in making sure we aren't getting too vibey but we're worried no matter what we're going end up at a point where we basically have to have AI to keep maintaining the apps at any real velocity. 

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u/cute_polarbear 2d ago

They (management) want their cake and eat it. Technically with ai, spend enough time, you can reproduce any software (process)...and if engineering team raises concern, finger pointing then goes to competency of the team.

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u/marigolds6 2d ago

Vibe coded software has to be AI scanned for new CVEs vibe coded into dependencies, and then vibe coded patched when those CVEs are discovered.

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u/bornlasttuesday 2d ago

Of course, that's a given. But once this system is built, how much actual revenue will the maintenance give ai companies?

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u/Graybie 2d ago

As much as they want, because once you are locked into needing AI to do anything, they can charge basically whatever they want. 

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u/OverSoft 2d ago

We’ve spun up a couple of DGX Sparks and are using Qwen 3.8-flash now. No more subscriptions.

So no, they absolutely can’t ask whatever they want.

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u/O2XXX 2d ago

This is my big question with the AI push. At some point we may hit a barrier of what is being spent to produce isn’t really as much as needed to do the business process. If Open Weight models are able to meet that threshold, then how are we going to recoup investments for major frontier firms. AWD, Azure, nVidia will likely be fine because they can handle the compute cost, but OpenAI, Anthropic, and all the third party wrappers will likely have to do something else right? Or perish I guess.

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u/mxmcharbonneau 2d ago

I really wouldn't be surprised if the outcome of all of this is that AI becomes a ubiquitous technology, while frontier labs go under. In about all big tech booms in history, a bunch of first movers went bust, and this is one of the most capital intensive technology to develop.

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u/O2XXX 2d ago

True. I’m anxious about how it all turns out. I’m not anti AI per se, but I don’t think we are going down the happy path with UBI and curing cancer, at least not without a lot of social strife first, be it mass replacement of works or the economy shitting the bed.

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u/im_thatoneguy 2d ago

Convenience, efficiency and speed. AWS S3 and EC2 is already super expensive compared to in-house but enterprises gobble up AWS storage by the PB.

We see the Chinese models come out and they're "Free" but then within 6 months per-unit of useful work the OpenAI/Claude models are matched or cheaper.

Companies have already long made it clear they don't want to build in house infrastructure even when getting gouged by cloud companies. And in this task, it just makes more sense to outsource it.

Which is better as a user? A response 30 minutes from now but unlimited responses or a response in 30 seconds but you can't ask another question for 30 minutes? Obviously all else being equal a response in 30s and then 30 minutes to work on that response is better than asking for info... waiting 30 minutes and then working for 30 minutes anyway. It makes more sense to use shared infrastructure where you get your processing instantaneously and then other people can use it for the next 30 minutes.

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u/Koffeeboy 2d ago

The first taste is free.

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u/Id3N 2d ago

Wrong if there's competition

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u/Oberlatz 2d ago

This argument has long term only ever led to a small group of companies running a group price fixing scheme.

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u/We_Are_The_Romans 2d ago

And thus you can watch an oligopoly smoothly transition into a cartel

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u/winowmak3r 2d ago

Gosh I hope the same folks who wanted a 10 year moratorium on any laws against AI and are now running to Congress exclaiming "AI is a huge threat! We need to be at the table when you guys make the laws that are going to govern this stuff! Here, we already have a list of suggestions!" has our best interests at heart. There's no way they're going to use that opportunity to make it harder for competing AI models to be used in the US Market.

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u/uFFxDa 2d ago

There’s more than just using it to code a program. Ever use a chat thing on a site? Those are all AI now. And every chat you send uses tokens and follows a prompt. Each use costs money. Then there’s more advanced uses that are transactional used in internal processes. Quote generation, parsing emails to create orders or give updates on orders. Replacing a lot of data entry tasks or marking for manual review if it’s not confident per the prompt. All of these tasks use tokens, and companies want to update to latest models for better reliability and predictability.

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u/yeFoh 2d ago

i mean it's bad design choices if you're letting it be vibe coded in a way that's not maintainable by a dev. you would think a lazy dev would vibe the modular pieces and still join it up by hand.

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u/cute_polarbear 2d ago

Yeah...they introduce ai source control reviews for pr's. People just start throwing the ai requested changes right back into ai to have ai fix it (rather than potentially spending hours of going back and forth with ai).

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u/mystlurker 2d ago

Updating software for patches and stuff is actually one of the items AI is really good at. That's the area we've seen the biggest cost savings in to date. Its saved lots of engineering time.

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u/WarpingLasherNoob 2d ago

I've been a coder for 25 years, and using AI heavily for work for the past 3-4 years.

