27/04/2015

By Louis Hall, CEO, Cerillion Technologies

The cloud is helping businesses to profit from new payment models.

If you had said the word ‘subscriptions’ to someone a few years ago, they would have immediately thought of a regular fee paid to a club, society or magazine. These days everything from music to razor blades, and software to socks can be bought regularly by subscription.

The shift to subscriptions has come upon us by stealth. In the consumer world it has been revived through services such as Spotify and Netflix. Now providers of all kinds of items we need on a regular basis are getting in on the act and offering their products “as-a-service”.

It’s easy to spot the attraction. When it’s so straightforward for customers to research alternatives online, signing them up to a regular subscription is seen as a shortcut way to ensuring recurring revenue. It’s also easier to up-sell and cross-sell – or at least find ways to build customer loyalty – when you have a relatively captive market.

However, those that choose to follow this route often face some significant challenges, not least the cost and upheaval of making the change from one-off billing for each customer to ongoing billing relationships. Thankfully this alone isn’t insurmountable.

However, one of the major problems many traditional businesses face in making this move is the need for improved agility and responsiveness in order to beat digital native competitors that are likely to appear in any market space.

Even if a business is the first to launch their product or service, it probably won’t be long before they have a rival, who will most likely undercut them on price. This means that no sooner has a company launched its first offering, it needs to have a plan about what comes next and how it will continue to evolve its offering to stay one step ahead.

This won’t always mean an entirely new product or service – it might be a compelling bundle, package, offer or pricing option. But it does demand that an organisation constantly renews its offering, coming up with creative ideas to impress the market. Yet, responsiveness on this scale is not always straightforward and businesses need space to experiment. Finding the right formula means learning from mistakes and then quickly adapting to meet changing demands. But this too can be expensive.

Legacy on-premise billing systems are typically not agile enough to handle the demands of a dynamic subscription business. In established companies, they are also often considered ‘untouchable’ for fear of affecting existing revenue streams. Any change to the service or payment model means costly updates, or even a completely new system. This might not have been an issue previously when changes were few and far between, but now this is a serious barrier to running a successful service.

The cloud is particularly valuable in this environment because it provides the much-needed flexibility required of a successful subscription-based business. A true cloud billing system doesn’t just reside in the cloud (although this is a requirement as its name suggests), it must also be designed as a native software-as-a-service (SaaS) application. It should, of course, be able to bill for cloud services, but should also be applicable to any digital and non-digital products and services.

With cloud technology of course, users pay only for what they use, and can be up and running in a matter of days or weeks rather than being bound by lengthy integration projects and high capital expenditure. But the real beauty of these systems is their flexibility. They make it easy to make changes, to try various iterations of an idea to see what works best, and to quickly scale up in order to deal with growth or big peaks of administration, for example when managing annual renewals. Furthermore, using cloud billing to automate processes will increase billing accuracy and efficiency.

All this can save significant sums of money; a point made by a recent online survey which polled the views of 200 senior IT professionals. Cost savings were identified as the biggest perceived benefit of cloud billing systems. This was particularly the case for large companies (1,000+ employees), with 85% of those currently using on-premise systems identifying reduced cost as a key benefit of cloud billing.

Cloud billing can work for small firms just as well as large – with the benefit of simple scalability for a growing business. It can be equally useful when selling coffee as for IT infrastructure. But anyone who wants to take part in the shift to subscriptions must do so as a matter of priority or miss the boat. Thankfully the cloud makes this possible, transforming billing from a barrier into an enabler of business innovation and revenue growth.