![]() ![]() Consumption definition software#Paying a single bill is simpler than managing hardware, software and other service costs separately. Consuming a service provided by a vendor removes the capital expense costs of building out their own systems, making it particularly attractive for smaller uses and startups. For example, CRM software may charge based on number of customer contacts held in the system.Ĭonsumption-based pricing is increasingly attractive for service customers. Software may charge based on specific uses. These are often specialized based on the workload. A prepaid amount of service defined by the provider. Gigabytes of RAM per second consumed by service. ![]() These may be billed individually or in groups up to 100,000 depending on the service. Many API service providers will charge based on the number of times the customer accesses it. Gigabytes of data that ingress or egress to the provider. Seconds a virtual machine was active or milliseconds a service was handling a customer request. Sometimes a service may track and bill on several factors at a time, making the total bill difficult for the consumer to predict. Some providers offer a certain amount of use for free. Most often these are quantitated by time used or amount of a resource. The exact details of what is tracked can change from product to product and provider to provider. Consumption pricing is common with the various types of cloud computing models.Ĭonsumption-based pricing tracks and bills how much a service is used. Software is more often offered as a subscription, but with the emergence of software as a service ( SaaS), consumption-based billing for software is being increasingly used. An example of subscription service is cable television, where customers pay the same amount per month regardless of how much television they watch. Platform as a service ( PaaS) and infrastructure as a service ( IaaS) often also use consumption pricing to maintain cost advantage and profitability.Ĭonsumption pricing is often in contrast to a subscription price model, where the customer pays the same amount for access to a service regardless of how much or little of the service used. These are often treated as commodities and may be required to rapidly scale up and down based on demand. For example, municipal utility companies, such as water and electricity service, charge consumers a fee based on the amount of the service the customer used.Ĭonsumption pricing is common in cloud computing and utility computing. It can also be referred to as pay-as-you-go billing, metered billing or usage-based pricing.Īlthough relatively new in computing, consumption-based pricing is common in many traditional business types. The provider tracks how much the customer uses and then bills them for the amount of services consumed. What is a consumption-based pricing model?Ī consumption-based pricing model is a service provision and payment scheme in which the customer pays according to the resources used. ![]()
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