White Paper items

The Rise of Cloud Billing

Driver of Business Agility in the New Service-based Economy 

A recent survey run by Cerillion, polling the views of more than 200 senior IT professionals in the UK across a broad range of industry verticals revealed that more than half of all businesses today (53%) are still using either an in-house-developed system or manual processes to bill their customers. 

The Rise of Cloud BillingAt the same time, the results highlighted 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. This shift was highlighted in the survey results, suggesting that one-off product sales are set to decrease by a third, as businesses gear up to embrace the ‘subscription revolution’. 

One-off pricing models are currently used by 84% of organisations but the research shows that this proportion is set to fall to 51% 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, as this white paper demonstrates, we are experiencing a shift in the way consumers purchase goods and services as part of the subscription revolution. The survey results reveal a distinct drop in non-digital products from 56% offering them now, to 45% expecting to continue offering them in the future. Non-digital services follow the same trend dropping from 67% to 58%. In contrast, the proportion of companies offering digital products is set to rise from 39% to 46%, and those offering digital services will increase from 44% to 51%. 

At the same time, there is a fundamental change in the kinds of pricing models businesses are using in order to monetise service offerings and drive recurring revenue. 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. The ultimate goal is, of course, the holy grail of revenue optimisation. 

In-house systems are typically not agile or sophisticated enough to handle this transition, and 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. The on-going growth of the cloud billing market is a key theme of this white paper. 

In line with this, the survey results paint a picture of a market about to undergo rapid growth. It is currently relatively small in the UK, with just 4% of survey respondents using a cloud billing system or Software-as-a-Service (SaaS) approach today. However, a further 11% 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.

As the subscription revolution gathers pace, agility, flexibility and matching products to the market’s demands are key. This is the same both for small businesses or start-ups looking to get a foothold in the market by introducing new services quickly and cost-effectively, and for more established organisations wanting to spread their wings and expand into new markets or geographies. Working in the cloud provides that – and as this paper argues – any smart business should be looking to bill in this way.

In terms of barriers to cloud billing, it is notable that 60% of those who have not yet adopted give the reason as having no issues with their on-premise billing solution, while 21% of respondents say they are just too busy to explore the cloud billing option. This should be food for thought for senior executives with their businesses potentially vulnerable to agile competitors coming into their markets with more flexible billing options available to them.  
The survey identified cost savings as the biggest perceived benefit of cloud billing systems. This attribute was highlighted by 37% of the sample and was most strongly supported by respondents in the manufacturing (59%) and telecommunications (47%) sectors.  

Cost savings are clearly a major attraction for large companies (1,000+ employees), in particular, where 69% currently use on-premise enterprise software and 85% identified reduced cost as a key benefit to be derived from cloud billing. Cost saving appears to be far less important a factor for smaller businesses who have had to take a lower cost approach to their billing anyway, and so these people are motivated more by wanting to introduce a structured approach to billing and ensuring the key information they need to drive their pricing strategy is easily accessible.

Indeed in the survey as a whole “accessibility of billing information from anywhere” was cited by 31% and widely seen as key in driving enhanced competitiveness in an increasingly crowded marketplace. This is seen as particularly important in insurance, with 64% of respondents referencing it, followed closely by telecommunications at 60% and banking / finance, with 56% of respondents highlighting it. The survey also revealed that proven billing expertise and having a track record of delivery is the characteristic that businesses most look for in their cloud billing provider with 29% of respondents referencing it. 

At Cerillion, we are well placed to deliver on these expectations. Unlike our competitors, we bring a rich heritage of enterprise billing experience stretching back over 20 years to the cloud billing arena. This is the foundation upon which we have built Cerillion Skyline, a powerful Software-as-a-Service (SaaS) billing application for the next generation of subscription and usage-based services.