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Blog/ Jun 13, 2024

The Era of Seat Based Subscription Billing is Nearing its End

The shift from traditional seat-based subscription billing to more flexible, usage-based models is gaining momentum. This change is driven by the need to better align pricing with actual usage and customer needs.

Adoption of Cloud Services and Market Shifts

Traditionally dominated by small to medium-sized businesses, cloud services are now being embraced by larger enterprises. SaaS vendors are capturing market share from premise-based companies, which now adopt “as-a-Service” models to attract and retain customers.

IDC predicts by 2025, the cloud will surpass on-premises infrastructure as the primary location where operational data is stored, managed, and analyzed for 65% of A2000 organizations. Gartner predicts that global UC spending will grow at a 3.7% CAGR to reach $53.5 billion in 2026.

Advancements by Amazon AWS and Microsoft Azure have shown businesses the benefits of cloud services, replacing traditional models with subscription and usage-based billing.

Subscription Billing Model

Investors favor models that turn initial sales into recurring subscriptions. However, customers may prefer pay-as-you-go options if they cannot justify long-term contracts.

Businesses may hesitate a usage-based model due to:

  • Complexity of tracking and charging for usage in real-time.
  • Familiarity with simple subscription models.
  • Difficulty in revenue forecasting.

However, a-la-carte offerings allow customers control over costs, improving experience and loyalty.

Amazon’s Disruptive Models

AWS has been recognized as a Leader in the 2023 Gartner Magic Quadrant for Contact Center as a Service with Amazon Connect. 

Amazon Connect has certainly disrupted the establishment with a pricing model that eliminates long-term subscription contracts and replaces them with more flexible usage-based pricing models that allow contact centers to subscribe on a pay as you go basis. Customers simply pay by the minute for Amazon Connect usage plus any associated telephony services. In addition, the company provides a free tier of service usage every month so customers can actually get up and running with the service for free!

Amazon has also implemented pay-as-you-go pricing for its UCaaS offering called Amazon Chime. The service charges a fixed amount per user per month with no upfront commitments. You can upgrade, downgrade, or cancel your subscription at any time. 

Rise of IoT and AI

Usage-based models are crucial for monetizing IoT, where traditional subscriptions may not apply.

AI applications in contact centers are replacing human tasks, with costs tied to usage frequency. Businesses will need to store more data for AI, linking value to application usage.

Embracing the shift

As the digital landscape continues to evolve, traditional seat-based subscription billing is rapidly being replaced by more flexible, usage-based models. These innovative approaches better align with customer needs, offering transparency, control, and scalability. Businesses that adapt to these changes can enhance customer satisfaction, drive loyalty, and open new revenue streams.

Embracing usage-based billing not only meets the current demands of the market but also prepares businesses for future advancements in IoT and AI. To stay competitive and thrive in this dynamic environment, transitioning to a usage-based model is essential.


About the Author

Ryan Susanna /

Ryan is a seasoned telecommunications expert with a broad background in both the service provider and software vendor sides of the business. Ryan is currently responsible for worldwide sales at LogiSense. During his tenure, Ryan has held executive level positions including Senior Sales Executive, and Director of Sales. In these roles, he has provided strategic sales, product, and market guidance for our next generation IP service management solutions.


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