Beyond Subscription Billing for SaaS Providers

The future has arrived for a large number of SaaS vendors. Their business is scaling quickly and they can’t ignore the billing question any more. The trouble is, the more they think about their needs, the more complex they realize billing really is. Many cloud providers today are struggling with a one-size pricing model that doesn’t fit the different products and pricing models that their customers demand, nor does it allow them to create new pricing strategies that protect their margins against high-utilization customers.  It’s hard to support the evolution of the SaaS market with subscription-based billing.

Cloud Competition Heats Up

Customers are becoming less tolerant of inflexible pricing options when they decide which SaaS vendor to purchase service from. In order to attract new customers, the leaders in the Cloud market will soon be introducing creative and customized pricing models to strike an ultimate competitive advantage.  Reference the recent challenge issued against Amazon’s cloud offering by Google and Microsoft – who will now be charging for only the exact number of minutes used as opposed to Amazon’s policy of charging for a full hour even when only 5 minutes of virtual server time is utilized.  As consumers come to view these pricing models as the new standard, many cloud providers will be unable to match what their competitors are offering if they don’t have a billing system that can support them.

Subscription Billing Woes

SaaS providers are also realizing that growth in a subscription-billing model can be hard to balance.  The subscription-based billing systems currently in place at many of these companies are actually limiting their future growth and profitability.   These systems lack the enhanced capabilities that allow SaaS providers to parse, charge, display and invoice metered usage.  They simply don’t have precise information about the system resources being utilized – in a nutshell, they can’t rate.

How can this be? Cloud providers who are using a simple subscription billing system are forced to build their own rating logic outside of the system when they want to offer complex pricing models. Rather than collecting usage metrics and passing them to the billing system, the provider must utilize IT resources to program these complex pricing models into external systems.   This is so that they can ultimately pass a simple record to the billing system that it is able to understand.  When valuable time and IT resources are required to get billing out the door with a subscription billing vendor, it becomes difficult to remain competitive in the rapidly growing cloud market.

Is Your Billing Holding You Back?

Rating is what gives SaaS providers the ability to really create offerings that manage bundled services, provide tiered discounts and handle taxes.  To move beyond simple subscription plans and understand the reality of their profit margins requires more than one-size billing.  When selecting a billing vendor, SaaS providers need to consider the complete range of cloud services they want to offer.  Billing isn’t the same as rating, and the difference can defeat a SaaS provider’s efforts to grow.

Cloud providers who have an experienced full service billing partner to streamline the complexities of their billing and back office operations will be in a better position to start customizing their offerings and stealing market share.

Your customers are more than subscriptions. Will you look beyond the limits of subscription billing before your competitors do?