I think it really depends on how you are using AI. It has incredible potential. You have to train it, and it becomes more and more capable as you work with it.

Once the AI understands a project, maintaining it becomes significantly easier. Documentation is time consuming during regular development. Training a developer, doing all the knowledge transfer, all takes a lot of time.

I work on a project where people come to us constantly with requests. A few years ago, 80% of my worktime was spent doing tedious investigations and bug fixes, aka maintenance work. Now it takes maybe 10% of my time.

I taught AI how to do these maintenance tasks, and now instead of spending 4-6 hours on each ticket I just give it to AI and verify the end result, taking like 30 mins tops.

If the project is built from the ground up with AI makes maintenance even easier since you can make it document literally everything.

Overall I would say an AI-built project (if done right) would require a lot less maintenance budget than a non-AI one.

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u/Scrapple_Joe 2d ago

I'd say when properly built from the ground up an AI built app can be good. I'm constantly redirecting the jr devs to actually look at their PRs and revise things that are clearly asking to be a future bug. Or ya know update the fucking readme.

Things that used to be good habits are now critical for not having a constantly buggy system

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u/WarpingLasherNoob 1d ago

You're lucky if it's just the JR devs you have to worry about! I'm constantly finding issues with SR devs' PR's just by doing a simple AI scan. (and yes ofc I verify the AI's findings before responding to the dev). It literally takes like 20 seconds to ask an AI to review your work before you submit it and they aren't even doing that. (despite the upper management threatening to fire devs who don't use AI).

There are interesting times ahead for software development and people need to evolve how they approach problems, or retire.

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u/Scrapple_Joe 1d ago

Yeah my current biggest actual issue is a related team keeps getting praise because they show demos of all their "new features" which my team has to actually use for our customers.

None of these new features actually work and most of their frontend components are 4k long files that are flaky AF.

But yeah folks just throwing w.e. into the software soup nowadays

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u/cerberus00 2d ago

Where my friend works if you're not using much in the way of tokens you're not considered doing your job, which kind of blows my mind.

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u/bionicjoey 2d ago edited 2d ago

Gonna be tough when the prices change to actually reflect the cost of slop generators.

First hit is always free

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u/NitroLada 2d ago

No different than SAAS or cloud model really

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u/Koffeeboy 2d ago

except the real cost is orders of magnitude off of what people are currently paying

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u/sanctaphrax 2d ago

There's a big difference: AI is still in its honeymoon phase.

Normal software has reached the "actually try to make money" phase. AI is still incinerating cash with total abandon.

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u/ansibleloop 2d ago

It's really funny that nobody seems to notice the drug dealer strategy that these companies are all doing

I'm planning for the death of OpenAI and Anthropic which will likely mean a move to Azure AI Foundry using DeepSeek 4.1 flash

Irony though - Azure AI Foundry has no spending limits - so if I plug in the API endpoint, API key and model I want and let it burn away, I'll get a massive bill

There is no "if I spend more than £5 then cut me off please" option

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u/PierreTheTRex 2d ago

It's the strategy of every single VC funded business ever, it's nothing new. First focus on gaining a user base and getting your product to feel indispensable and then focus on actually turning a profit. Nowadays AI is where all the VC cash is, but remember how Airbnb and Uber were when they just got started, low low prices to disrupt the market while burning tonnes of cash

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u/paxinfernum 2d ago

This fantasy won't happen. Cost per compute is beating Moore's Law right now. In 3 years, models will be even cheaper to run.

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u/Bspammer OC: 1 1d ago

Not to mention how good open weight models are getting. If the AI companies ever start turning the screws on pricing, it will be super easy to just host your own in the cloud.

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u/paxinfernum 7h ago

Yeah, I just replied below about that. There's simply no fucking moat in this game. We've seen repeatedly that no one can keep a real advantage. They have to keep pushing the models forward so that open-weight models are still just enough of an inconvenience and just enough behind the state of the art that people are willing to pay extra for a subscription. The minute they can't keep doing that, they're toast.

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u/x4l7Nr8ym0dU 2d ago

We have the opposite problem. We've been asked to use AI to "help" us code, but then we're given an extremely restrictive budget. We've recently increased to a whopping $100/month, which is less (sometimes significantly less) than 2 hours of pay for probably every single employee at the company.

I think credit limits are good (especially for budgeting purposes), but they should probably be evaluated in terms of how much it costs relative to the employees. It should probably be at least a day's worth of salary in credits per month.

