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UCaaS Pricing: Are Consumption-based Models a Con?
- Avoids need for major capex expenditure
- Removes complication of owning and depreciating capital assets
- Makes costs directly proportional to the volume of usage
- Provides the ability to readily right-size services throughout the contract term
- Gives certainty of cost of ownership over the full contract term
- Entitles customers to future software upgrades automatically
- All services charged based on the number of monthly active users
- Each user charged according to the features they use
- Ability to increase / decrease volumes at will
- Discounts automatically applied based on volume and longevity of service
- Truly inclusive pricing, including all reasonable professional services, training, service management, etc.
- Minimum quantities — inability to downsize from initial contract quantities over-estimated based on legacy telephony numbers
- Charges applied from contract date —it often takes months after charges commence to complete a UCaaS rollout and before users are actually consuming services
- One size fits all — all users have to have the same feature set even though only a small number actually require enhanced capability
- Hidden extras — base contracts might exclude features and services such as connectivity, service management, or third-party services that you need to make your service work
- Professional services charges — you’ll often incur additional fees for design, installation, training, documentation etc.
- Restrictive change clauses — many contracts specify minimum service periods for additions during the contract period
- Unexpected price variations — prices may vary according to the retail price index or currency fluctuations
- Discount models — customers often must pay multiple years’ charges up-front to get benefit of long-term contract discounts
- Ensure the contract enables you to vary quantities both up and down. It is equally important to ensure that additions made late in the contract term do not commit you to a significant contract extension across the board. A successful tactic that I have used is to agree to a short contract extension for the whole service when making late additions that have an equivalent monetary value to, say, a three-year term for the additional requirement.
- Ensure you have an onboarding strategy that takes account of payment triggers as well as service delivery. Do not accept a situation where you will be paying for all your services months before you migrate to them.
- Be smart with contract volumes. Do not get into a situation where you are paying for hundreds of users that never use the service. Ideally survey your users in advance of contract signature to ensure you only pay for what you need. If this is not possible, then contract for an agreed minimum volume with the ready ability to increase this later.
Dave is writing on behalf of the SCTC, a premier professional organization for independent consultants. Our consultant members are leaders in the industry, able to provide best of breed professional services in a wide array of technologies. Every consultant member commits annually to a strict Code of Ethics, ensuring they work for the client benefit only and do not receive financial compensation from vendors and service providers.