TL;DR:
Imagine you have a utility bill for your home. You only pay for the electricity, water, and gas you actually use each month, rather than paying a flat fee regardless of your consumption. Similarly, consumption-based services in cloud platforms like Microsoft 365 and Azure work on a pay-as-you-go model. This means businesses are billed based on their actual usage of resources, such as computing power, storage, and user licenses. This model allows companies to scale their usage up or down based on their needs, ensuring they only pay for what they use.
Details For the Techies:
Consumption-based services in cloud platforms like Microsoft 365 and Azure represent a pay-as-you-go model where customers are billed based on their actual resource usage. This model allows organizations to pay only for the resources they actually use, without requiring upfront investments or fixed commitments.
In the context of Software as a Service (SaaS) offerings like Microsoft 365, charges are primarily based on per-user license fees. Licenses are assigned to individual user accounts within a subscription, and organizations can have multiple subscriptions to accommodate different service levels1. For cloud infrastructure services like Azure, resources are billed based on actual usage metrics, such as compute time, storage, and transactions. Scaling is automatic based on demand, allowing businesses to adjust their resource usage dynamically.
This model provides the dual benefits of scalability and cost-efficiency, allowing businesses to adjust resources based on demand without the burden of significant upfront costs. For more detailed information, you can refer to the Microsoft 365 Licensing Marketing Overview.