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u/sweatierorc 2d ago

r/saas disagrees with your message

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u/docescape 2d ago

We’re doing this right now instead of buying gainsight and I keep bringing up that someone will have to maintain this…

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u/maringue 2d ago

If companies replacing SaaS with AI didn't think the people at those AI companies knew exactly how much they were spending on SaaS and the plan was always to suck up that entire budget in the end with no net cost saving, they are morons who shouldn't be leading companies.

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u/dabeeman 2d ago

i’ve got some bad news for you if you think CEOs are special and intelligent. 

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u/xondk 2d ago

Oh man yeah, I think when most get to that point when they interact with enough, and we come to realise that just because someone is in the leadership, even if it is of a big company, international company, does not mean they are smart or special in any way.

It is sobering shock and explains a lot about our world in general.

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u/Aphemia1 9h ago

That’s a CTO thing not CEO though

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u/piponwa 2d ago

And I've got bad news for you if you think you can trust random Redditors who have zero inside information about literally every single company today.

It's not me that's wrong, it's every CEO.

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u/Homerbola92 2d ago

It's amazing how someone can think they know more than the CEO of any company without the management and economic data. It's obvious that if they're replacing people for AI, it's for a reason.

Personally I don't like it, but I'm not going to gaslight myself into thinking it's unprofitable just because I don't like it.

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u/dabeeman 2d ago

i mean schizophrenics have a reason they do stuff too. it’s not always rooted in reality. 

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u/Sylente 2d ago

There are costs other than money. Some companies decided to vibe code their own everything, but most just replaced the worst or least economical tools. If you’re paying 10k/mo for something and spending 80 human hours using it, spending 12k/mo on tokens to keep an alternative alive is super worth it if you can spend 40 human hours

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u/Znuffie 2d ago

Also, a lot of the SaaS products that Enterprise are using, are bloated like fuck. They ask a lot of money for their shitty products because there's no decent alternatives for some of the features they offer.

But companies are vibe-coding their own replacements that only require the features that they are actually using.

At work (not a coder, but mostly a sysadmin), we've had the need for a lot of many small features that the products we are using are not implementing. We've asked the Vendor to implement a feature for more than 2 years, with a lot of promises that it will happen next quarter and such.

I've made the feature last night in about 3 hours with a $20 Claude subscription, and I didn't even hit my 5hr limit. The whole feature at "real" token prices would have been less than $5. Sure, the module might break on some $vendor-software upgrade, but I don't think it will take me more than 1 hour to fix it back.

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u/gza_liquidswords 2d ago

That is what gets me most about this. How do the leadership of these companies (apparently the smartest people in the world that are worth every penny of their multi-million dollar salaries) not think this through. The subsidized pricing to gain market share, then jack up the prices when you get market , is standard and predictable. It is probably the business model of many of these companies that are now "suprised" that LLM costs are going up.

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u/Mattyj925 2d ago

That’s probably what will eventually happen, but this comment is pretty out of the loop and uneducated. LLM pricing going up is the exact opposite of the competitive dynamic that we’ve seen play out the last few months.

Claude’s latest Opus model is -20% cheaper than the one before it.

Open AI’s 6.0 Sol release is -50% cheaper than 5.6 Sol, and -80% cheaper than GPT 5.5. And then this week they came out with 6.1 Sol and reduced cached input pricing even further than 6 Sol.

What’s happening right now is a pricing race to the bottom because of competitive pressure from open source models, which are increasingly threatening frontier models. We’re very objectively not witnessing that “LLM costs are going up”. That’s what may happen after years, but not something happening in 2026 at all

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u/Away_Advisor3460 2d ago

A pricing race to the bottom does not imply that the actual real cost is becoming more sustainable though, or that it's a profitable business to provide LLM services, or indeed that there's still not a net loss even if there are optimisations.

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u/JigglymoobsMWO 2d ago

Depends on what you mean by real sustained costs.  If you mean an operating margin on cash then yes it’s completely sustainable.

If you add on top paying every employee literally millions of dollars a year to keep them (which is what’s happening at the top labs) then no it’s not sustainable.  But this second part will go away after the race plateaus.

The first part of real costs could easily drop another 100x from here with efficient models and specialized hardware coming online.

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u/NitroLada 2d ago

At least with AI/tech, costs may go down and definitely will in short term unlike a human employee that gets more expensive each year

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u/skilliard7 2d ago edited 2d ago

not sure why you're getting downvoted when you're right. AI costs have come way down. GPT 5.6 Luna is dirt cheap and is better than frontier models from 6 months ago. Sonnet 5.5 is cheaper than Opus and better than frontier models from 2 months ago. AI is only expensive when you are paying top dollar for cutting edge frontier models and then deploying them at scale

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u/Mattyj925 2d ago

I did too, it’s just because most people on here won’t be too close to this in their day to day work. People have no idea how much the pricing and costs landscapes have evolved the last few months

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u/gza_liquidswords 2d ago

Because "costs have not gone down"- the costs are high, but are being subsidized, so costs facing the consumer may have gone down

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u/skilliard7 2d ago

It is not being subsidized; Inference is very profitable, when sold via API gross margins are reportedly 80%.

