In enterprise software as a service (SaaS), usage-based pricing—a pricing model in which customers are charged only when they use a product or service—is gaining traction. According to a report by VC firm OpenView, roughly 60% of SaaS companies 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.
But while usage-based pricing has its advantages, it can be more difficult to monitor from a billing perspective. Often, companies that pay for products based on price struggle to figure out what to charge their own customers for those products.
“This is a new challenge for engineers, as they need to build real-time infrastructure to establish cost controls and integrate usage data with product and revenue teams,” Peter Marton, co-founder and CEO of OpenMeter, told TechCrunch in an interview. “Data in real time is also a challenge from the consumer’s side. A strong feedback loop between customers interacting with usage-based products and spending reflected in their billing and usage dashboards is critical to controlling spending.”
Marton experienced firsthand the problems with “measurement,” as he calls it, while working at Stripe as a software engineer. There, he encountered blockers that collect usage-based pricing data from different service providers and infrastructure and aggregate and analyze that usage together.
In search of 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 user usage of applications.
As Marton explains, OpenMeter — built on Apache Kafka, an open-source tool for handling real-time data sources — processes “usage events” across the company’s technology stack. It then turns events into human-readable spend metrics, which it routes to billing and finance dashboards, as well as customer relationship management databases for review by product and revenue teams.
OpenMeter may also impose usage and speed limits. And it can do usage-based pricing or hybrid pricing, allowing companies to charge their customers more transparently (at least in theory).
“OpenMeter is … built for engineers and offers a composable 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 built a solution that engineering teams can gradually adopt.”
One of OpenMeter’s monitoring dashboards. Image credits: OpenMeter
Now, OpenMeter isn’t the only game in town when it comes to vendors dealing with metering dilemmas.
There’s Metronome, which recently raised $43 million for its software that helps companies offer usage-based billing, and Amberflo, which builds toolkits to transform SaaS pricing with usage measurement. On the other hand, M3ter supplies SaaS companies with usage-based pricing solutions.
So what sets OpenMeter apart? Well, for one thing, it’s open source. OpenMeter’s software is available for free to use, with paid options for businesses that prefer managed plans.
Marton implies that it is also cheaper than the competition — although he admits that the exact price is still being determined.
“Competitors in the usage-based space only supply revenue teams with a closed-source, billing-first approach,” he said. “OpenMeter Focuses on New Generation of AI Companies.”
In any case, OpenMeter 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 out of its San Francisco office, has “several” leading AI companies as customers — but declined to name them.
“The economic crisis has pushed companies to control spending more tightly, requiring an understanding of cost per user and enforcement of usage quotas, while revenue teams must find actionable insights into usage data to find new sources of revenue,” said Marton. “It’s a tailwind for OpenMeter.”