There are multiple ways to pay for software – Pay As You Go, Flat Fee payment, One-Time licence, or Per Device pricing. But what about ‘PUPM’ payments?
Popular for Software as a Service (SaaS) businesses, Per User Per Month (PUPM) payments allow flexibility, consistency, and anytime customisation. Understanding how this works is simple, enabling easy budgeting once you know how.
So, to help you understand how PUPM could benefit your business, we’ll explore what PUPM is, how it works, and any potential pitfalls of the payment model.
What Is PUPM?
Per User Per Month (PUPM) is a pricing model used by companies across different industries to charge organisations for services delivered to their monthly users.
One of the most well-known examples of this is Microsoft, who grant companies and their employees access to its 365 suite (Word, PowerPoint, Excel). The business owners can then pay for this access through PUPM. It’s also a common payment method for SaaS platforms, collaboration software, or support tools.
As PUPM is based on the number of users, the fee charged varies depending on the number of active users.
For example, a software provider might charge £10 per user per month for their software. If an organisation has 100 regular users accessing this, then their monthly cost would be £1000.
How To Use PUPM
Using PUPM as a payment method is simple and effective, as you bill customers a fixed monthly fee based on their active users.
Before offering this as a payment structure, there are a few things to consider first. You can set up PUPM in just five steps:
Step 1: Define what a ‘user’ is – For you, this might be an individual accessing the service, or it could be a seat on a board. Decide which best suits your product offering.
Step 2: Establish your price – Now you know what a ‘user’ is for you, it’s time to set your price. E.g., £10 per user, £12 per board.
Step 3 – Offer customisations: You can charge more for additional services. For example, you may offer a basic package for £6, which includes the essentials. Then, you can offer an £11 premium rate for all services.
Step 4 – Track users: It’s important to keep track of how many users are accessing your software, as this is crucial to charging the customer later down the line.
Step 5 – Charge the customer: Now it’s time to charge your customer at the end of the month, based on the number of users and the fixed rate you agreed to.
Common Uses for PUPM
While there are plenty of businesses and software providers who offer or benefit from PUPM, there are a few common places where you may find it as a payment option.
Common uses for PUPM include:
- IT Services: If your business needs external IT support or security, then this is a great way to utilise PUPM payment methods.
- Communication & Collaboration Tools: For businesses that require software such as Zoom, Microsoft, Slack, or Adobe, PUPM works perfectly.
- SaaS Applications: Microsoft Teams and Google Workspace often offer PUPM as a payment method for businesses.
- Customer Relationship Management Software: Platforms like HubSpot or Salesforce create flexibility for customers by allowing them to use PUPM as payment.
6 Benefits of Using PUPM
Wondering why PUPM is such a popular payment method? Let’s explore six benefits of using this method yourself.
- Easy to Budget
One of the benefits that PUPM customers appreciate is how easy it makes budgeting on a month-to-month basis.
As the cost is spread out monthly throughout the year, instead of one bulk payment, companies can better manage their flow of cash, avoiding the need to invest in costly upfront services.
- Simple to Scale
Scaling up or down based on need is made simple with PUPM payments, as the users can be adjusted at any time.
If there are a few new starters joining your business who’ll require access to the software, then licenses can be expanded. Should a person retire, they can also reduce the amount of licenses paid for.
- Offers Consistency
PUPM offers consistency and predictability to customers through their fixed monthly cost per user.
Customers don’t have to try to calculate dynamic pricing figures; they know exactly how much they’ll pay based on the agreed cost per user and the number of users accessing the service. The price at the end of the month is always consistent with the active users.
- Charges Based on Use
Instead of one bulk fee, where the customer may be paying more or the software provider might receive less, PUPM charges based purely on usage.
As such, it offers a cost-effective payment method for customers, as they simply pay for what is used and nothing more. For the software provider, they know they’ll receive the exact figure for services given.
- Customisable
Price tiers can be offered with PUPM, meaning it’s completely customisable for both the software provider and the customer.
If a customer only needs the basic version of a product, they can opt for a cheaper package that keeps their outgoings lower. If a more expansive package is required, then the premium offering allows customers access to that, while ensuring the provider is paid accordingly.
- Straightforward to Understand
All in all, PUPM is easy, straightforward, and simple. Customers know exactly what they’re paying for, while the provider is never underpaid for what’s used.
There are no hidden fees, as the customisable tiers mean customers can choose the exact level of service required. Plus, providers don’t need to worry about a customer using more than what is paid for, as the monthly fixed fee per user means they’re always paid for what’s used.
Are There Any Challenges to Using PUPM?
On the whole, PUPM is a flexible, simple payment method for accessing software. However, while there are no real challenges to PUPM, there are a few things to keep in mind for the best use.
- Easy to Lose Track: If your team is likely to grow at a rapid rate, then you need to keep a close eye on how many people are using the software. As your team expands, it can be very easy for your subscription costs to skyrocket before you have time to notice.
TIP: Make sure to remove inactive user licenses straight away, should a person retire, find a new job, or otherwise leave the business. This way, you won’t end up paying for a person who no longer requires access to the software.
- Leaves You Dependent on Software Providers: Another factor to be aware of is that PUPM leaves you dependent on the software provider to an extent. As they’re typically subscription-based, it can be difficult to switch elsewhere if you find another provider that offers a more suitable service
Are There Other Common Pricing Models?
Although PUPM is an easy payment method used by many, there are other pricing models commonly used across the market. To explore other options, check out our handy table below.
| Payment Method | How It Works |
Pay As You Go | Similar to PUPM, Pay As You Go charges are based on product usage. For example, a Pay As You Go phone provider may only charge you for minutes used, as opposed to a contract. |
One-Time Licensing | You pay one upfront price for continued use of the software, as opposed to a monthly subscription fee. Over time, this typically works out cheaper, but it does involve hefty initial fees. |
Per Device | Ideal for companies where employees use their own laptops to work, per-device payment methods charge based on how many computers are accessing the software. |
Flat Fee | Here, you pay one agreed, fixed rate for access to the software, regardless of how many people need to use it. For larger teams, this can often be the more cost-effective method. |
Halcyon Keeps Your Business Costs Fair and Accurate
Here at Halcyon, we’re passionate about ensuring businesses receive the best services from software providers – that’s why we offer expert IT advice to all our customers.
Our IT Consultancy Service gives you access to dedicated advice, helping your business to be tech-savvy, making decisions that best serve your business. If you’re unsure whether a PUPM payment method is the right way to pay, then our IT team is on hand to talk it through with you.
Get in touch with us today to see how we can help you better understand what your business is paying for and where costs can be cut. Give us a call on 0333 344 5789 or send us an email to hello@ithalcyon.co.uk.
James Hamilton is an IT industry expert and the founder of Halcyon, with extensive experience delivering managed IT, cyber security, and connectivity solutions.
