PART ONE: Billing in a Service Environment

We inherently know how to buy things.

When buying a car, how do adults weigh the balance of price, size, fuel efficiency, and curb appeal? We simply evaluate our needs and preferences, review our budget, shop around, strike a reasonable bargain and move on.

Simple right?

I like that used car company commercial where hundreds of cars go whizzing by and a voice says “need room for 7?” and some cars drop off. “Less than 10,000 miles?” More drop off. “All wheel drive?” Same. Finally there is one car left – the perfect car for the buyer.

Don’t you wish that choosing enterprise software was this easy? Unfortunately the world of software, especially billing software, is incredible muddled. The solutions themselves are exceedingly hard to evaluate, they are often dressed up in overly aggressive marketing materials, and there is very limited objective advice to be found.

Let’s take, for example, the world of ‘Service Provider Billing.’ This is a class of software that is designed to support the needs of service providers and long-term relationships with customers. Think telecommunications, cable/satellite, utilities, IaaS/SaaS/XaaS, digital content providers, etc. These companies need monetization platforms that support recurring and usage relationships in complex selling environments.

Service Provider Billing

In the Service Provider Billing category alone, ATG tracks 4 distinct categories of companies: Tier 1 (Companies like Amdocs, Comverse, Convergys/Netcracker, Oracle BRM, CSG, etc.), Tier 2 (Companies like Cycle 30, Enabil, IDI, Revchain, etc.), Emerging/Cloud (Companies like Aria, Monexa, goTransverse, Vindicia, Zuora, etc.), and open source Billers (Companies such as jBilling).

Keeping to the Car theme, we have 4 different categories of billing companies, but the differences are far greater than comparing SUV’s to Minivans to Sports Cars. When we work with clients, we leverage a comprehensive approach that ultimately does what we all do when we go through our personal buying process – what do we need, at what level of quality, at what price, at what terms?

And once we made our purchase, how do we use it wisely to get a good return for our money?

For nearly a decade, ATG has been helping clients navigate these muddy billing waters. As we discussed in a previous blog post, we’d like to offer up the bones of our approach to the community. Use it, borrow it, change it, improve it. We hope we can generate some good dialogue on this topic and improve this important process. Here goes…

Needs Determination

The first step is to confirm that there is a need for a new billing system in the first place. How many of us have found that a ‘billing problem’ is actually an order problem, or a contract problem, or sales problem?

Everyone complains about their billing system, but often their actual need (and the dollar value associated with that need) do not match up with the expected costs of a new billing platform roll-out (software, implementation, conversion, roll-out, training, etc.). Billing implementations are long, often painful, and costly. Clients need to be absolutely precise and thorough in their justification for the new billing platform.

The next step is to build an internal set of the current problems associated with the billing platform today. List the problems and assign a monetary value. Baseline the data. For example, a client may have a problem that their billing system cannot support daily usage processing, and therefore the Product team cannot roll-out out a new pricing approach that could subsequently add $10m in incremental revenue to the company.

This list of problems and associated benefits to solving them, will be essential to guiding the team through the implementation process. It is also a good idea to build a really strong integration diagram. Let’s be honest. Not a lot of people understand billing. A simple diagram that shows the current billing ecosystem (including as many as 12 to 18 interfaces), along with the areas you are shopping for, will be invaluable to efficiently coordinating with internal stakeholders and the billing vendors.

With these prerequisites in mind, the next step is to reach out to the vendor community. There are lots of ways to do this. Big companies may have a prescribed RFI/RFQ/RFP process. Smaller companies may have one person tasked with finding a new system. You can use a consulting company, or do it yourself.

I will mention CAVEAT EMPTOR – buyer beware. Not a lot of people purchase more than one billing system in their career. This is the kind of decision you need to get right the first time.

At ATG, we have something called the Accelerated RFP process. Here is what we do:

01 Determine Functional Fit

Can the billing vendor handle the billing functions you need? Go back to the simple diagram – does the billing system need to work in a multi-channel selling environment with bundled products and services in a subscription environment with usage overage? Will it provide customer sub-ledger processing or will it integrate with your ERP/FMS for Invoicing and A/R? Will discounts be applied in the billing system or by an upstream CPQ tool?

We track 250+ requirements, across 14 functional areas. We maintain ‘scores’ for numerous billing vendors, but if you are doing this for the first time you will want to establish a weighted scoring system for each of the functional areas, and determine how important they are to your environment. Our areas of focus from a functional perspective include:

1. Customer Hierarchy
   
2. Product Catalog
3. Billing Account Creation/Order Entry
4. Billing Account/Service Maintenance
5. Usage Processing
6. Bill Processing
7. Invoice/Statement Formatting and Processing
8. Taxation
9. Payment Processing
10. Dispute/Adjustment Processing
11. Accounts Receivable
12. Revenue Recognition
13. Billing Operations
14. Reporting

Whatever you do – please make sure that your evaluation of vendors covers ALL of these areas. Gotchas lurk everywhere.

