Due to the continous engagement of customers throughout the as-a-service offering life cycle, and based on each customer’s subscription term, the billing operations team has insights on how customers are consuming the service and how much they are willing to pay for the service. These insights can be shared with the customer support, sales, and pricing teams to enhance the overall customer experience, drive cross-sell/up-sell opportunities, and adjust pricing based on demand.

A flexible consumption model supports multiple monetization models (e.g., flat subscription, overage, standard tiered pricing, volume tiered pricing, minimum commit, etc.) that allow organizations to differentiate themselves and offer value to customers. A mature subscription billing and revenue management process and platform can enable such complex monetization models, thereby significantly reducing invoicing errors, revenue leakage, and customer escalations. In addition, it can help accelerate time to market of new SaaS offerings by quickly deploying a subscription billing and revenue management platform to manage the subscription to cash value chain. Organizations transitioning to flexible consumption models or cloud-native companies often develop custom solutions or manually support billing operations until their recurring revenue reaches a certain threshold.

The subscription billing and revenue management

The subscription billing and revenue management process for flexible consumption needs to support a range of capabilities, from usage telemetry and mediation and rating, to billing and invoice generation. System architecture must be flexible and scalable to support various monetization models and revenue growth objectives while ensuring seamless integration and data consistency across the offer-to-cash life cycle. Successful adoption and enforcement of subscription billing and revenue management processes requires a formal billing operations governance structure and resources with the right skills (e.g., recurring billing skills to rate the customer usage appropriately before generating the invoice for the customer).

Simplify and standardize business processes

A shift to subscription model and flexible consumption requires an entirely new business model that fundamentally alters how products and services are priced, consumed, and billed and how revenue is recognized. To enable diverse and complex as-a-service offerings, a robust set of monetization capabilities and associated billing processes should be established across the following areas

In a flexible consumption model, usage telemetry refers to gathering data (such as service features usage, pricing unit of measures, and user activities for security and audit purposes) on how the service is used by the customer. The usage data is collected from different sources including files, IoT sensors, softwareas-a-service (SaaS) platforms, etc. The real-time monitoring and collection of this usage data is important for agile billing. This data is fed to mediation and rating engines for processing prior to billing.

Mediation and rating

Mediation is required to convert the raw usage data gathered from products/SaaS platforms into billable/chargeable data units. The data must be normalized, transformed, and enhanced for billing purposes. The process should also support advanced mediation features like deduplication, automated validation, usage aggregation, and real-time rating.

A flexible billing engine allows customers to set billing frequencies, leverage configurable charging models (minimum commit, tiered, etc.), and consolidate billing across multiple subscriptions, business units, or hierarchy of accounts. It also enables the billing operations team to customize invoices based on customer preferences across geography, customer account hierarchy, or billing entity

Flexible and scalable architecture focused on integration and data

Moving from a perpetual software architecture to a flexible consumption architecture requires the addition of many new elements and integrations. While some elements, such as CRM and General Ledger, may require little to no change, most components of the order to cash eco system will require unique tooling and/or enhancements. There are options to either run perpetual business on the same, new, or enhanced architectural components as subscription and consumption-based products, or there is the option to diverge perpetual business from subscription and consumption at a logical point where the systems may require functionality that is in too stark a contrast to be converged.

Subscription order management and fulfillment (provisioning) is very different from the perpetual model because the services platform is owned and managed by the provider but consumed via cloud by the customer. In the perpetual model, there is a one-time sale and the customer is responsible for deploying and managing the software solution on their infrastructure.