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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 data-driven business landscape, monitoring and observability solutions are no longer optional—they're essential. But when evaluating these tools, one question consistently perplexes SaaS executives and technical leaders: is it better to choose a solution priced by metrics or by hosts?
This pricing decision impacts not just your immediate budget, but your long-term monitoring strategy, scalability, and ultimately, your ability to detect and resolve issues before they affect customers. Let's explore the key considerations to help you make the right choice for your organization.
Understanding Monitoring Pricing Models
Before diving into recommendations, let's clarify the two primary pricing dimensions in the monitoring and observability market:
Host-Based Pricing
Host-based pricing charges based on the number of servers, containers, or instances you're monitoring. Typically, you pay a fixed amount per host per month, regardless of how many metrics you collect from each host.
Example: A company with 100 servers might pay $15 per server per month, totaling $1,500 monthly, regardless of whether they collect 10 or 10,000 metrics per server.
Metrics-Based Pricing
Metrics-based pricing charges based on the volume of data points ingested, stored, or processed. You pay for the number of metrics, logs, or traces your systems generate and send to the monitoring platform.
Example: A company might pay $0.08 per 1,000 metrics ingested. If they generate 20 million metrics monthly, their bill would be $1,600.
Key Factors to Consider When Choosing a Pricing Model
1. Workload Characteristics
For Host-Based Pricing:
- Best for environments with a stable, predictable number of hosts
- Advantageous when hosts generate large volumes of metrics
- Simpler to budget when your infrastructure changes slowly
For Metrics-Based Pricing:
- Better for dynamic environments with fluctuating infrastructure
- More cost-effective when you have high-density hosts with selective metrics
- Provides more granular control over what you monitor and pay for
2. Scalability Implications
According to a 2022 study by Dimensional Research, 79% of organizations reported that their monitoring costs increased faster than their infrastructure growth when using metrics-based pricing. This "cardinality explosion" can lead to significant budget surprises.
Host-based pricing provides more predictable scaling costs—if you double your servers, you double your costs. With metrics-based pricing, doubling servers might increase your costs by 3-5x due to the exponential relationship between hosts and metrics.
3. Business Growth Alignment
Your monitoring pricing model should align with how your business creates value:
- SaaS companies that scale by adding customers on shared infrastructure may prefer host-based pricing, as customer growth doesn't necessarily mean proportional infrastructure growth.
- Infrastructure providers may find metrics-based pricing aligns better with their value creation, as infrastructure utilization directly correlates with business success.
Real-World Scenarios: Which Model Works Best?
Case Study: E-commerce Platform
An e-commerce company with seasonal traffic spikes found that host-based pricing was more economical. During Black Friday, their metrics volume increased by 400%, but their server count only increased by 50%. With host-based pricing, they paid only 50% more during peak season, versus a 400% increase they would have faced with metrics-based pricing.
Case Study: Fintech Application
A fintech startup chose metrics-based pricing initially because they had few hosts but needed deep visibility. As they scaled to over 1,000 microservices, they found metrics-based pricing became prohibitively expensive. They switched to host-based pricing and saved 62% annually while maintaining essential visibility.
Hybrid Approaches Gaining Traction
According to Gartner, by 2025, more than 60% of observability vendors will offer hybrid pricing models that combine elements of both host and metrics-based approaches.
Some innovative approaches include:
- Base fees per host with reasonable metric allowances
- Tiered metric pricing based on business criticality
- "Active time" pricing based on when hosts are actually processing workloads
- Reserved capacity models with flexible bursting capabilities
Making the Right Decision for Your Organization
To determine which monitoring pricing model is right for your organization:
Audit your current environment: Document your host count, metric volume, and how these numbers have changed over time.
Project future growth: Estimate how your infrastructure and monitoring needs will evolve over the next 12-36 months.
Calculate sample scenarios: Use pricing from several vendors to model costs under different growth patterns.
Consider monitoring maturity: Less mature monitoring practices may benefit from the guardrails of host-based pricing, while sophisticated teams can often optimize metrics-based pricing.
Evaluate business-specific factors: Industry regulations, compliance requirements, and business criticality should influence your decision.
Conclusion: There's No One-Size-Fits-All Answer
The ideal monitoring pricing model depends on your specific infrastructure, monitoring philosophy, growth trajectory, and business model. While host-based pricing offers predictability and simplifies capacity planning, metrics-based pricing can provide more flexibility and control over exactly what you monitor.
Many organizations find that their needs evolve over time. What works during your startup phase might not be optimal as you scale to enterprise level. The best approach is to thoroughly evaluate both models against your specific requirements and growth projections.
Remember that the most expensive monitoring solution is the one that fails to alert you to critical problems. Focus first on getting the visibility you need, then optimize the pricing model to make that visibility sustainable as you grow.
What's your experience with monitoring pricing models? Has your organization found one approach more effective than the other as you've scaled?