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May 15 2018

What is subscription-based pricing model? Definition from

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subscription-based pricing model

A subscription-based pricing model is a payment structure that allows a customer or organization to purchase or subscribe to a vendor’s IT services for a specific period of time for a set price. Subscribers typically commit to the services on a monthly or annual basis.

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Subscription-based pricing is increasingly being used for cloud computing. In a subscription-based model, cloud customers typically pay upfront, prior to receiving access to cloud services. Prices are often based on the subscription’s length and a longer subscription often translates to a lower cost. Unlike pay-per-use or consumption-based pricing. however, a subscription-based model can cause customers to overpay for services.

Cloud customers that use significant resources can benefit from a subscription-based model, however if a customer only uses a small amount of computing resources, a subscription-based pricing model may not be ideal. Some cloud providers offer a subscription-based model that can adjust to reflect actual usage.

Subscription pricing terms are documented in the provider’s service-level agreement (SLA).

This was last updated in February 2015

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