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Technical Insight: Subscription vs. Consumption in as-a-Service Contracts (Part 4)

Published September 14th, 2021. Part 4 of "Evaluating Infrastructure-as-a-Service" series. This Technical Insight covers subscriptions vs. consumption models found in as-a-Service contracts. Download the free Technical Insight now!

This is Part Four of the “Evaluating Infratructure-as-a-Service” series. To view the rest of the documents in this series, click here.

When vendors began introducing as-a-Service acquisition options for their product portfolios, they would often use the word “consumption” to describe the way in which users would be charged for their services. Users of Storage as a Service (STaaS) for example, would be charged for the storage capacity they “consumed” in a given time period – typically one month. The trend now, however, is to add the practice of subscribing to the service as well as paying for capacity consumed. What is the difference?

Vendors are now in the habit of offering an infrastructure base – some level of capacity that a user will pay for during the life of a services agreement. The base is now referred to as a subscribed capacity that the user pays for on an annual basis and will always pay for during the life of the agreement whether or not it is actually used. Use of capacity above this base falls into the consumption category and is billed as used. Charges for consumption capacity can go up or down monthly depending on usage; whereas charges for subscribed capacity are locked-in although some vendors allow users to redefine the amount of subscribed capacity at certain intervals during the agreement period.

Here we look at some examples of this services delivery and billing model and explore some of its contractual implications.


Certain aspects of are the same for all of the following type of services:

  • Base subscription defines the minimum capacity level that customs must pay for during the life of the contract without exception.
  • Consumption capacity over the base is charged on an as used basis.
  • The base subscription term defines the life of the initial term of the contract.
  • Subscription payments are made yearly in advance for each year of the subscription contract.
  • Capacity can be added to the base subscription with a commensurate increase in subscription charges.
  • Vendors maintain at least a 20% consumption capacity buffer for growth and spikes in usage. Consumption capacities range from 20 to 50% of the base. These levels may be negotiable.
  • End of subscription term provisions are defined in the contract and typically allow users to renegotiate a new subscription or extend on a short-term basis (month-to-month, quarter-to-quarter).

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