Our Shift to Usage-Based Pricing
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Appsmith helps developers build internal apps (like support tools, dashboards, asset-tracking apps, and much more) quickly. Today, we’re launching usage-based pricing for all Appsmith customers. Users can access the Appsmith Business plan starting at only $0.40 per hour per user. They won't have to worry about unpredictable pricing or shock expenses - costs are capped at an affordable price of $20 per user per month.
The self-hosted Community edition is still free and open source — nothing is changing there — and we still offer the Enterprise edition with custom pricing.
We strongly believe that user-based pricing, which most of the SaaS industry and most of our competitors use, is unfair to customers, and that usage-based pricing is a much more principled and ethical alternative. In this post, we share why we chose usage-based pricing with a cap based on information gathered from our community and customer base, how exactly it works, and why it’s the best possible choice for Appsmith’s community and customers.
User-Based SaaS pricing is outdated and limited
Setting a pricing model is a challenging exercise, and it is especially difficult to get right for an open-source company like Appsmith: we need to balance the availability of our open-source product and community empowerment with building a sustainable business in the long run.
On most SaaS pricing pages today, including those of our competitors, you will find a combination of a few tiers of features with per-user pricing. We considered this approach but realized that it is misaligned with our goal of empowering developers to make their internal software better. Here are a few specific reasons why we felt this way:
User-based pricing artificially limits the number of users who can experiment with the software. Once you’re over your paid user limit, you need to go through an admin or, in larger organizations with annual contracts, through the procurement department to use the software your organization already pays for! Such an experience stifles the adoption of this technology and innovation in the industry and is not acceptable to us.
Another reason why we decided against user-based pricing is it carries a lot of hidden risk for customers due to it leading to wasted resources. This is because a horizontal platform like Appsmith helps developers build apps catering to a wide variety of use cases and usage patterns.
For example, consider customer support apps, which can have a variety of users like individual agents (high usage for multiple hours every day), managers (that log in only once a week), and product and user research teams (that log in once a month). If the cost per user of using a customer support app for several hours a day costs the same as a user logging in once a month, something seems off.
Consider another situation in which a company is scaling. A vendor management portal at a hyperlocal e-commerce company (that grew from 5 locations to 50 locations and now has seen a 100x increase in the number of vendors that log in sporadically) would shudder to commit to a user-based annual plan
Other pricing models, such as fixed monthly fees or one-off license payments, didn’t align with the way our customers get value from our software either.
So we chose to implement a pricing structure that rises beyond the archaic user-based pricing model, is easier to understand, and is more transparent: usage-based pricing. We believe this model supports the way developers function in the software space today much better than all other options.
Usage-Based, but with a cap
In a usage-based model, you only pay for what you use within a software product. The unit of use that’s most relevant for Appsmith is hours of use by each user. So in the new pricing model, if you use Appsmith for one hour, you’ll only pay for that hour.
The key reason why we believe in usage-based pricing is the amount you pay is proportional to the value you receive from the product.
There are also additional benefits:
Usage-based pricing is more flexible: when your usage increases for a short period of time, your bill is higher just for that period. When you use the software less, you pay less.
Usage-based pricing also aligns with the incentives of customers and SaaS providers. The provider isn’t incentivized to exaggerate the benefits of the product to get higher short-term sales. They are instead incentivized to do the opposite: make sure that potential customers will really get what they need out of the product in the long term by focusing on making the product as great as possible.
Usage-based pricing shares risk between providers and customers. Because the provider only makes more revenue if customers use the product more, trying out a piece of software no longer requires an up-front investment. The risk is fairly shared between the customer and the software provider.
When we transitioned to usage-based pricing, we knew that Appsmith wasn’t the first company to do this. We were particularly inspired by the stories of Snowflake or Hashicorp (Packer, Consul, Vault, etc) and even Mixpanel, who used fair pricing rather than charging whatever they could get away with.
There was still one major issue with how many companies implement usage-based pricing: lack of spend predictability. If you happen to use the product a lot, you can end up with an unexpectedly high bill, which could discourage heavy use. The user-based pricing model doesn’t have this issue as you know in advance how many users you’ll pay for. We wanted the best of both worlds: the value alignment of usage-based pricing, as well as the predictability of user-based plans.
Our solution: we are capping usage-based spending at a maximum monthly charge of $20 per user per month. In the illustration below, you can see how much of a difference the cap makes to the total cost of an Appsmith plan.
We also split features in our pricing tiers based on what individuals vs. businesses would find valuable. This allows us to offer a free, open-source application with all of the features that individual developers would need, while still charging for features targeted towards a subset of users, like large teams who get extraordinary value and generate specific financial results from the use of our software. In our opinion, this is the best way to balance the values of the open-source community with economic realities.
Usage-Based pricing makes new use cases possible
Our new usage-based Business plan makes the costs to experiment with the Business edition very low. We think it’s important to decrease these up-front costs so that engineers can show value within their own companies before the companies are comfortable paying for the product.
Another benefit of usage-based pricing is that it’s now more affordable to create small ad hoc tools for your clients and partners with Appsmith. In a user-based pricing model, every client or partner would have needed their own paid account, which doesn’t make sense if they only use your tool once a month. Our new pricing model doesn’t have this limitation and we hope to see an increase in internal apps made not just for employees, but also for customers, clients, partners, contractors, and everyone else who’s part of your company’s ecosystem. Check out our templates to see the breadth of use cases and options!
How we’re tracking Appsmith usage
For those interested in the exact mechanism of usage tracking: we only start a usage session based on an interaction with the application. Having the application open in multiple tabs won’t trigger sessions when the application is not being used. This is another way to promote transparency: you are only charged when the application is actively being used, not just when the application is open.
All usage is also equal. This means that a session becomes valid across all devices. If, for example, you have three instances running – one for production, one for development, and one for testing – they can all be used at the same time for the same 1-hour charge.
The application stores your session data locally and then periodically sends anonymized and encrypted usage information to the Appsmith billing servers to calculate billing information. This ensures that your usage data is always secure and never exposed to third parties.
Usage-Based pricing will ensure the longevity of the Appsmith project and our community
We believe that internal application development platforms are a powerful new tool for education, business, and individuals. Appsmith is the first OSS project of its kind and we want the project to grow rapidly while ensuring its longevity.
We wanted our pricing model to guarantee the ongoing viability of our freely available, open-source Appsmith platform by sharing in the value gained by our Business users without adding financial hurdles to adoption. To realize this, we undertook a thorough consultation with both our OSS and Business users to find out what would work best. We then clearly communicated to our community what we were implementing and how, as well as how it would lead to long-term benefits for the project.
As Kyle Poyar of OpenView has said, “With usage-based pricing, you share in your customers’ success. Your revenue growth is a reflection of the value they derive from using your product.”
We are making world-class tools in this space and we expect fair, open, and transparent pricing to be a large part of this. If you’d like to try out the Business edition of Appsmith, feel free to have a look at our pricing estimator and sign up here!
Cover artwork by Jemma Jose