This is an era of mobile devices, cloud computing and Internet of Things. To cater to this era, firms are testing new product offerings that combine elements of service, software, content and hardware together. Like products, the process of monetizing is evolving too. Firms are moving to consumption models that blend one-time subscription and usage based billing. More and more CEOs have come to realize the shift of business models and how they reflect their value and relationship with customers.
“There’s a secular movement that’s happening . . . more to an annuity relationship as well as a subscription relationship. These are the long-term relationships we want to have with all customers.” Satya Nadella, CEO Microsoft (May 2015)
The shift from consumption business models to subscription business models is persistent for almost every industry. Everybody is experimenting with an alternative business model. Subscription billing has been gaining attention both in the B2B and B2C markets. Companies have been repackaged, re-engineered and re-developed their products only to gain monetization through a subscription model.
Forrester Wave has identified the eight most significant vendors in subscription billing category — Apttus, Aria Systems, Digital River, goTransverse, Recurly, SAP hybris, Vindicia, and Zuora — and researched, analyzed, and scored them. Our blog is based on this report to offer you a synopsis of the report.
What is Subscription Billing?
For those of you who are new to Subscription billing, it is a system of billing consumers on a fixed time basis for products or services they receive. This includes downloadable software, access to premium websites, eBooks, etc.
Why Firms Are Adopting Transformative Business Model for Relationship with Customer
As businesses are adopting transformative business model relationships, there are four key drivers that have come to the notice through Forrester’s Research. They are:
- A desire for tenacious customer relationship– Firms are looking for a tenacious customer relationship. There are scenarios where the consumer’s credit card is vaulted and there is a recurring relationship. For example, Uber is changing what is possible from a relationship and a transactional viewpoint. An inherent flexibility with an emphasis on loyalty is now target for companies; they are looking beyond a one-time purchase.
- A quench for more customer insights– A recurring subscription allows firms to build long term relationship and perform sentiment analysis. The customer insights received enable firms to turn the analysis of usage into new product innovation and better product packaging.
- Zeal to capitalize on the cloud– Subscription is equal to the cloud. Any B2B or B2C sector migrate their products, business and consumer services in the cloud. When they do that, they migrate to subscription or a usage based monetizing model. Selling access to cloud services via one-time licensing and support model is something unheard of.
- A proclivity to test connected products– The internet of things is bringing in a wave of business model innovation. As the demands of people these days are different and they prefer to remain online and connected, product engineers are given a blank canvass to develop the next generation of products. Their service offerings are now packaged with devices to offer real time monitoring. It will not be a surprise if the IOT firms start using subscription and consumption based business models to monetize their new services.
The SOAP and REST APIs- An Understanding of the Key Capabilities of Subscription Billing
A subscription billing platform has SOAP and REST APIs that make them stand apart. Forrester Wave’s report of Q4 2015, explains how it works. The SOAP and APIs include:
- Product Catalog comprising of pricing, monetizing models, configure, price and quote.
- Finance management comprising of revenue recognition, GL subledger, MRR/ARR
- Notifications comprising of retention management, Retry Logic and escalation rules.
- BI and Analytics comprising of Subscriber Analytics, financial metrics, dashboards.
- Invoicing includes invoice customization, workflow, and approvals.
- Billing comprising of secure payments, dunning, and revenue recovery.
- Usage? Metering comprising of usage ingestion, rating and aggregation.
- Account management includes entitlements and account hierarchies.
These eight SOAPs make a subscription billing platform. All enterprise back office work, third party services and internal services are categorized and then implemented as SOAP and API for the platform. These features are included in the client account which helps in the acquisition and retention of customers through their ecommerce platform.
Qualities to Look For In a Subscription Billing Company
Forrester Wave evaluated the strength and weaknesses of the eight top subscription billing vendors across a list of technology and business criteria. This evaluation was done to assess the state of the subscription billing market and how vendors compete again each other to aid the market and business firms. Each vendor has different strength and weaknesses, which helped Forrester to identify the best among the lot. The evaluation criteria for vendor selection procedure considered the following features offered by the subscription billing providers:
- B2B versus B2C strategy
- Verticalized specialties
- Usage based business model capabilities
- Cloud architecture
- Integration strategy
- Financial Reporting
The evaluation performed on subscription billing market by Forrester Wave was intended to be just a starting point. The purpose of the report was to give firms idea about subscription commerce, how it is emerging and the leaders in the domain. There are several other notable service providers in the market who offer impeccable subscription solution. Consider the valuable insights from this report and use them to make your business effective and reachable to a wider group of audience.
- Key capabilities In the Subscription Billing Market Vary Greatly to Fit Diverse Needs.
- Subscription Billing Platforms Support a Diverse Set of Monetization Models.
- Customer lifetime value (CLV) is of paramount importance to the product owners.
- A recurring subscription enables firms to build long-term relationships & monitor engagement.
- Apttus, Aria Systems, Digital River, goTransverse, Recurly, SAP hybris, Vindicia, and Zuora top subscription billing providers.
- CRM plug-ins enable day-to-day management of the subscription life cycle.
- Prebuilt ERP/finance system connectors enable the sync of general ledger codes to the subscription billing platform.
- eComm platforms integrate the primary APIs of the subscription platform to expose the customer-facing acquisition & retention experience.
Download the Forrester Wave Subscription Billing Q4 2015 report below: