For most of my career, software was the most predictable line in my budget. We bought a number of licences, usually named users or servers, and paid the same every quarter whether the business had a good month or a bad one. I could forecast it in September for the following year and be within a few percent.
That is changing, and I expect it to keep changing. At its last renewal our transport management supplier moved from a fee per user to a fee per shipment planned. Our customer notification platform charges per message sent. The new slotting tool in the warehouse is priced per order line. The analytics product our finance team wants is priced on compute consumed, and the assistant features appearing in half of our software are sold as credits. None of this is unreasonable. Suppliers want to be paid in proportion to the value they deliver, and a parcel is closer to value than a seat is.
What it does to an IT department is less comfortable. Last December, our busiest month, those lines together cost forty one percent more than in an average month, and I learned that from the invoices in January. A department that has always forecast from a list of contracts now has costs that move with volume, and the volume forecast belongs to operations and commercial, who have never had a reason to send it to me.
So we are starting to plan these lines the way our transport team plans fuel. They are budgeted as a rate per parcel multiplied by the volume plan, and when the volume plan changes, my forecast changes with it. Usage is reported monthly beside the volume it served, so a rising rate shows up as a rate rather than hiding inside a growing total. And every new consumption contract has to include a ceiling or a band, because a supplier paid per message has no reason to tell us that our system has started sending each message twice.
Within a decade I expect a large share of what IT spends to be a variable cost of trading. The board's question will stop being what IT costs per year and become what it costs per parcel, and I would like to have that answer ready before anybody asks.
– Serguey Shinder
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