Paying Too Much for Cloud Billing? Pay-Per-Use Model Could be the Answer
24/09/2020 | Blog
Cloud waste costs amounted to approximately $14.1 billion in 2019 and this figure is rising—largely due to lack of transparency and mismanagement.
Consumption billing is one way for businesses to minimize costs. It’s essentially charging customers only for what they use. It also offers greater control over cloud payment options.
Before we get into the details, let’s take a closer look at cloud billing, subscription pricing models, and automatic billing.
How Does Cloud Billing Work?
Cloud billing refers to the way you pay for your cloud services. There are several options to choose from, including various subscription pricing models and pay-as-you-go. Let’s quickly run through the most popular options:
- Free plans: Free plans usually last for a fixed trial period. If you don’t choose to pay after the trial period the service is terminated.
- Contract plans: Just like with a phone contract, these require up-front payment for a fixed number of billing cycles before you’re allowed to quit. Many have grace periods, auto-renewals, upgrade and downgrade options, and cancellation fees.
- One-time plans: One payment at checkout.
- Recurring plans: This is when the product has auto-renewal in place. It usually comes with a grace-period and an auto-termination date if payment isn’t received.
- Tiered pricing: This is similar to flat-rate pricing, but with varying price points for different packages.
- Pay-Per-Use plans: A set price per unit, with layered pricing and limits. The provider tracks usage and bills accordingly—so the user only pays for what they need.
What is Pay-Per-Use Billing and What Are the Benefits?
Traditionally, contracts and one-time plans were the most popular option. But now, PPU is gaining traction. Why? Because clients can see their usage and payment history as well as their receipts, orders, balance, and upcoming renewals. This gives a greater degree of control and transparency, both over their payments and usage, which many businesses find useful. Customers can also expect to pay little upfront and costs can scale with the growth of the business. This makes it ideal for startups and rapidly growing businesses.
When it comes to cloud computing, many businesses think the savings come from the fact that large providers can offer economies of scale, which makes it cheaper than doing it yourself. In some cases, this is true. However, the real value comes from not paying for services you don’t use. This is what PPU is all about.
Are There Downsides to PPU?
In short, yes. If you integrate apps without tracking usage and providing accountability, you’re unlikely to save money or see much benefit. On the other hand, if you apply good practices to the process, analyze your IT objectives, and conduct proper comparisons, these downsides can be avoided.
“The cloud can help reduce costs, but more importantly, can be a core element of strategy, and occasionally, be the cornerstone of competitive superiority and market dominance,” says Joe Weinman, a computing expert and author of the book, Cloudonomics: The Business Value of Cloud Computing.
How interworks.cloud’s PPU Model Works in 3 Steps
1. Full PPU with Integration Options
interworks.cloud allows Independent Software Vendors (ISVs) to integrate seamlessly with the platform. At the end of the month, you will be charged based on what you’ve consumed, rather than sending you a standard fee. This means you’ll never overpay. For example, instead of pre-buying 100 GB of Acronis services, you can open an Acronis subscription for free (just like in Azure) and at the end of the month you will be charged solely for the GB you’ve consumed.
As previously mentioned, tracking usage is a must if you want to see the biggest benefits of a PPU model. It not only gives you greater control over your finances, but also helps you gain insight into your business’s activities. Our platform tracks the use of each service and makes this data available to you.
Of course, PPU means you don’t pay for what you don’t use—but on the flip side, it does mean you pay for everything you do use, and if you don’t keep track of this, costs could escalate.
With interworks.cloud, however, additional features include a credit limit and budget alerts. These features help resource management and caps overspending. You can also assign limits to specific resources for a greater degree of control: the distributor can set a credit limit to the reseller, or the service provider can set a limit for the end-customer. Budget alerts also allow the Marketplace users to set an alert threshold on top of a budget that will allow them to receive notifications when they have reached their limit.
In short, CSPs can significantly improve their billing with interworks.cloud. Instead of pre-buying a set amount of data, with interworks.cloud you can open a subscription for free, and at the end of the month be charged solely based on your usage.