Usage-based pricing moves the forecast problem; it doesn’t remove it
You trade seat-count uncertainty for consumption uncertainty. Whether that’s better depends on what you can see.
Analysis. This piece contains the author’s interpretation. Where it relies on reporting, sources are listed below.
The pitch for usage pricing is that revenue tracks value. The cost is that revenue also tracks your customers’ seasonality, budget freezes, and one big account’s migration project.
In our view, the companies that handle this well forecast consumption the way they used to forecast deals: by account, with an owner, reviewed weekly. That’s an operational change, not a pricing one, and it’s easy to underestimate.
Sources
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