Consumption-based Subscriptions

Appxite Updated by Appxite

Introduction

Usage-Based Subscriptions charge customers based on actual resource consumption rather than a fixed number of licenses. This article provides a comprehensive guide to how usage-based billing works in the Platform, including how charges appear on invoices, how to interpret usage meters, and best practices for managing consumption costs. Whether you're managing cloud infrastructure, platform services, or software-as-a-service offerings, understanding usage-based subscriptions will help you accurately forecast and control costs.

In this article:

Overview

Usage-Based Subscriptions differ fundamentally from License-Based Subscriptions in that they charge based on actual resource usage rather than a fixed number of licenses. This article explains:

  • How usage-based billing works
  • How to interpret usage-based charges on invoices
  • Best practices for managing consumption costs

Key Characteristics

Billing Model

  • Pay-as-you-go: Customers pay only for what they use
  • Billed in arrears: Charges appear after usage occurs, not in advance
  • Variable costs: Monthly charges fluctuate based on actual consumption
  • No fixed commitment: Typically no minimum usage commitment required

Billing Process

Consumption-based subscriptions are invoiced after each billing cycle completes:

  1. Usage data is collected throughout the billing period
  2. At the end of the period, total consumption is calculated for each meter
  3. Consumption data is multiplied by the applicable rates
  4. The total cost is included in the invoice with the charge type Usage Fee
NOTE! The quantity for Usage Fee is always 1, which means that Unit Price = Total Price on the invoice.

Billing Cycle Alignment

Consumption-based subscriptions are aligned with the billing cycle of the reselling contract under which they are purchased. This differs from license-based subscriptions, which establish their own billing cycles.

Common Types of Consumption-Based Services

Cloud Infrastructure (IaaS)

  • Compute: Virtual machines, container instances, functions
  • Storage: Block storage, object storage, file storage
  • Networking: Data transfer, IP addresses, load balancers

Platform Services (PaaS)

  • Databases: SQL databases, NoSQL databases, caches
  • Analytics: Big data processing, data warehousing
  • AI/ML: Machine learning training, inference, API calls

Software Services (SaaS)

  • API Usage: API calls, transactions processed
  • Data Processing: GB of data processed or analyzed
  • User Actions: Specific operations or workflows performed

Understanding Usage Meters

What are Meters?

Meters are individual measurement units for different aspects of service usage. A single consumption-based subscription may have multiple meters tracking different types of usage.

Common Meter Types

  • Duration-based meters: Resources measured by time (hours, seconds)
  • Volume-based meters: Resources measured by size (GB, TB)
  • Transaction-based meters: Resources measured by operations (API calls, transactions)
  • Throughput-based meters: Resources measured by rate (MB/s, IOPS)

Meter Tiers

Many consumption-based services use tiered pricing for meters:

  • Decreasing tier rates: Cost per unit decreases at higher usage levels
  • Free tiers: Initial amounts of usage included at no cost
  • Reserved capacity: Discounted rates for committed usage levels

Reading Consumption Charges on Invoices

Standard Invoice View

On a standard invoice, consumption charges appear as:

Subscription   | Quantity | Charge Type | Amount
---------------|----------|-------------|-------
Azure Services | 1        | Usage Fee   | $237.45

Detailed Invoice View

With detailed invoice line items enabled, consumption charges break down as:

Subscription      | Meter                  | Quantity | Unit  | Rate  | Amount
------------------|------------------------|----------|-------|-------|-------
Azure - Compute   | VM - D2v3              | 240      | Hours | $0.12 | $28.80
Azure - Storage   | Standard Blob          | 500      | GB    | $0.02 | $10.00
Azure - Bandwidth | Outbound Data Transfer | 1,000    | GB    | $0.08 | $80.00

Example Scenario: Azure Cloud Services

Monthly Usage Pattern

A company uses Microsoft Azure with these monthly consumption patterns:

  • Virtual Machines: Running 3 VMs of varying sizes
  • Storage: Using blob storage for application data
  • Databases: Running a managed SQL database
  • Networking: Data transfer for external applications

Billing Cycle: January 1-31

During January, the company consumes:

  • 720 hours of D2v3 VM time
  • 500 GB of standard blob storage
  • 720 hours of S2 SQL Database time
  • 1.2 TB of outbound data transfer

Invoice (February 1)

The February invoice would show:

Subscription   | Charge Type | Amount
---------------|-------------|-------
Azure Services | Usage Fee   | $432.60

With detailed line items enabled:

Subscription      | Meter                  | Quantity | Unit  | Rate  | Amount
------------------|------------------------|----------|-------|-------|-------
Azure - Compute   | VM - D2v3              | 720      | Hours | $0.12 | $86.40
Azure - Storage   | Standard Blob          | 500      | GB    | $0.02 | $10.00
Azure - Databases | SQL Database S2        | 720      | Hours | $0.25 | $180.00
Azure - Bandwidth | Outbound Data Transfer | 1,200    | GB    | $0.13 | $156.20

Managing Consumption Costs

Monitoring Usage

The Platform provides several tools to monitor consumption:

  1. Usage Reports: Detailed breakdowns of consumption by service and meter
  2. Trend Analysis: Comparison of current usage with historical patterns
  3. Forecasting: Projections of expected usage and costs

Troubleshooting High Consumption

If you experience unexpectedly high consumption:

  1. Identify Unusual Activity:

    • Compare with baseline usage patterns
    • Look for spikes in specific meters

  2. Check for Resource Leaks:

    • Unused but running virtual machines
    • Orphaned storage resources
    • Inefficient code or database queries

  3. Implement Governance:

    • Enforce tagging policies for resource tracking
    • Deploy resource locks for critical environments
    • Implement approval workflows for new resources

Comparing with Other Subscription Types

Feature Consumption-Based License-Based One-Time
Billing Timing After usage (arrears) Before usage (advance) One payment
Cost Predictability Variable Fixed Fixed
Scaling Flexibility Pay for exact usage Pay for maximum capacity N/A
Primary Charge Type Usage Fee Cycle Fee One-Time Fee
Minimum Commitment Typically none Fixed licenses N/A

Vendor-Specific Considerations

Microsoft Azure

  • Usage data typically has a 24-72 hour delay
  • Certain preview services may not incur charges
  • Enterprise Agreement customers may have different billing arrangements

Amazon Web Services

  • Detailed billing requires AWS Cost and Usage Reports integration
  • Savings Plans offer flexible discount options beyond Reserved Instances
  • Free Tier offerings vary by service

Google Cloud Platform

  • Sustained use discounts apply automatically
  • Committed use discounts require 1 or 3-year commitments
  • Billing export to BigQuery enables detailed analysis

Summary

Usage-Based Subscriptions in the Platform provide flexible pay-as-you-go billing based on actual resource consumption. Unlike License-Based Subscriptions, charges are billed in arrears after usage occurs, and costs vary based on consumption patterns. Understanding usage meters, reading detailed invoice line items, and implementing monitoring tools are essential for managing consumption costs effectively. Usage-Based Subscriptions align with seller contract billing cycles and typically include no minimum commitments, making them ideal for variable workloads and scaling flexibility.

Related Articles

 

Consumption-based Subscriptions compliant rw_v1

Was this article helpful?

0 out of 0 found this helpful

Articles in this section

Add comment

Please sign in to leave a comment.