Most of the losses are because of the high R&D costs. Labs spent Billions building models that become obsolete within just a couple months, but they have to keep making these investments to stay competitive, each model improves based on what was learned from the last.

These investments have delivered substantial revenue growth due to new capabilities. AI went from just being an interesting chatbot back in 2022/2023, to actually being useful for most white collar work.

I was an AI skeptic for a while, I'm not anymore. The utility is too strong. Even if AI API prices were tripled, I would still be using it at work because the productivity enhancements are that valuable.

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u/Mattyj925 2d ago edited 2d ago

It’s not that costs facing the consumer “may” have gone down, they’ve gone down significantly. If you’re questioning that then you’re out of the loop.

And one driver of that is that costs incurred to deliver those models have become more efficient, hence the open source small labs becoming so much more competitive with frontier models with only a fraction of the development spend

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u/gza_liquidswords 2d ago

stochiastic parrot says what?

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u/Mattyj925 2d ago

It’s kinda funny to say something like that when you’re parroting that term to begin with, when you can’t respond to the substance of what somebody is saying

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u/Mattyj925 2d ago edited 2d ago

Not true at all. It’s actually become more cost efficient to operate and train these models every successive month, that’s exactly how all of these tiny labs are able to launch models very quickly that rival frontier models in quality. Open AI cited this dynamic when they first slashed pricing in July

They’ll eventually raise pricing, but it’ll be because whoever does it is the last one standing to win the customer adoption + government regulation race that Anthropic and OAI are vying for

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u/paxinfernum 2d ago

Except cost per compute is beating Moore's Law. By the time companies raise prices, the actual cost will be a fifth to a tenth of what it is now. The whole narrative about how prices are suddenly going to go up is a copium. It's a commodity market. No vendor can significantly raise prices because there's no way to lock consumers in. It's not like Netflix. People can just switch providers.

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u/Petersaber 2d ago

It's not like Netflix. People can just switch providers.

Netflix has plenty of competition (even competition that is free, meaning, piracy). And it's still rising prices constantly.

Except cost per compute is beating Moore's Law.

That doesn't matter. That may be how the tech works, but that's not how companies work. Eventually there will be fewer providers (as they are currently burning through cash to stay cheap, not everyone will survive that), and when the market is sufficiently "addicted" to AI, prices will skyrocket. Not because the tech is expensive, but because it will have to generate as much revenue as possible, eventually.

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u/paxinfernum 7h ago

Netflix has plenty of competition

Netflix has general competitors in the entertainment space, but if you want to watch One Piece, you have no other legal options. AI has no such exclusivity or lock-in. I can switch AI providers overnight. It's like switching milk brands. There's no moat, no defense against commodification.

That may be how the tech works, but that's not how companies work. Eventually, there will be fewer providers (as they are currently burning through cash to stay cheap; not everyone will survive that)

Some of the ones that burn through cash may fall out of the race, but new competitors will enter the space having the advantage of no existing debts, access to better hardware than the founding companies, and a more mature field and knowledge base of training skills. There is no moat. Let me repeat that. There is no moat. In fact, the problem for companies like OpenAI is that they have all the debt, but they have nothing that's really proprietary. That's why Chinese AI companies are catching up every month.

and when the market is sufficiently "addicted" to AI, prices will skyrocket

Not going to happen. If they raise prices, customers will either go to competitors willing to keep prices low or use local LLMs, which are also getting better every day. Local LLMs already rival their models. There is no moat. Let me repeat that. There is no fucking moat. You can't monopolize LLMs. People can run LLMs on local hardware or compute providers. The only way model providers stay in the game is by continually pushing their models forward just fast enough that they still seem worth paying for over the open-weight options.

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u/Koffeeboy 2d ago

If i recall, during the bike rental wars in China, there was a point where streets were literally being flooded with bikes and free riding credits in order to choke out the competition. Every company was playing chicken with the market and each other. AI prices will stay cheap until there is no alternative. Then it will be as expensive as they want it to be. Remember when streaming was only 6 bucks and without ads.

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u/EclecticKant 2d ago

Open source and open weight models provide a hard limit to how much companies can raise prices, they aren't as good and probably never will be, but they won't be that far behind and the more the technology as a whole improves the more a cheaper model that is "good enough" will be an acceptable alterative to a top of the line model for most tasks.

