"Strange, it must be impossible to sign only yearly contracts."
I don't think yearly contracts are what he's after - rather, an example of what he wants to escape. He cites Amazon, who provide bandwidth and storage based on exactly what you use: if I shave 10% off the size of my web content, I pay Amazon 10% less for it. If I need a dozen big Windows servers for a day to test something, I get charged for 288 machine-hours, not for buying a dozen Windows licenses. If I tune it a bit to finish an hour sooner, that's a direct financial saving.
"I could bankrupt an entire office by spamming their email with Word and Excel docs that would require a nickle each to Microsoft to open."
Or they could save that fortune (and dodge the virus risk too, with malicious attachments) by opening all the attachments in Google Apps or OpenOffice instead of paying anything at all to Microsoft. Instead of $100/yr for an Office license they use 0.01% of the time, pay ten cents an hour for the hundred hours they actually need Excel - and put the other $90 to something more useful.
With annual contracts, you pay for it whether you use it or not. This way, you only pay IF you actually use it - a huge improvement, as long as the PAYG rates aren't stupidly high.