Defogging The Cloud where you'll hear Billingviews.com Publisher Alex Leslie, as well as our own billing expert Jason Mondanaro walk through best practices for choosing the right monetization solution for your business.
4. 4
Traditional and Evolving Answers
Hosted
Cloud-based
Application Service Provider
Software as a Service
Managed Services
Outsourced
Billing as a Service
5. 5
Hosted Billing
In the cloud
Customizable for each customer
Longer contracts
Enterprise software configured for each customer
6. 6
Software (Billing) as a Service
Not customizable per customer
Multi-tenancy
Upgrades dependent on provider not
customer
Levels of complexity vs. business model sophistication
7. 7
Managed Services
Partnership based on trust
Hosted at provider or customer
Software either provider’s or customer’s
http://www.billingviews.com/heck-cloud-billing-anyway/
Outsourcing day-to-day management responsibilities
8. 8
Where will your billing
system be physically?
Who is going to
operate each layer of
your technology cake?
Balance of exclusives
or sharing?
What does it need to
do?
Beyond the Labels
9. 9
The Trade-Offs of Location
Resilience Elasticity
Incremental
Capex Opex
In Your Own
Facilities Low/Depends Low Very High Low
In a Co-Lo Medium Low Medium Low
In the Public
Cloud High High Low Medium
What characteristics are important for your billing solution infrastructure?
11. 11
Balance of Custom and Upgrades
We’ll get right on that feature! Features are free!
As soon as you sign this SOW…
But we only work on cool ones,
and they come on Thursdays…
You get what you pay for, but not everything you want may be for sale.
12. 12
What is Billing to You?
And that is the supplier
revenue share portion
of the global contract
discount rebate…
OR
Just price times quantity? Or do you need to run complex
contractual billing and settlement?
13. 13
Can a Single Number Do it All?
Service Provider Desires:
Cover Costs
Maintain margins
Grow Business
Customer Desires:
Receive Value
Be treated fairly
14. 14
Value Curve in a 3rd Dimension
Amount Willing To Pay
Functionality
Utilization
Flat Subscription Price
Bigger Cheapskates
Gobblers
Lost Opportunity
Cheapskates
Potential
Opportunity
Customers Waiting
for
Something Better
One price but unlimited functionality -- what is the market perception?
15. 15
The Subscription Cliff
Customer’s behavior changes
Adding more price points introduces more
decisions
Potential Increase Churn
16. 16
Flat Fees By Another Name
Consumption models may automatically scale with your customers,
but the market may wash your margins out with the tide.
17. 17
Need to track more forms of utilization and
establish new measures of value
Need to allow customers to use more if they
want to but be aware of consequences
Go Beyond Single Prices
18. 18
Establishing New Measures
Boundaries are everywhere in business.
But there are consequences to crossing
They are intentionally permeable
24. 24
Turn it Up a Notch
What if APIs were used for data-driven product
creation & pricing rather than data synchronization?
25. 25
Intelligent Product Configurator
Product Costs
Profitability Goals
User Behavior
Intelligent
Product
Configurator
Real-time
Offers
Product
Managers
Package
Changes
Customers
Now-Casting
Real-time
Notifications
Automating new Product Development based on Customer Behavior
26. 26
Science Fiction Not Fact
Airlines’ yield management systems
Amazon Web Services spot pricing
Geolocation driven coupons
Exchange Powered Business Models
Prices vary up and down
customers pay on value
not on equal price.
Where – In the end Super Storm Sandy among many other disasters in the news tells us that cloud or no, all our IT systems are in fact rooted in some physical location. The question is how can you leverage both providers and architectures to protect yourself and in the best case scenario be in “two-places at once” at the very least!There really are only three places where you can run your IT systems these days. You either run them in your own building/facility, you rent space at someone else’s facility or you run it in the public cloud. It is very rare that people’s own facilities are highly resilient Most office buildings do not have multiple provider utilities you probably have limited square footage and a minimal number of spares of equipment regardless of how you’ve configured your servers. Co-Lo facilities have similar issues although their physical plant is often more robust, there are still limits with a single building (SquareSpace Anecdote) and you still have the spares question. Often this is why the Public cloud is becoming a superior option. Not only do you have redundant facilities (assuming your applications are architected to take advantage!) but they take care of the economies of scale with physical spares.Some may be asking but what about Hosting at my Provider’s? Well your provider has themselves chosen one of the three options above so you better figure out which one it is and estimate the likely impact.
Who – Who is going to run each layer? Who buys and installs hardware, swaps failed drives, wires the network? Who patches security flaws and database upgrades, who upgrades your billing software itself or even runs it? Do you have people who can do all this? Do you want to have people spending time doing all this?Over 8 Combinations here. What does “On-Prem” mean when your licensed software is run in the public cloud? What about “Managed Service” or “Hosting?” The technology stack can be split across so many vendors now that these traditional terms almost have no meaning without a follow-up sentence for clarification.
Balance – Exclusivity has a price. If you want to be able to develop new features and capabilities at a whim and with any integrator you want you may have to pay for it. However, if you don’t mind being flexible and waiting for consensus, you can save a lot by taking plain upgrades as supported by your maintenance or service.
Billing at the root is just figuring out the amount to put on an invoice and get paid! There is a whole gamut of capabilities out there from simple POS platforms that generate receipts for purchases, to recurring billing services, all the way to powerful settlement and agreement contract management systems. You need to understand where you are today, and where you might be tomorrow.Let’s dig a little more deeply into this aspect of Billing. It has a little to do with pricing, and understanding the consequences of pricing models.
What is the perfect Price? It is a matter of perception and therefore as varied as there are suppliers and customers. Beware of Simple Answers, often they just move the challenges to a different part of the business.When you are just starting you may be tempted to keep things simple and go with a single Subscription price.
Value Curve == Blue Ocean Strategy term. But for any given Value, what is the resulting population in the market?Speaking Points:With a single subscription price you have split the market from those happy to get the service and those for whom it is not a good value. However, while the value is good for everyone to the right of the price line what are the other impacts? As a Service Provider you have some population of “Gobblers” who are seriously over utilizing your service. Will you always have enough low-cost users to offset them? Will low feature users develop a sense of unfairness in the pricing? After all they are paying the same amount as the gobblers, this may adjust their perception of the value over time and result in increased churn. They are also susceptible to simple and niche services. One of the big promises of SaaS is constantly increasing features and functions for the same price. But does that make sense? How big are each of these audiences? How can you get more?
Customer’s behavior and usage of services has some degree of variability. If you add more price points and limitations on features available at price points then you are bounding customer behavior is smaller and tighter boxes. Bumping into cliffs and walls are not comfortable and invite the customer to re-evaluate their purchase of your service on a frequent basis. Spending more money might invite a new purchasing process and evaluation hindering business agility for both vendor and customer.Many Cliffs does not equal Stairs….
Who has a finite number of minutes on their mobile plan?What happens when you hit the limit?Frequent Flyers out there, how close are you to premier status this year?Do you want to finish the year at 49k or 99k miles? No! -> Flights to no-where in December.Image Source: http://24.media.tumblr.com/tumblr_lmiyzccTpY1qkso5no1_400.jpg
Who always drives the speed limit? – Boundary without enforcementWho likes Red light cameras? – Boundary with explicit enforcementWho generally slows down when given a warning? – Boundary with InfluenceCustomers know when they’ve breached a contract boundary and have to pay more or penalties. They usually will be very upset and turn the problem around: “How dare you not warn me that I was doing something that was going to have consequences!”Tie back to Airline example if you knew you were only a few hundred mile short of premier status you might take a random flight to nowhere in December. Otherwise in January you’re going to be very angry.
So there are lot’s of ways business can attempt to influence behavior. And they all generally come down to dollars and cents.Free-Nights and weekendsSpot Pricing for compute hours to maximize utilizationCommitment contracts to offset capital investmentThe key is transparencyBut what can your customers see?
I get an Azure balance update every 3 days. I see the number go down, but I’m the one who has to keep in my head my burn rate, my lead-time for issuing a PO, how long my vendor take to reflect a payment etc… to know when I should add more money.What does this ATT message mean? I have 1 day and 35% of my data plan left. So is this saying I have nothing to worry about? Has my usage trend grown so much that I might actually run out by tomorrow? What is the point of this message!?
MetraTech is introducing what we call Behavioral Billing. Which tries to add context to data by the system that is most likely to have the context people care about (Financial!) and that’s the billing system.
Many back office systems have Product Catalogs, CRM, ERP, Billing, CPQ. Each have different abilities and need to be integrated so they have APIs. But what if we used the APIs not just for mundane data synchronization but instead data driven product creation? Automatic generation of A/B testing versions of products etc..?
Airlines – We are all familiar with constant price fluctuations, the best price actually isn’t the earliest price (No incentive to discount early)Amazon constantly monitors capacity of hardware compared with expected demand and underlying costs, uses Spot Pricing to fill the gaps and increase profitabilityWe are seeing Location based services just taking off where people can be given a coupon or incentive based on proximity, maximizing context and as they add relationship tracking will be able to offer more advanced options.Of course the most common grand-daddy model is any exchange based business, which is moving from commodities and auctions into cloud, peer-to-peer car rental services and more.