Meter-to-cash and order-to-cash strategies for IT service providers



Service providers are constantly evolving their offerings from new cloud and network offerings to the growing need for cyber security services. Providers need to be innovative with their offerings in growing the client base, revenues within existing clients and retaining them for longer all while building and retaining a high performing workforce, a great challenge and if done well pays off well.

Product managers have a key role to play in this, a lot needs to be considered when defining vision for new product, here we will focus on one of the more important decisions to get right. Selecting between an order or usage metered based model, hopefully this article helps in making that decision. Before we delve into considerations too far let’s be clear on what we mean by metered vs order-based models.


Metered Model

  • Typically requires an initial order and engagement to subscribe to the offering and will have boundaries as to consumption. Clients would be charged a unit rate for their changing consumption which is then metered over course of the billing period, resulting in a variable bill. Typically, an order would be required to then change the subscription to access difference performance or boundaries of service.

Order Model

  • Order based offerings typically require an order for any commercially effecting change, orders would then be processed as per the providers approach to fulfilment and billing. Consumption of the product and or service would be within the boundaries set, with no metering of usage so bills would not vary and be predictable.

Here are some typical examples before we explore considerations

Metered

  • Amazon EC2 instance, Azure virtual machines

  • Usage based bandwidth or backup services

  • Pay as you go support services

Order-based

  • Dedicated security or network appliance

  • SSL certificates, DNS registration

  • SAN storage array

  • Annual support contract

Considerations

  • Strategy for client engagements helping make the right decisions via consultation, understanding requirements, providing design advice, increasing chance of up-sell as well as retaining solution integrity. There can be many things to consider i.e. environments, performance, capacity, security, recover-ability and regulatory compliance etc.

  • Understanding of purchase frequency, how often would clients require a change that impacts commercials i.e. 100 clients each needing 25 changes a month, that’s 2500 changes a month.

  • How complex is the change scenario, what other things need to be considered upon such change i.e. backup of data flexing is pretty simple, however adding another business-critical server application requires many other things to be considered.

  • How frequently are clients requiring interim additions, if amounts and pricing is varying widely then a metered model may be appropriate.

  • Is the offering fit for a metered usage model, would it be compatible with your business model or strategy? Or maybe a part of the offering fits but other aspects don’t.

  • Defining and naming the unit of sale leading to product packaging, client visibility and billing

  • Efficiency and effectiveness of processes

Initial on-boarding request to fulfilment and billing

Ongoing change i.e. upgrades, downgrades, decommissioning and replacements

  • Do costs flex in-line or out of line with usage and if so what is the variance?

  • Unit of sale and their measurement making this clear for everyone

  • Building and maintaining smart metering and reporting solutions feeding billing, and aiding visibility and reporting

  • Change management for reporting and management systems and components, alignment with product life-cycle developments, ensure that process does not breakdown as result of change

  • Governing the limits of offering maybe technically bound or manually governed

  • In life usage change how do clients dial up or down consumption

  • Cost accounting, management and recovery vs usage predictions to form pricing

  • Client usage governance and bill shock management

  • Estimating usage for commercial understanding, client modelling and quoting

  • Contracted lifetime for order, ensuring costs are recovered and profit is made

  • Audit trails for order-based change and breakdown reporting for metered usage, helping maintain client trust

When considering the above the following should be keeping in mind. Service providers need to a) Acquire more clients b) Grow revenues within existing clients and c) Provide great service to retain clients longer. To help achieve this there must improvement to each growth lever


Data source, Jordan T. McBride Price Intelligently

  • Enable sales, pre-sales and account teams to be informed and guided regarding your offerings via highly visible and well packaged offerings

  • Unburden people from low value activities, have the right people doing the right things at the right time ultimately focusing on the client

  • Make commodity basic needs very easy to consume, in a low-cost rapid turnaround manner

  • Enable people to provide great client engagements on a regular basis, providing high value assistance and advice for non-commodity needs

  • Ensure a comprehensive portfolio of products and services that fit well with your space, meeting needs of your clients, including ceasing revenue leakage i.e. monetising of your specialist resources via packaging into easily sold products and services.

  • Have friction free, efficient and joined up downstream processes from service delivery to billing, with minimal delays and handovers.

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