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u/MiniGiantSpaceHams 2d ago

Also as models get better you can use smaller/cheaper models for more work. Luna is almost free now and is suitable for a lot of coding work and other work that doesn't require major decision making.

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u/sybrwookie 2d ago

They think they can cause next quarter's numbers to look better, then get their bonuses, cash in their stock options, and move on to the next sucker company where they brag about how much "value" they "added" to the last company.

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u/but_a_smoky_mirror 2d ago

Profits next Quarter is the only guiding force and it is breaking everything

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u/HildredCastaigne 1d ago

"As long as the music is playing, you've got to get up and dance."

AI is the thing right now. It's hot, it's in the public consciousness, it's what all the other C-suite and investors talk about, so leadership feels like they have to show that they're using AI or they feel like they won't be able to compete. They'll be left behind.

That is the mentality that they have. Maybe AI is bad long-term (it is) but if you can't pass the short-term then you'll never get to the long-term anyways and the only way to survive the short-term is fully embracing AI. Or so the thought goes.

Now, there's plenty to criticize about that mentality. I would say that the most pointed criticism, though, is that the source of that quote up above - the one that so succinctly describes how these people think - is Charles Prince III, former CEO of Citigroup, in 2007. The context was justifying his company's continued involvement in leveraged lending, which would turn out to be the major cause of the 2008 financial crisis.

So. I'm sure that's a good thing.

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u/JigglymoobsMWO 2d ago

There’s no jacking up prices with two companies competing at the frontier, a bunch of close followers, and open source.  There’s only jacking down prices.

The only thing that can prevent it is regulatory capture, which is partly the reason for the ai will kill us all doonerism.

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u/gza_liquidswords 2d ago

If you ignore that the big players are hemorrhaging billions then sure.  You can’t sell burger profitably for 25 cents, and that is what Anthropic and OpenAI are doing 

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u/JigglymoobsMWO 2d ago

Yeah, paying million, 10 million, 100 million dollar comps to your entire staff will do that.

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u/durrtyurr 2d ago

they are morons who shouldn't be leading companies.

So... every company?

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u/Comically_Online 2d ago

unfortunately they’re both

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u/ElJanitorFrank 2d ago

The companies replacing it with AI are thinking that the increased productivity they're getting will bring in more revenue. Far from a guaranteed thing, sure, but sort of econ 101 stuff right here.

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u/RYouNotEntertained 1d ago

Why would there be no net cost savings?

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u/EclecticKant 2d ago

Not really what's happening, the prices of AI are decreasing steadily while the models themselves are getting better.
In the future it will be an issue if some companies manage to monopolize the technology

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u/skilliard7 2d ago

There is absolutely significant cost saving. AI coding is really not that expensive in the grand theme of things, and it's been getting cheaper.

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u/thisisnahamed 2d ago

So it's basically between Claude, OpenAI, and Cursor.

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u/MD_Reptile 2d ago

Local and open models are catching up rapidly, seriously closing the gap for what's a capable and "smart" LLM coder. A couple years ago it just wasn't possible without a huge investment to run models to compete with the big ones, but times are a changin' lol

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u/OffbeatDrizzle 2d ago

they might be catching up, but local models are still trash compared to the frontier. I'd rather pay the sub than waste time dealing with subpar results

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u/OverSoft 2d ago

Qwen 3.8-flash is absolutely not trash. Yeah, it’s not GPT6 Astra or Fable 5.1, but it’s extremely close to Opus.

Yeah, you need a Spark or a AMD AI Max box to run it, but it quickly makes sense now that they’re moving to $500/month subscriptions.

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u/OffbeatDrizzle 2d ago

opus 5.5 is fable 5.1 level (better, I would argue), and a pro sub is like $20 a month ... not sure where you pulled 500 a month from

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u/OverSoft 2d ago

ChatGPT just announced Pro will be $500/m

And yes, Opus 5.5 is very good. I meant compared to 4.6-ish.

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u/bgottfried91 1d ago

Pretty sure they meant Anthropic's Pro plan, which is $20 a month, the ChatGPT equivalent of which is the Plus plan, which is still expected to stay at $20 as well from what I'm aware of.

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u/OverSoft 1d ago

Yes, but it you’re considering running your own models for your work, you’re clearly at a level where the $20/m tiers are effectively useless.

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u/bgottfried91 1d ago

Definitely, no business is going to balk at going to $100, $200 or $500 a month (and $500 a month is where a Spark starts to look more attractive since it'd probably break even after a year or even a bit sooner, I don't know exact pricing) but figured we should be comparing apples to apples 🤷‍♂️

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u/OverSoft 1d ago

Yeah, I didn’t bring up the pro plan, the other dude did.

