Transitioning to a flexible consumption model

A new subscription billing and revenue growth management capability is key

To meet the growing demand for flexible consumption models, organizations must establish a new subscription billing and recurring revenue growth management capability. Understand the role of process standardization and explore the essential tenets for adoption.

The shift to flexible consumption models

Companies are moving away from traditional business models to flexible, consumption-based ones. Flexible consumption models (FCM) allow customers to consume and pay for products or services based on the amount of use. It’s a significant strategy transition—one that requires reengineering the value chain and realigning teams to the new business model.

Subscription billing and revenue growth management capabilities are key to FCM transformations. They enable customers to “pay as they go,” scale their service usage up or down based on business needs, and automatically renew their subscriptions.

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Potential benefits of subscription billing and revenue growth management

Process standardization and automation offers a range of potential benefits for companies transitioning to flexible consumption models:

  • Improve customer experience and enhance customer behavior insights. Due to the continuous engagement of customers throughout the as-a-service offering life cycle, the billing operations team has insights on how customers are consuming the service and how much they are willing to pay for the service. These insights can be shared with the customer support, sales, and pricing teams to enhance the overall customer experience, drive cross-sell/up-sell opportunities, and adjust pricing based on demand.
  • Support complex monetization models and reduce billing errors. FCMs support multiple monetization models that allow organizations to differentiate themselves and offer value to customers. A mature subscription billing and revenue growth management process and platform can enable such complex monetization models, thereby significantly reducing invoicing errors, revenue leakage, and customer escalations.
  • Lower operating costs. Organizations transitioning to FCMs or cloud-native companies often develop custom solutions or manually support billing operations until their recurring revenue reaches a certain threshold. But this approach can lead to increases in operating costs. Process standardization and automating billing processes helps in overcoming this challenge through various enabling drivers across the usage to invoice value chain.

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Key considerations for subscription billing and revenue growth management

To successfully execute on a subscription billing and revenue growth
management strategy, organizations must be prepared to make significant changes to existing processes. They may also want to consider new approaches to system architecture and put formal governance in place.

Simplify and standardize business processes: The subscription billing and revenue management process for flexible consumption needs to support a range of capabilities—from usage telemetry and mediation and rating, to billing and invoice generation.
Flexible and scalable architecture with focus on integration and data: System architecture must be flexible and scalable to support various monetization models and revenue growth objectives. It should also ensure seamless integration and data consistency across the offer-to-cash life cycle.
Establish billing and revenue management governance and operational structure: Successful adoption and enforcement of subscription billing and revenue growth management processes requires a formal billing operations governance structure. It also demands resources with the right skills.

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Tackling transition challenges

Streamlined subscription billing and revenue growth management must comprise several capabilities, including usage metering, billing, invoicing, revenue recognition, and reporting/analytics. A billing platform must integrate with sales, financial, support, and product platforms to deliver a seamless customer experience.

At Deloitte we understand the complexity of this transition challenge. We have guided numerous companies through the successful design and deployment of subscription billing and revenue growth management capabilities and architectures.

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