Use of in-house-developed billing systems acting as brake on new service-based economy
3 min read
18 February 2014
A new survey by Cerillion Technologies has revealed that more than half of all businesses today are still using either an in-house-developed system or manual processes to bill their customers.
At the same time, the results highlight a clear shift in the way products and services are sold: away from traditional one-off product sales towards a more flexible pricing model based on subscriptions and usage. While one-off pricing models are currently used by 84 per cent of organisations, the research shows that this proportion is set to fall to 51 per cent in the future. In contrast, new pricing initiatives built around an on-going service relationship are growing steadily, including subscriptions, pay-per-use and freemium pricing models.
“Today, we are experiencing a shift in the way consumers purchase goods and services as part of the subscription revolution. This is a fundamental change in the kinds of pricing models businesses are using in order to monetise service offerings and drive recurring revenue,” says Louis Hall, CEO, Cerillion Technologies. “This process is set to accelerate as revenue models mature and the need for innovative pricing and product packaging to differentiate and create value in customer relationships becomes more acute.”
“Unfortunately, in-house systems are typically not agile or sophisticated enough to handle this transition and manual processes cannot scale,” Hall continues. “That’s why these new business models are perfectly complemented by the rise of enterprise cloud billing solutions. This is an approach which can deliver flexibility and agility for businesses in mixing and matching service and usage-based pricing models, while enabling them to quickly set up and start billing for a new service without the need for any infrastructure or upfront licence fees.”
In line with this, the results paint a picture of a cloud billing market about to undergo rapid growth. It is currently relatively small in the UK, with just four per cent of survey respondents using a cloud billing system or Software-as-a-Service (SaaS) approach. However, a further 11 per cent say they are using a managed service – and with cloud penetration generally on the rise – Cerillion foresees dynamic growth in the cloud billing market as businesses strive to meet the demands of the new subscription-based economy.
The survey also identified cost savings as the biggest perceived benefit of cloud billing systems. This attribute was highlighted by 37 per cent of the sample and was most strongly supported by respondents in the manufacturing (59 per cent) and telecommunications (47 per cent) sectors.
Cost savings are clearly a major attraction for large companies (1,000+ employees), in particular, where 69 per cent currently use on-premise enterprise software and 85 per centidentified reduced cost as a key benefit to be derived from cloud billing. Cost saving appears to be much less important for smaller businesses which are motivated more by wanting to introduce a structured approach to billing and ensuring the information they need to drive their pricing strategy is easily accessible.