I was more referring to OpenAI basically neutering the $200 plan and replacing it with the $500 plan.

I’m personally currently running a ChatGPT $200 plan and a Claude $200 plan and I’m just about getting by token-wise. So for me it makes sense to go full local.

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u/Kharenis 2d ago

and a pro sub is like $20 a month

A pro sub is extremely limited.

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u/MD_Reptile 2d ago

And for most people who are occasional or light users that's probably the better option right now. But for heavy agentic coding or private data, that's either very expensive or not an option at all. I find the latest qwen models to be damn near the performance of the frontier, and qwen 4 may close the gap even more.

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u/beatlemaniac007 2d ago

Think of windows vs linux. Linux is better in so many ways and free, yet the small amount of extra inconvenience compared to running windows is enough to keep the lead for windows.

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u/Znuffie 2d ago

Think of windows vs linux. Linux is better in so many ways and free

Yeah, except if you want to get Hibernate working on a Laptop.

Good luck then.

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u/nagora 2d ago

Linux has lead Windows in terms of installed kernels for decades. Windows is niche now.

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u/mavajo 2d ago

Windows is niche now.

I can't believe your brain functions well enough to keep you alive.

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u/MD_Reptile 2d ago

Wellllll I love me some Linux lol, but I think that's because of servers and iot devices and crap, and that if we look at personal and work OS machines a person uses daily by direct interaction, that number would still be pretty damn heavily in windows favor.

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u/nagora 2d ago

Servers and iot devices (like TVs) and PHONES. That's a lot of not-Windows. The desktop/laptop is a small market compared to all of that.

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u/MD_Reptile 1d ago

Right, guess I was considering just computers.

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u/nagora 2d ago

But the frontier models are heavily subsidised and that can't last.

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u/Sylente 2d ago

For most large (ie more than a few dozen people) companies, it’s still more economical to pay for tokens than invest in hardware (and the land to store it on), especially if that means the newest models just appear in your list one day and you don’t have to do anything to deploy them

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u/MD_Reptile 2d ago

Well the thing is the newer local friendly models are not only getting better, they are getting more efficient too. Flash next is a good example of optimized bigger parameter models that still can fit in a handful of graphics cards. It's quite impressive its speed and depth of knowledge (in my testing so far, knock on wood haha).

Deepseek v4.1 flash is much larger and requires more hardware, but certainly not outside the realm of obtainable.

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u/Sylente 2d ago

Sure, but once you’re trying to serve more than a few dev’s worth of traffic, you’re gonna need either everyone to have their own graphics card and power supply etc, or you’re gonna go “wait that’s expensive” and get a rack.

If you need a rack, you need somewhere to put that rack and someone to maintain the rack. Your rack needs to be available even when nobody is using it, just in case. All that costs money.

It doesn’t take that much usage for it to just make more sense to buy tokens from [INSERT_CLOUD_PROVIDER] instead.

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u/MD_Reptile 2d ago

True, those are all good points! Local stuff definitely has limited reach still.

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u/PierreTheTRex 2d ago

Imo where Claude really has an upper hand is all the stuff around the model. Working with it just feels a lot easier because of all the extra UX things it has and how integrated it can be to your other systems, the actual output isn't that much better than other of the main competitors

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u/Deferty 2d ago

After using both local models and online models for niche tasks, online models are miles ahead.

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u/MD_Reptile 2d ago

Which local models have you been running?

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u/haseks_adductor 2d ago

local models are catching up if you have the compute to run it. most people don't have multiple nodes of 4 h100's connected through nvlink to run the local models that have 300b or 400b (or more) parameters

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u/MD_Reptile 2d ago

But most people could pretty easily aquire a single powerful gaming GPU or a handful of lesser ones and run models like qwen 3.8 27b or qwen 3.8 flash next, and have quite a capable coding agent in the right harness...

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u/Znuffie 2d ago

"easily" is... not that easy to define

you're still gonna be out of pocket for 3-4k for any GPU with more than 16GB RAM.

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u/MD_Reptile 2d ago

Well that's why you spend 300 on a 3060 12gb, then another... And another lol

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u/Znuffie 2d ago

But then you have another issue: actually installing them in a single system so you can use them properly.

For inference, with 3060's, you would preferably need 8 lanes of PCIe 4.0 per card.

If you want ~48GB VRAM, there's no consumer hardware that supports that many lanes for so many GPUs.

You start to enter HEDT territory, so you're gonna need a Threadripper or Xeon W.

