Usage-Based Pricing: Balancing Flexibility with Financial Predictability

As of 2025, usage-based pricing (UBP) is dominating SaaS business models, with 59% of software companies expecting it to drive a greater share of revenue this year, an 18% jump since 2023. This pricing model, which charges customers based on how much they actually use, can be a win-win: flexible for customers, and lucrative for vendors.

But there’s a catch.

For finance and procurement teams, UBP makes forecasting notoriously difficult. Budgets can spiral unexpectedly, especially during peak usage periods or product launches. Unlike flat-rate subscriptions, usage-based models fluctuate monthly, and that unpredictability introduces real risk to EBITDA, gross margin targets, and cash flow planning.

Why Finance Teams Are Pushing Back

Finance leaders are increasingly raising concerns. A recent survey showed that 68% of finance execs prefer predictable spend models, even if they sacrifice some flexibility. Why? Because usage-based models often lack visibility. If not tightly managed, companies can end up with cost overruns, shelfware, or inefficient pricing tiers.

How to Combat the Unpredictability

Here are a few practical steps companies can take:

1. Use tiered or hybrid contracts

Negotiate contracts that combine flat-rate base fees with usage-based elements. This gives teams a minimum predictable cost while still benefiting from scalability. Some companies even build “ceilings” or “floors” into these deals to cap risk.

2. Get ahead of the renewal

Start reviewing usage patterns 6-9 months before a renewal. Vendors often assume you won’t check the details, but analyzing historical usage can uncover overages, shelfware or underused modules that give you leverage.

3. Align Procurement with Finance and IT

Make software procurement a cross-functional effort. Finance teams can guide cost analysis, IT can assess utility, and procurement can negotiate smarter deals based on actual business value, not just list price discounts.

4. Leverage vendor intelligence

Vendors have internal discount structures, margin targets, and quota pressures. Partnering with specialists who’ve worked for those vendors can give you an edge in negotiation by understanding what can actually be moved, and when.