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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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In today's digital landscape, system outages and technical failures can cost businesses thousands of dollars per minute. Effective incident management has become a critical component of business continuity, but one question continues to challenge both vendors and customers: how should incident management tools price alert volumes?
This question becomes increasingly important as organizations scale their infrastructure and monitoring capabilities, potentially generating thousands of alerts monthly. Let's explore the various pricing models for alert volumes in incident management tools and determine which approaches deliver the most value.
The Current State of Alert Pricing in Incident Management
Most incident management platforms use one of several pricing models for alerts:
- Unlimited alerts with seat-based pricing: Companies pay per user (typically those on-call responders) with unlimited alert volumes
- Tiered alert volume pricing: Fixed price bands based on monthly alert quantities
- Per-alert pricing: A straightforward pay-per-alert model
- Hybrid models: Combinations of user-based pricing with alert volume limits
According to a 2023 industry analysis by Gartner, 47% of incident management vendors now offer some form of consumption-based pricing tied to alert volumes, up from just 28% in 2019.
The Problem with Per-Alert Pricing
While per-alert pricing seems transparent on the surface, it creates several challenging dynamics:
Alert Hesitancy
When organizations pay per alert, they face financial pressure to reduce alert volumes. This can create a dangerous situation where teams might:
- Increase alert thresholds beyond optimal levels
- Consolidate multiple issues into single alerts, creating confusion
- Disable alerting for lower-priority systems that still impact user experience
"We've seen clients literally turn off critical monitoring to save on alert costs," notes Sam Thompson, an IT Operations consultant at Deloitte. "That's the opposite of what reliable systems need."
Unpredictable Costs
Per-alert pricing also introduces significant budget uncertainty. A major incident or monitoring system misconfiguration can trigger thousands of alerts in minutes, creating an unexpected expense.
Value-Based Pricing Approaches
The most effective pricing models align costs with the value received from incident management tools. Here are approaches that better reflect this principle:
1. User-Based Pricing with Reasonable Alert Thresholds
This model acknowledges that the primary value of incident management tools comes from efficiently routing and managing alerts to the right responders. Charging primarily for users (those on-call rotation members) with generous alert allowances better reflects where the value is created.
PagerDuty and OpsGenie have moved toward this model, offering substantial alert volumes included in their base packages with reasonable overage fees.
2. Incident-Based vs. Alert-Based Pricing
Some newer platforms distinguish between raw alerts and actual incidents. Since multiple alerts often relate to a single incident, this approach charges based on the number of distinct incidents rather than individual notifications.
This aligns pricing more closely with the actual disruptive events requiring human intervention rather than the volume of machine-generated signals.
3. Severity-Adjusted Pricing
Not all alerts represent equal value or urgency. A critical production outage provides more opportunity for the incident management tool to deliver value than a minor warning.
Some vendors now offer weighted pricing models where critical P1 alerts might count more toward monthly limits than lower-priority notifications. This encourages appropriate severity classification while acknowledging the differing value of managing various alert types.
Best Practices for Evaluating Alert Pricing
When selecting an incident management solution, consider these factors regarding alert pricing:
- Analyze your alert patterns: Understand your typical monthly volumes and how they might grow with your infrastructure
- Consider your alert-to-incident ratio: If you generate many alerts per actual incident, favor tools that price by incident rather than raw alert count
- Evaluate overage policies: Look for vendors offering soft limits or reasonable overage charges rather than punitive fees
- Prioritize value delivery: The goal is reducing MTTR (Mean Time to Resolution), not minimizing alert counts
The Future of Notification Pricing
The incident management market continues to evolve toward more sophisticated pricing models. Emerging approaches include:
- Value-based SLAs: Pricing tied to improvements in incident resolution times
- AI-filtered alert pricing: Charging only for alerts that pass AI evaluation as requiring human attention
- Business impact pricing: Connecting costs to the actual business significance of systems being monitored
Conclusion
The most equitable pricing model for incident management tools balances predictability for customers with fair compensation for vendors. Pure per-alert pricing often creates misaligned incentives, while user-based pricing with reasonable alert allowances better reflects the core value proposition of incident management platforms.
For organizations evaluating on-call tools, the conversation should focus less on "how much per alert?" and more on "how effectively does this platform help us resolve incidents faster?" The right pricing model supports that mission rather than hindering it.
When selecting an incident management solution, prioritize vendors who demonstrate an understanding that their success should be tied to your operational excellence—not the volume of notifications flowing through their system.