What to Look Out For When Selecting a Subscription Billing Vendor

Anke Lasserre & Grahame Pullen Posted 01 September 2016

Technology is providing a powerful enabler of new as-a-Service (aaS) consumption and delivery models. The Subscription economy has evolved and is disrupting almost every industry.

Customers benefit from cheaper and more convenient access to products and services, whilst businesses generate new revenue streams, deepen customer relationships and access new customer segments. However, offering subscription based products or services requires an agile billing solution in the background. Here are five top tips on choosing the right solution provider.

1. Thoroughly check the solution’s Fitness for purpose

This is dependent on your organisation’s budget and business requirements. Agile Billing solutions vary widely in terms of functionality, features and ways to do business; cost and licencing model; ease and depth of integration with other systems; data migration options; scalability; reporting capabilities; and provider expertise and involvement.

  1. Collect stakeholder input early as the solution will affect multiple areas of the organisation. Key stakeholders areas are finance, sales, marketing & IT
  2. Start with defining a list of high level requirements/ user stories for your business
  3. Research suitable billing providers on the internet as well as using other sources, such as research papers (published by companies such as MGI, Forrester or Gartner)
  4. Engage a number of Subscription Billing vendors in a Request for Information (RFI)/Proposal (RFP) process and ask for their detailed response to these requirements to provide a good initial overview It is a good idea to engage the short listed vendors in a phone conference and a product demo focusing on use cases relevant to your business. The direct contact will highlight their different styles, experience and motivation; and seeing their product in action is revealing
  5. Ask about the vendor’s experience if specific integrations are required (e.g. with a legacy ERP system).

2 .Proven implementation track record

Apart from your business requirements, ask the vendors about their project experience and successful installations; whether they have a defined implementation approach/methodology; the average implementation duration, and how many projects they’re involved in at this moment (there is a fine line between being in demand and overstretched!). Implementation approaches vary from “the customer does it all with some online help” all the way to complete professional services based contracts, depending on the complexity of the solution, integration requirements and customer capacity.

Perform Due diligence on the last 1-2 vendors before the preferred vendor is selected or a contract signed in order to verify and/or validate their RFP responses, to identify and mitigate risk and to avoid costly mistakes in partnering with the wrong provider1.

A phone call with at least two reference customers per vendor is highly recommended.

3. Selecting subscription billing vendor licencing costs models that align with your business

It's crucial to understand the billing software subscription model and how it will evolve with your growing subscription business.

Typical models are:

  • Subscriptions are beneficial for customers if they believe that they will buy a product on a regular basis and that they might save money. For repeated delivery of the product or service, the customer also saves time
  • Revenue Share - Percentage volume of subscription revenue managed by the solution (e.g. ranging from 1% to 3%). This fee model can be appealing to start with (as very cost effective), but might create scenarios later on where such fees become excessive or do not align with the strategic direction of your business
  • Based on functionality used, number of users/ transactions, complexity and/ or data volumes
  • A combination of the above
  • Should you consider offering the subscription billing functionality to resellers of your products or services (“sub-tenants”), ensure this is possible and agree on a suitable sub-tenant pricing approach
  • Understand any additional ongoing fees such as support related costs.

4. Privacy and data protection act compliance

  • Compare and understand the short listed vendors’ security certifications and ensure that they are in line with Australian Privacy and Data Protection Act. Some vendors rely merely on the security offered by the public cloud provider their solution is hosted in whilst others offer significantly greater levels of protection
  • Strict requirements exist around data related to credit card payments (PCI Compliance)
  • Understand where the providers’ cloud data is located (e.g. public cloud/ data centre in the U.S.) and which privacy laws apply (e.g. U.S. privacy laws are not in line with Australian data privacy requirements). The provider might be able to establish an Australian based data location but potentially at additional cost
  • Take advice from your legal department. Even if the applicable privacy laws are comparable to the Australian laws (e.g. EU-Safe-Harbour), be aware that you might have to disclose this to your customers and they might not feel comfortable with their organisation and subscription related data being stored in another country. This also applies to your own organisation due to the billing data potentially being commercially sensitive.

5. Vendor geographic location

Currently there are still very few agile billing vendors with offices within Australia. The time zone difference means that face to face communication could be challenging. Understand the implementation approach (onshore to offshore ratio); your team’s experience; the requirement for the vendor team to be onshore, and associated costs.

Speak with the vendor about how they will address this challenge, including which collaboration tools they are using.

1Source: Gartner 2015 | Due Diligence Reduces Costly Mistakes in Outsourcing and Cloud Services