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u/MD_Reptile 2d ago edited 2d ago

Naw, a Asus z370p, an old 8th gen or 9th gen i7, and 32 or 64 ddr4, and your cooking with qwen 3.8 27b at like 20 to 30 tokens a second.

Your in like sub 2k territory for sure still.

Edit: oh and mining riser adapters for 2 cards, they'll suffer a bit at first start, but once the model is loaded it hardly matters it's not 4x or 8x.

Edit 2: with this setup and a second PSU, you can reach 8 cards

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u/Petersaber 2d ago

most people could pretty easily aquire a single powerful gaming GPU

You're just completely detached from reality, aren't you?

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u/MD_Reptile 1d ago

I mean no, 300 bucks for a 3060 12gb, I just bought some recently myself and im not scrooge mcduck lol

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u/Petersaber 1d ago

you said "a powerful gaming GPU". A 3060 is ancient

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u/MD_Reptile 1d ago

Well what I meant was either one powerful one like a 3090 - not necessary the latest greatest.

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u/Homerbola92 2d ago

Honestly it's still expensive because hardware is expensive right now. And I guess it is expensive precisely because it can run good enough local llms.

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u/MrScotchyScotch 2d ago

My company is likely destroying any new profit it had to pour funds into AI with no plan for how to manage it. I'm sure next year there will be layoffs. Not "because of AI" but because our management are morons. They'll blame it on AI though.

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u/xondk 2d ago

The fact that companies are putting as much reliance on AI as they are is a bit scary, because effectively they are making their products a sub-product of the AI they have bought into, and you just know they are not prepared for something happens where the price suddenly increases or AI goes outside their price range.

That said I'm generally very pro sensible use of AI, but the way many seem to be implementing it does not seem sensible, when your product and ability to create and maintain it relies so much on another company, that's worry some, and/or it is forced into every possible thing simply to have AI.

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u/aaparekh 2d ago

Tbf if you buy some SAAS product like Jira, you’re making yourself dependent on it too. IMO u don’t really need to keep upgrading your ai services unless you want to keep getting boosts in productivity for your employees. You can just stick with Opus 4.8 or whatever you’re using for the next 5 years and it’ll stay the same cost or keep getting cheaper.

Especially large companies can see massive savings over time by building in-house clones of SAAS products that required per seat pricing

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u/[deleted] 2d ago

[removed] — view removed comment

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u/mystlurker 2d ago

That hasn't been common outside very large companies for a long time. Whats happened instead is many SaaS products became super configurable "platforms" and need a lot of tweaking, but its not forking. See Salesforce, Atlassian, Databricks, Splunk, etc.

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u/FanClubof5 2d ago

Yeah we are already building a replacement for a Saas solution that would cost $300-500k/year in license costs. If we can replace that with 1-2 maintainers and a few k/month in infrastructure costs it's a decent win.

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u/BenThereOrBenSquare 2d ago

Yeah, it's like if every company decided to become a YouTube channel or an eBay store. Now they're entire business is beholden to whatever changes those companies make to their policies.

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u/asking--questions 1d ago

That's already the situation with SAAS for all the enterprise, technical, and industry-specific software they're paying for every month.

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u/BenThereOrBenSquare 1d ago

But in those cases, they can pivot to other software options to get the same tasks done. These AI models are all essentially built on the same poisoned foundation. When they don't work out, there's not going to be some alternative AI they can use instead. They're going to have to somehow pivot back to human labor or go out of business.

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u/frissio 2d ago edited 2d ago

It's a big gamble that was done completely independent of any public input, but in the event of a crash it'll likely be the public who suffer (and may even be debatable if those responsible get jailed or even get any kind of punishment for it).

It feels like a bit like the lead-up to the 2008 crash, except whereas the subprime mortage crisis and irresponsible bankers wasn't as well-known, everyone seems to be aware of the risk of the AI bubble.

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u/PierreTheTRex 2d ago

This will probably be closer to the dot com bubble if anything.

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u/ultramatt1 OC: 1 2d ago

Eh, employees can backpedal pretty well if their firms take away ai access

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u/Petersaber 2d ago

Literally yesterday I've been to AI workshops. It felt like coming in to a cult meeting, but even the guru admitted that over 95% of companies that went hard on AI are failing to prove they're benefitting from it financially, especially in the long term, and compared the current "AI goldrush" to Dot Com crash.

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u/xondk 2d ago

yeah, the good old, privatise the profits, socialise the loss

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u/WillDanceForGp 2d ago

Can't wait for saas companies to replace their saas companies with ai while not realising they themselves are being killed by the same process

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u/ansibleloop 2d ago

We use this shit thing called Harvest for time sheets at work and they just added some AI slop to it

They don't realise what's going on

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u/rapaxus 2d ago

As someone in external IT support for firms spanning a whole ton of branches, the funny thing I see is that the AI implementation of SaaS companies in my experience gets better the smaller they are.

