Understanding Pricing: Consumption Versus Capacity

• For customers accustomed to on-premises licensing, aspects of Microsoft’s cloud pricing models can feel unfamiliar.
• Understanding the implications of capacity and consumption pricing models can help teams create effective cost management plans.

Customers adopting Microsoft’s cloud will come across four different pricing models. Two of them will be familiar to anyone well-versed in Microsoft’s on-premises licensing, but two widely used models bring challenges that managers and purchasing departments need to understand to ensure proper cost management.

Cloud Pricing Models

Although the details vary widely across services, Microsoft uses four general types of pricing models for its cloud services:

• Per-User pricing models are based on the number of users running or accessing the software or service
• Per-Device pricing models are based on the number of devices (for example, PCs) running or accessing the software or service
• Capacity-based pricing models establish an upper