On your providers business models

 June 30, 2025

When buying a service, you’re not just buying what’s on the label. You’re buying into someone else’s business model. This aspect is now becoming even more relevant, considering that many times, when buying a product, you are also buying a service with it since there are more and more hybrid products.

If you don’t understand how your provider is structured and how it makes money, you will not fully understand your relationship with them. And you’re more likely to get blindsided.

Incentives predict behaviour

If you know how your providers make money, you can predict how they will behave. The predictions you will be able to make tend to fall into three buckets:

• Things they will try to push you: this bucket is everything they will push you to buy or use, such as additional features, usage upgrades, long contracts, premium support packages, or adjacent services with high margins.

• Things they will try to pull you from: this bucket is everything they will try to avoid you doing, so anything that increases delivery cost without direct revenue. That might include deeper integrations, unusual compliance requirements, or heavy customer-specific customization.

• Risks they have: for example, a VC-funded startup burning capital at a loss carries runway and stability risk. A profitable services firm with thin margins carries people capacity risk. A usage-based SaaS with infrastructure costs carries volatility risk if usage drops or spikes unexpectedly.

Business model shapes behaviour

A critical aspect to understand is that not all business models are created equal; therefore, every business model has very specific nuances.

A provider that makes money from usage-based fees is incentivized to drive your consumption upwards. More API calls, more seats, more storage, more transactions. Their revenue scales with your usage. All the “aaS” companies (SaaS, PaaS, IaaS, etc.) are examples of businesses leveraging this business model. Generally, expect them to build features that maximize your usage or to promote to you (or your users, if they can) the usage of more and more of their services. There is an exception to this continuous attempt to make you use more, which is the case in which their own costs scale linearly with your consumption. In this case, they may nudge you towards patterns that optimize their infrastructure costs, such as avoiding usage peaks or batching requests efficiently.

A provider relying on retainers or fixed monthly fees wants predictable, stable revenue with minimal incremental effort. Their priority is keeping you just happy enough to keep paying month after month. Examples of that kind of business are colocation services, rental offices, etc. You may see strong onboarding experiences designed to lock you in early, with diminishing support intensity over time if issues do not threaten retention. Their growth focuses on landing more customers, not necessarily expanding each customer’s usage unless premium tiers are part of their upsell model.

A provider with a project-based or implementation fee model is driven to deliver milestones fast and move on. Their commercial success comes from new projects rather than long-term operational maintenance. Examples are some niche consulting companies specializing in pilots and solution viability. While they will aim to satisfy you to secure future work, their incentives rarely align with deep ownership or lifecycle management of what they build. Expect rapid implementation, clear close-out, and limited appetite for iterative improvement unless it’s scoped as a new revenue-generating piece of work.

A professional services firm with billable hours earns through time spent. Their behavior naturally aligns with deeper problem exploration and incremental project extension. You may see thorough diagnostics, robust discovery phases, and recommended follow-on engagements. The majority of consulting firms adopt this business model. Their incentive is to remain embedded with you as long as the budget allows, so clarity of scope boundaries becomes essential.

A marketplace platform provider makes money from transactions between buyers and sellers. Their primary goal is increasing transaction volume and liquidity. An example of this is online marketplaces such as Amazon.com and eBay. Expect them to prioritize features that reduce transaction friction, attract more sellers, or lock in buyers through loyalty programs while deprioritizing platform changes that help individual users but do not scale marketplace liquidity. Those providers will not care if the quality of the products transacted in their marketplace is sound or not as long as they believe the bad quality of some of those products will not reflect poorly on them.

An ad-supported platform is driven by user attention and engagement. Their product decisions will optimize for metrics like daily active users, time spent, and click-through rates for advertisers, not necessarily your operational productivity or mental well-being. This business model is very common, but not exclusive, to social networks. Expect design choices that keep you on-platform longer, even if that introduces distraction or feature bloat.

Mapping this to your decision making

Understanding your provider’s business model and specific incentives is important. To do so, you can ask yourself the following four questions:

1. How do they actually make money from me? Look beyond the invoice. Are they monetizing your data? Is the current pricing a market-entry loss leader that will shift later?

2. Who are they optimizing for right now? Their customers, their shareholders, their board, their next funding round, or their strategic exit?

3. Where does my success align or conflict with their incentives? Do they benefit when you grow?

4. What is their most significant strategic risk, and how does that flow to me? Their risk is your risk if they are critical to your operation. Funding, staffing, legal compliance, concentration – know it.

Why this matters

If you understand their business model, you’re no longer just a customer reacting to their moves. You become an informed customer who can anticipate their behavior (pricing shifts, contract changes, feature focus), negotiate with leverage (framing deals in ways that benefit both parties rather than defaulting to theirs), and plan for continuity (understanding their funding, stability, and incentives lets you build operational resilience).

Ultimately, understanding your provider’s business model turns an opaque relationship into a transparent one. You’ll make smarter decisions, avoid avoidable surprises, and keep control of your own strategy – rather than becoming collateral damage in theirs.