How to Manage Cloud Subscription Services Billing

Across the IT channel, VAR and MSPs now use a range of subscription billing and e-commerce tools for managed and cloud services. Some of the tools are built directly into clouds like Microsoft Azure, Office 365 and Amazon Web Services. Others are from master CSPs and cloud aggregators like Ingram Micro Cloud and other distributor cloud services. But some IT service providers -- particularly larger MSPs and telcos -- have deployed complete subscription billing management platforms for their various services.

The top subscription billing tools and platforms include offerings from Apptus, Zuora and several other key providers, according to the Forrester Wave 2015 report. But what exactly must the platforms offer? Forrester points to these eight capabilities:

1. Product and service catalog. Service providers use this capability to "define the type of subscription or consumption model required and the associated pricing rules, tiers, and offers.

2. Notifications. This typically includes expiration warnings, activations/welcome notices, credit card expiry, and failed billing attempts, Forrester says.

3. Invoicing. The invoicing components must support complex "consumption-based business models" while delivering "clear and concise invoicing" to end-customers.

4. Usage/metering. This will need to track (i.e., meter) devices, services, and products that are being consumed, Forrester asserts.

5. Finance management. Financial metrics in the recurring revenue and subscription world "must be forward- looking and report on customers, not units; lifetime value, not average selling price; recurring profit margins, not annual gross revenue; and renewal rates, not close rates," Forrester maintains.

6. Business intelligence and analytics. Service providers must be able to generate reports that track "subscription-related metrics such as annual recurring revenue (ARR), bookings, subscriber churn, retention rates, and customer lifetime value (CLV), among other areas, Forrester says.

7. Billing. This is separate from invoicing. renewing existing customers is not an easy process. Subscription billing platforms must manage card number updating (in the case of expired or replaced cards) authorization recycling (in the case of declined transactions), and more, Forrester says.

8. Account management. For B2B scenarios, the end user is rarely the buyer, Forrester notes. Active seats and usage stats need to be rolled up to ensure accurate billing to the right department, division, and cost center, the research firm says.

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Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.