In enterprise software as a service (SaaS), usage-based pricing—a pricing model in which customers are billed only when they use a product or service—is gaining ground. According in a report by VC firm OpenView, about 60% of SaaS businesses today offer some form of usage-based pricing. Recently, Apigee, Google Cloud’s API management platform, made the switch, as did vertical software giant Autodesk.
However, while usage-based pricing has its advantages, it can be more difficult to track from a billing perspective. Companies that pay for pay-as-you-go products often struggle to figure out what to charge their customers for those products.
“This is a new challenge for engineers as they need to build a real-time infrastructure to implement cost control and integrate usage data with product and revenue teams,” said Peter Marton, co-founder and CEO her OpenMeter, he told TechCrunch in an interview. “Real-time data is a challenge from the consumer side as well. A tight feedback loop between customers interacting with usage-based products and consumption reflected in billing and usage dashboards is essential to controlling spending.”
Marton experienced problems with “measurement,” as he calls it, firsthand while working at Stripe as a staff software engineer. There, he encountered blockers that collect usage-based pricing data from different providers and infrastructures and aggregate and analyze that usage together.
Looking for a solution, Marton teamed up with András Tóth, a former Cisco software engineer and Marton’s former colleague at RisingStack, a software development company, to launch OpenMeter, which measures application usage by customers.
As Marton explains, OpenMeter — built on Apache Kafka, an open-source toolkit for handling real-time data streams — processes “usage events” across a company’s technology stack. It then converts the events into human-readable consumption metrics, which it feeds into billing and finance dashboards and customer relationship management databases for product and revenue teams to review.
OpenMeter can also impose usage and rate limits. And it can perform usage-based or hybrid pricing, allowing companies to more transparently (at least in theory) charge their customers.
“OpenMeter is … built for engineers and offers a synthetic architecture to process real-time usage data and control costs,” Marton said. “Enterprises choose OpenMeter for its composability. It’s hard to replace decades of monetization infrastructure all at once, so we’ve created a solution that engineering teams can adopt incrementally.”
One of OpenMeter’s monitoring dashboards. Image Credits: OpenMeter
Now, OpenMeter isn’t the only game in town when it comes to vendors facing metering dilemmas.
There’s Metronome, which recently raised $43 million for its software that helps companies offer usage-based billing, and Amberflo, which is building toolsets to transform usage-metered SaaS pricing. Elsewhere, M3ter provides SaaS businesses with usage-based pricing solutions.
So what makes OpenMeter different? Well, for one, it’s open source. OpenMeter’s software is available for free to use, with paid options for businesses that prefer managed plans.
Marton hints that it’s also cheaper than the competition — though he acknowledges that exact pricing is still being worked out.
“Competitors in the usage-based space only serve revenue pools with a closed-source, billing-first approach,” he said. “OpenMeter Focuses on New Generation of AI Companies”.
In any case, OpenMeter has managed to achieve a measure of early success, raising $3 million from Y Combinator (which incubated it), Haystack and Sunflower Capital. Marton says the company, which currently has four employees based out of its San Francisco office, has “several” market-leading AI companies as clients — but he wasn’t willing to share their names .
“The economic downturn has pushed companies to have tighter control over spending, requiring them to understand cost per user and enforce usage quotas, while revenue teams need to find actionable insights in usage data to find new revenue streams,” Marton said. . “It’s a windfall for OpenMeter.”
