European organizations have mirrored the global spending trend, with record levels invested in IT outsourcing driven by cloud service investments.
In Europe, the value of contracts signed during the third quarter of this year reached a record £4.7bn, 36% higher than the same quarter last year and 4% higher than the previous quarter this year.
The increase was driven by heavy spending on cloud services, which totalled £2.4bn, 59% higher than last year. In Europe, infrastructure-as-a-service (IaaS) and software-as-a-service (SaaS) deals were both up 59%, to records of £1.75bn and £677m respectively. This from Computer Weekly.
Now, let’s couple that … with some information about SaaS Spending. OpenView – a VC firm – looked at pricing models, and determined that of the nearly 600 SaaS companies that responded, 45% say they are using this flexible pricing model, up from 34% in 2020.
Here’s the bit I care about.
The report’s definition of usage-based pricing adoption includes companies like Twilio, whose pricing is almost entirely pay as you go, as well as those offering subscription tiers based on usage, like Zapier.
In other words, the report’s co-authors don’t draw the line at whether there’s a subscription element; instead, they consider if pricing is tied to product consumption behavior, as opposed to just seat-based pricing in a landscape where companies also charge based on customer size, functionality, services or other factors.
The value a customer receives rarely ties in directly with how many people log in, especially as more and more startups now offer solutions built around automation, AI or APIs.
Why do we care?
So, SaaS is the future, and this is particularly true for SMBs. Now I want to consider how pricing models might shift again. Per unit – IE, seat based pricing – maybe should go away here. Can services be done on a consumption model… that doesn’t just look like time? That’s a big question to ponder, and the one I’m left with today. No quip of an answer – just that lingering question. How might services beyond the SaaS product itself be charged on consumption?