Three considerations for managing SaaS contracts with usage-based pricing models

One of the biggest benefits of a software license management solution like Applogie is that it shows you how you’re really using your SaaS subscriptions. This information is crucial for making data-driven business decisions, budgeting and communicating effectively across departments.


When it comes to tiered subscriptions (where, for example, you purchase 100 individual user licenses and only pay more if and when you are using all 100 and need more), up charges can be major – but they’re also expected. If you don’t agree to purchase more licenses, you may need to Applogie to help you get creative with the 100 you already have, but at least you won’t get hit with any surprise bills.


Some SaaS vendors, however, offer consumption-based pricing models. Solutions like Heroku, Twillio and Sendgrid charge customers based on the resources they use. “In this model, says TechTarget, “the provider may charge a flat rate for all resources per time used or may charge at different rates for various components of the service.”


On the surface, the pay-only-for-what-you-use model sounds amazing – it’s efficient, tailored exclusively for your needs, and can be scaled back to account for other business spend when needed. For very small businesses, this could be the case. But for many other organizations, consumption-based pricing models can be trickier to manage than other term SaaS licenses.  


What happens when you don’t know exactly what your employees are going to use for a month? When your users are spread across departments, managing a variety of campaigns, accounts and technologies, knowing what they’re going to do before they do it is impossible. That means you could easily get stuck with a sky-high SaaS bill at month end.


Does this mean enterprise corporations should stop partnering with SaaS vendors who charge on a consumption basis? Of course not. But you do have to be smart about your usage. Here are three ways you can stay on top of your consumption-based license costs, no matter the size of your organization:

Consumption based SaaS
  1. Track your usage in real-time. It’s incredibly risky to wait for a monthly invoice to arrive from a consumption-based vendor. Instead of crossing your fingers for a budget-friendly bill, keep track of your employees’ usage week by week, and have plans in place to slow usage when necessary. Sound like a lot of work? It is – but Applogie can track what’s being used (and by whom) automatically, send you an alert when usage approaches a custom-set limit, and forecast usage for the rest of the month, so you and your team can make the most informed business decisions possible.
  2. Set usage thresholds. If it’s important to ensure your team doesn’t exceed a certain amount per subscription per month, make sure to set and communicate a usage threshold before each month begins. Then, because you’ve been tracking usage in real-time, you’ll be able to carefully plan the rest of the month, rather than hitting your determined threshold prematurely and being forced to halt operations until next month.
  3. Know the value of your usage commitment within your license. With consumption-based models, you don’t only have to worry about overages. Usually, you will be contracted to a monthly minimum as well, meaning that if you don’t use the software a certain amount, you’ll be charged as if you did anyway. Every month, you and your team should evaluate whether the software still fits your needs and if you’re still driving the appropriate value from the subscription. If you find yourselves struggling to get your contract’s worth from a solution, it may be time to reevaluate.


SaaS licenses come in all shapes and sizes, and keeping track of each one manually just doesn’t make any sense. Let software handle your software – get Applogie.