In Outcome Pricing, Failed Work Is Pure COGS

Outcome-based pricing, currently used by about 5% of B2B software companies but expected by survey respondents to reach 31% within three years, appeals because customers pay only for successful results, yet it can expose vendors to substantial hidden costs from failed attempts. Illustrative calculations show that a seemingly profitable per-resolution price can approach zero margin when failures require more model inference, tool calls, and retries than successful tasks. To manage this risk, companies need defined task step, tool-call, and token limits; visible model-routing and customer-level cost attribution; clear contractual definitions of failure types and payment responsibility; and real-time, per-attempt controls rather than invoice-level reporting. Before adopting the model, vendors should also assess whether outcomes are consistent, attributable, measurable, and predictable, while addressing customer budgeting concerns through annual commitments, spending floors and ceilings, or alternative pricing options.

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