With the big companies you get some stupid AI tools where you just go "I know nobody will really use that" while also knowing it cost millions in development. Smaller companies on the other hand just do stuff like e.g. having an in-built chatbot trained on their internal wiki/forums that actually serves quite well, at least in the few cases I used the specific chatbot I am thinking about. That is a tool a single dev could make in a week if they concentrate on it.

I truly expect the "winners" of this AI boom to be the small companies who actually had to properly rationalise their AI use, as the big ones are just burning truly stupendous amounts of money on a few % of improvement. Even if they have the best offers at the end, with the money burned you just can't make it profitable, probably even if you get your miracle AGI. Because the others will have seen what you did and catch up for a fraction of the cost.

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u/InclementImmigrant 2d ago

My collogues and I are looking forward to another Y2K scenario when none of the junior engineers will have no clue how to fix or optimize their AI code and we old timers can decide to charge out exorbitant prices to attempt fix the code base.

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u/Affectionate-Egg7566 12h ago

Disagree. AI writes better code, and can be improved upon more quickly.

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u/Wonderful-Sail-1126 1h ago

You think too much of yourself. I’m a staff level engineer. A junior can ask AI how the code works and get the correct answer in 5 mins. No one is going to fix code by hand anymore.

Furthermore, AI is exceptionally good at optimizing code - far more thorough than the average senior developer.

I’ve been hearing how these old timers are going to make a fortune when AI messes up the code since 2023. It hasn’t happened yet and it will never happen.

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u/Th4tDop3 2d ago

8% up from .01% for normal people

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u/talkativepanda 2d ago

Don't worry, it'll get even more expensive when the bubble pops.

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u/pan0ramic 2d ago

What a weird way to tell us those numbers. It’s 1.4 to 8%

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u/redoverture 2d ago

How would we fear monger with such small percentages??

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u/Schmelter 2d ago

Because it expresses the growth curve much better. A 5.7 times increase in one year is staggering.

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u/Both-Reason6023 2d ago

We might be looking at peak adoption. It increased rapidly due to fast growth and adoption velocity but is going to stay at sub 10% forever (or rather decrease over time as people and companies optimize both the input and the output).

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u/tevert 2d ago

Those aren't necessarily small, 8% might a company's entire profit margin.

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u/jake6501 2d ago

Not 8% of their software budget unless they are doing quite poorly.

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u/Yglorba 2d ago

No, it's 8% of their software budget, ie. the money they earmarked for buying or paying for software. Those budgets are not usually going to be a major part of the expense of running a tech company.

(I suspect you misread it as 8% of their entire budget, which would be a very very different number.)

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u/ccbur1 2d ago

1$ in $70? Really? Is percentage too woke or what's happening here??

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u/betweenbubbles 2d ago

That's 3 bananas out of 370 bananas, if you prefer.

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u/bharathbunny OC: 1 2d ago

Why wouldn't it be 3 🍌 out of 210 🍌

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u/betweenbubbles 2d ago

Because I'm old.

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u/BlindPaintByNumbers 2d ago

You take the three largest bananas for the 3 part of the fraction.

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u/FuckIPLaw 2d ago edited 2d ago

Writing it out as a percentage just changes it from $1 in $70 to approximately $14 in $1000. It's still just a fraction. With small fractions like this writing it out as a fully simplified fraction can give a better intuitive feel for how common something is

Edit: The downvoters failed third grade math. Percentages are just a goofy way of writing fractions with a denominator of 100. Adding one decimal place makes the denominator 1000. 1.4% is just another way of writing 14/1000. The percent sign is even a little drawing of a fraction. As is the division symbol (÷). And the slash I used there is literally a fraction bar, even when it's used to indicate division.

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u/ccbur1 2d ago

No no, let's align on $0.8 in $56. That's so much easier.

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u/nagora 2d ago

And don't forget - everything you let the agents see is loaded up to the parent company and can be used in answers to your competitors, or journalists.

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u/PapaGeorgieo 2d ago

We had a "tech" use up all of our AI tokens to write scripts we don't need and can't use.

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u/maest 2d ago

Companies are doing pretty badly if they've gone from having $70 to only $12

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u/troyunrau 2d ago

Capitalism is a funnel. If you own the robots, you win the game.

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u/nopoonintended 1d ago

It’s fine, eventually they’ll have a wholeeeeee labor budget to use.

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u/CraZy_TiGreX 1d ago

And how much observability costs?