How cloud service providers can effectively monetise and deliver the ultimate cloud offering
The cloud ecosystem has ushered in an exciting era of open access to world-class computing power, resources, storage, development framework and software applications. With this has come an explosion of innovation. While cloud service providers (CSPs) have enabled innovation and cost reduction for their customers, they have likewise been challenged to leverage the power of the cloud to innovate around monetisation and billing. This has resulted in business risks, such as:
- Becoming a commodity provider due to high CSP customer churn resulting from lack of differentiation
- Inability to exceed client satisfaction due to poor usage and billing details
- Missed revenue and maximisation opportunities due to value-added resellers covering this growing need
- Slow time-to-market of new services because there is no dynamic promotion mechanism built into the charging model
- Credit risk exposure, as enterprises with low credit ratings can end up using more than what they can pay
In short, effective monetisation of services remains a challenge to overcome for CSPs to deliver the ultimate cloud offering.
Cloud computing monetisation models today remind us of the billing models of the past, with a bias towards flat rate billing. There were few monetisation models that were low latency usage or activity-based, reflecting consumption behaviour. However, with the onset of the mobile data tsunami, bundled packages to enterprise and retail clients and overall market saturation, monetisation models had to be changed to meet customer needs. Providers saw an opportunity to design billing plans to deliver the best offer at the most competitive prices and increase average revenue per user.
Recently, some have positioned subscription billing as the answer to CSPs’ billing challenges. While subscription billing has its place, it is inadequate for the needs of providers who need flexibility with their pricing plans, require hierarchy-based usages and billing break down, and stronger revenue recognition capabilities.
Market realities are rapidly pushing CSPs to become more robust in how they rate, charge and bill for their services. Following are five essential challenges CSPs monetisation models must meet to be successful:
- Billing and charging models must be value driven and more reflective of consumption behaviour
- Transparency and granularity of usage details must be available by accounts and sub-accounts
- Effective policy control and enforcement must be in place to deliver appropriate quality of service and SLA according to the purchased offer
- Implementing a low latency credit control policy is necessary so clients don’t experience the “bill shock” effect
- Delivering reliable and scalable billing and revenue management will be paramount to building trusted client relationships
The market potential
Value maximisation potential in the cloud computing era is limitless for all “as a service” models. Effective revenue management and billing can help power the delivery of the ultimate cloud offering by enabling multi-dimensional pricing models.
The flexibility represented in Figure 1 can also be leveraged to deliver benefits, including:
- Bundle: by bundling different services and packaging them as one
- Incent: by leveraging metered information of usage and consumption behaviour
- Reward: by giving limited period bonus services once criterion are met and usage levels have been crossed
- Inform: by sending near real-time notifications of key account activity or critical usage to a client’s preferred channel
- Satisfy: by delivering rated unbilled usage information to CSR or enforce credit limit checks to avoid bill shocks
Another benefit of using multi-dimensional revenue management attributes is that billing transaction data records can be used to obtain the end-customer’s usage and consumption behaviour, adding the creativity and innovation needed to achieve differentiation.
Monetising the potential
CSPs have an unprecedented opportunity to be innovative and successful in deploying monetisation models.
Figure 2 illustrates the most time-tested rating and charging keys that have been applied across industries to monetise services. Combining these monetisation strategies can significantly boost the value that IaaS, PaaS and SaaS deliver to CSPs’ clients.
Delivering the ultimate cloud offering calls for ultimate flexibility with on-demand access. The challenge is offering flexible, scalable and reliable monetisation, billing and revenue management for cloud services. The CSPs that can effectively monetise and bill for their services will thrive by meeting the evolving needs of this dynamic market. By learning from the past and understanding the future, CSPs will triumph with higher client satisfaction and a more successful business.
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