Usage-Based Software Pricing via Billable Units
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Solution Overview
Problem
Existing pricing models for software products often fail to accurately reflect the value provided by the software's execution, as they are typically based on time rather than actual usage metrics, leading to inefficiencies and potential overcharging or undercharging.
Innovation Solution
Implementing a pricing model based on billable units defined by the software provider, which can include parameters such as the number of operations, functionality provided, data processed, or log-ins, allowing for non-time bound pricing that charges customers based on actual usage rather than elapsed time.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Ease of operation
If software products are priced based on time (subscription or fixed price), then pricing simplicity is improved, but pricing accuracy reflecting actual value provided deteriorates
Solution Approach 1:
The patent segments the software usage into discrete billable units (e.g., number of operations, data processed, log-ins) rather than using continuous time-based pricing. This segmentation allows for more precise measurement of actual value provided while maintaining manageable pricing complexity through defined unit categories.
Solution Approach 2:
The patent changes the pricing parameter from time-based (subscriptions, fixed prices) to usage-based parameters such as number of operations, data volume processed, or number of log-ins. This parameter change enables pricing to accurately reflect the actual value provided by the software while allowing customers to pay only for what they use.
2Ease of manufacture
If time-based pricing models are used, then implementation simplicity is improved, but alignment with actual value provided deteriorates
Solution Approach 1:
The patent implements a feedback mechanism where the software product monitors and reports actual usage metrics (billable units) to a billing service. This feedback loop enables the system to automatically adjust pricing based on actual value provided, ensuring reliable alignment between what the software delivers and what customers are charged.
Solution Approach 2:
The software product performs self-monitoring of usage metrics and automatically generates billing data without requiring manual tracking or complex external systems. This self-service capability maintains implementation simplicity while achieving accurate value alignment through automated usage tracking and billing.
3Measurement precision
If usage-based pricing with multiple billable units is implemented, then pricing accuracy is improved, but system complexity increases
Solution Approach 1:
The patent introduces a billing service as an intermediary component that handles the complexity of tracking multiple billable units, calculating charges, and managing customer accounts. This intermediary approach allows the software product to focus on core functionality while maintaining pricing accuracy through centralized billing management.
Data Source
AI summary
Functionality is disclosed herein for charging for the use of software products based upon billable units defined by a software provider. The software product identifies the occurrences of the billable units as the software product is executing. The software product also sends billing data to a billing service identifying an occurrence of a billable unit, or billable units, such that an invoice may be created that charges for use of the software product based, at least in part, on the occurrence of the billable units.