Cloud Billing - Are telecom billing vendors really the right fit?

While here at Monexa we regularly get excited about subscribers, recurring billing and payment processing, we understand the rest of the world doesn't always share our excitement. It seems everything the cloud topic touches these days is getting attention and subscription billing is now along for the ride!

IDC has just published a Cloud Billing research paper where they draw comparisons between telecom providers and emerging cloud infrastructure providers when it comes to billing for their services. For frequent readers of this blog you won't be surprised to hear that we completely agree with the thesis of the IDC paper. One of our favorite topics is pricing strategies (see our post on SaaS Pricing Strategies) for SaaS and Cloud subscription services and we often draw comparisons to the mobile phone industry.

At Monexa we have a unique perspective on this topic. We cut our teeth handling subscription billing for the Telecom and ISP world and have moved into providing our on-demand recurring billing solution to SaaS and Cloud providers over the last 2 years. Comparing our experiences with our Telecom and ISP customers to the direction our SaaS and Cloud infrastructure customers are going we can offer some concrete examples of the fit:

• Metering: Cloud infrastructure providers in particular but many SaaS application providers have highly metered services. The best way to link value with your pricing strategy is often through usage based pricing.
• Subscription Plans and Pricing: A common criticism of purely metered services is the uncertainty factor. We see many providers now rolling out plans that bundle a certain amount of usage or provide unlimited usage for a fixed price. I've often pointed to GoGrid's pricing plans as a great example of this move toward the telecom model.
• Reseller support: Virtually all of our SaaS and Cloud customers are rolling out channel strategies this year for their subscription services. As a result they are working through how to support their resellers from a marketing (think white-labeled or co-branded online storefronts) and billing (who owns the billing relationship?) perspective.
• Partner Products: In the telecom world many of the products and services are not delivered by the telecom vendor themselves. SaaS and Cloud providers are beginning to bundle services from partners into their offerings and will be looking for their billing solutions to help with revenue settlement.

Clearly, there is a capability fit for providers of Telecom billing solutions to move into the cloud billing space (we ourselves are proof of it). The question we at Monexa have is this:

Is there is a cultural fit between telecom billing providers and the growing cloud infrastructure providers?

Time to value: This is a key mantra of the SaaS and Cloud community. The model for selling Operational Support System (OSS) solutions, of which billing is one piece, to telecom vendors has included very long sales cycles, very long and expensive implementations and highly customized on-premise software.

Because our solution has always been delivered on-demand, and our pricing structure has very low implementation costs we've never felt like a traditional telecom software vendor. If our customers aren't making money, we aren't either.

Culture and Language: Not only is there a significant terminology/language gap between the telecom and the cloud infrastructure worlds but we also see a significant discrepancy in what each market finds important.

As we identified these issues, we brought people with SaaS backgrounds onto the Monexa team and quickly devoted engineering resources to capabilities our new customers and prospects felt were important such as a rich UI experience.

Outside of our subscription billing capability fit, our on-demand philosophy and our willingness to quickly adjust to a new market have been the two biggest factors in our successful move into the SaaS and Cloud billing markets.

I'm certainly not going to say Telecom Billing vendors can't make the transition (look at us) but I strongly believe the functional fit of their products is only one of many factors they need to consider.

Comments

[William Louth]

Scott the biggest difference with the telecoms is that metering and billing (which are largely distinct issues in the cloud) will happen up and down the activity/distribution software/hardware stack and across multiple cloud service interactions in fulfilling a single user interaction. One service's billing will become another's metering model (partially at least).

Billing in the cloud will initially be based on what the market is willing to accept (high margins) especially as most users or composite cloud service designers will have very little knowledge of the cost drivers of services rendered and very little choice (especially with hardly any compatibility). Only when we get a swarm of cloud services offering similar services at much more competitive pricing will we see metering become a key business management information source as we nearing utility computing.

Cloud Computing – A Tale of Two Machines
http://williamlouth.wordpress.com/2009/03/23/cloud-computing-a-tale-of-two-machines/

ABC for Cloud Computing
http://williamlouth.wordpress.com/2009/01/27/abc-for-cloud-computing/