FinOps & process
Percentage-of-savings pricing
A cost-tool pricing model that charges a cut of the spend it manages, or of the savings it finds, not a flat fee.
Last updated
Definition
Under percentage-of-savings or percentage-of-managed-spend pricing, a vendor's revenue rises with your cloud bill or with the savings it can claim credit for finding. The vendor's incentive is then not quite the same as yours. A tool priced this way gains when your spend stays high, or when it claims ever larger savings. It does not gain by making itself unnecessary and helping you spend less.
Flat, plan-based pricing removes that misalignment. The fee stays constant whatever your spend or savings. The vendor's only real incentive is to keep the product useful enough that you keep paying. Any other software works on the same incentive.
Where it shows up
You see percentage-of-savings or percentage-of-managed-spend pricing on a vendor's pricing page or in its contract terms. It is stated as a cut of managed spend, or of the savings the vendor claims credit for finding. A flat monthly fee, by contrast, is unrelated to the size of the bill.
What makes it expensive
A percentage-based contract signed while spend is small looks cheap. The fee then rises automatically as the company and its cloud bill grow. The rate never changes, so the contract never looks worse. Only the invoice does, every year, in step with the growth you hoped for.
Related
The invoice is a lagging signal.
A monthly invoice tells you what already happened. CostMon builds a daily baseline, so a spike stands out while you can still act on it.