In recent years, usage-based pricing has become an increasingly popular model in enterprise software-as-a-service (SaaS). According to a report from VC firm OpenView, approximately 60% of SaaS businesses now offer some form of usage-based pricing. This shift towards usage-based pricing is not limited to smaller companies, with industry giants such as Apigee and Autodesk also making the transition.

The Challenges of Usage-Based Pricing

While usage-based pricing offers many benefits, including increased transparency and flexibility for customers, it can be more difficult to manage from a billing perspective. Companies paying for usage-based-pricing products often struggle to determine how much to charge their own customers for these products. This is because the data required to accurately calculate usage is typically generated in real-time, making it challenging to integrate with existing billing systems.

"This is a new challenge for engineers, as they need to build a real-time infrastructure to put cost control in place and integrate usage data with product and revenue teams," Peter Marton, co-founder and CEO of OpenMeter, told TechCrunch in an interview. "Real-time data is a challenge from the consumer side, too. A tight feedback loop between customers interacting with usage-based products and the consumption reflected on their billing and usage dashboards is essential for controlling spending."

The Problem with Metering

Marton experienced these challenges firsthand while working at Stripe as a staff software engineer. There, he encountered difficulties collecting and aggregating usage data from different providers and infrastructure. In search of a solution, Marton teamed up with András Tóth, an ex-Cisco software engineer and former colleague at RisingStack, to launch OpenMeter.

Introducing OpenMeter

OpenMeter is a platform that meters customer usage of apps. Built on Apache Kafka, an open-source toolkit for handling real-time data feeds, OpenMeter processes "usage events" across a company’s tech stack. It then turns these events into human-readable consumption metrics, which are funneled to billing and finance dashboards as well as customer relationship management databases for product and revenue teams to review.

OpenMeter can also enforce usage and rate limits. Additionally, it can execute usage-based or hybrid pricing, allowing companies to more transparently bill their customers. "OpenMeter is built for engineers, and offers a composable architecture to process real-time usage data and control cost," Marton said. "Enterprise companies choose OpenMeter for its composability. It’s hard to replace decades of monetization infrastructure at once, so we built a solution that engineering teams can easily integrate into their existing systems."

Other Solutions to the Metering Problem

While OpenMeter offers a comprehensive solution to the metering problem, other companies are also working on similar solutions. For example, some startups are developing platforms that use machine learning algorithms to estimate usage based on historical data and user behavior.

One such company is Aria, which uses AI-powered analytics to help businesses better understand their customers’ usage patterns. Aria’s platform can provide insights into areas such as usage spikes, bottlenecks, and opportunities for upselling or cross-selling.

The Future of Usage-Based Pricing

As more companies adopt usage-based pricing models, the need for innovative solutions to metering will only continue to grow. With OpenMeter and other platforms leading the charge, it is likely that we will see significant advancements in this area in the coming years.

In conclusion, while usage-based pricing offers many benefits, it also presents challenges related to metering. Companies such as OpenMeter are working to address these challenges with innovative solutions that can help businesses better manage their usage-based pricing models.

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