Q

How will the move to usage-based billing affect ARPU?

Switching from a subscription-based billing model to a usage-based one could affect ARPU, says Managed services expert Lauren Robinette explains how to predict these changes.

When going from an annual subscription model to a usage-based billing system, is it possible to predict the effects on average revenue per user ( ARPU)?

It takes time to understand the return on investment (ROI) and total cost of ownership (TCO) for any investment, and it’s also important to consider actual usage versus projected need.

Starting with a usage-based model is ideal. After the first year of collecting data, it becomes easier to forecast the long-term shifts in revenue and expenses. The next step is developing the ability to hypothesize more accurate annual forecasts without over-provisioning. Some products can aggregate the public cloud usage and pricing, and then optimize the information into real-time or into a report. 

Have a question for Lauren Robinette? Send an email to editor@searchcloudprovider.com.

This was last published in June 2012

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