02 Determine Technical Fit

This category has been evolving rapidly. We finally had to split this section into two – one for On Premise and one for Cloud Billers. At ATG, we use a basic rule of thumb that in a billing implementation – 40% of the effort is in installing the new software. The other 60% is in the integrations and changes to the rest of the existing billing Ecosystem.

Consequently, it is critical that your technical team is comfortable with the new technology and understands the API, data extraction, and product catalog configuration capabilities and how they will mesh with the existing environment.

On the cloud side, it is absolutely essential that you review the vendors Business Continuity strategy in detail. Ask the hard questions about realized up-time over previous 8 quarters, written disaster recovery plans, how they test, when they test, etc. Make sure their operational environment is bulletproof.

Ensure your technical team is aware of the environments necessary to develop, stage, test, and deploy. This category is a bit broad for a blog, but these are some of the basics we look for. Really interrogate the API. Oh, I already said it. Do it twice…

03 Determine Commercial Fit

Remember the dollars associated with the problems identified above? This analysis should give you an idea of your budget. Check with finance early and often. Are there Cap-Ex or Op-Ex concerns? That could be a massive driver. Many of our clients are confused about the fundamental difference in how you pay for a cloud billing implementation versus the old method of On Premise implementations. Don’t guess – check with finance early. We break Commercial fit into the following categories:

License or Subscription Price – Duh. However, it is important to get several different prices. How much of the billing platform do you want to buy?

Some of the vendors sell their system in little piece parts, others as an ‘all in’ package. Most have some form of percent-of-revenue model. We typically work with large enterprises where the billing system will be deployed in numerous phases. Consequently, we like to get several prices from the vendors.

For example a Year 1 price at $x million in revenue and a Year N price at $y million (or billion) in revenue that typically includes all of the revenue for the enterprise. We build 3- and 5-year total cost of ownership (TCO) models that factor in all of the related costs beyond the software license or subscription.

If you are evaluating On Premise and Cloud billers together you will need two very different models to be able to have an apples-to-apples 5-year TCO. The Vendor sales team will have lots of incentives, extras, end-of-quarter deals, terms, and prepaid discount that you will need to factor in.

Implementation Estimates – obviously a daunting task. In the selection process we simply provide a standard set of implementation criteria (# of products, revenue, interfaces, customers, hierarchy). The purpose at this point is simply to get an apples-to-apples estimate for comparison purposes.

In our opinion, you can often gain some insight into the maturity of the vendor’s Professional Services (PS) organization during this exercise. It is important to make sure you understand the vendor’s hourly or daily rate. The estimates will fluctuate, but make sure you are aware of the $200+ hourly rates that are standard for most vendors.

Ongoing support costs – Maintenance and support and what is included in the M&S or the subscription. Ask very detailed questions about how much support you get for free before the hourly rates kick in.

Training costs – Is training included in the Subscription or is it extra? Is on-going training available? This is particularly important for the Cloud Billers, which are evolving rapidly.

04 Determine Intangible Fit

How important is that ‘gut feel’? How valuable is it that you trust one vendor vs. another?

At ATG we feel this is an often overlooked but essential part of the evaluation. The word ‘partner’ gets thrown around a lot. But really, truly – you need your billing vendor to be a real partner with you. Billing can be a slog.

In 25 years, I have never seen the perfect implementation or the perfect vendor, or

the perfect client, for that matter. What I have seen all too often is lots of finger pointing and name calling that can devolve into lousy working relationships – where everything is double scrutinized, every little nit-noid change needs a contract amendment and there is no trust.

Does the vendor fight you tooth and nail on a simple MNDA form? Are they unprepared for meetings, demos, working sessions? Are their initial estimates way off the mark? These are often signs that the company you are working with may not have the required maturity.

Lots to discuss here, but we look at the following specific areas:

Ease of Doing Business – This is the ‘gut feel’ part. What is their view of partnering? How onerous is their legal? Do they share information between Sales and PS?

References – We require three 1:1 references, with customers that are similar to our client. Where possible, we like to have a fresh reference, perhaps in the midst of an implementation, and one or more that have a lengthy history. We ask NPS (1 to 10) style questions around:

• The vendor selling and contracting process
• The vendor implementation process
• The vendor maintenance and support process
• Overall experience

Financial Viability – This is always a tricky one. The billing space is pretty hot right now, but let’s be honest. Two years from now, a few of these companies will be gone. Gone to withering away, or gone through acquisition. Will the acquisition be from an industry giant that will invest heavily in the asset, or to eliminate competition? No one has a crystal ball here, but the hard questions need to be asked and answered.

Professional Services Ecosystem & Availability of Resources – Think about it – what is your project’s probability of success with the vendor’s A-team versus their B- or C-team? What is your project’s probability of success if you get the vendor’s delivery partners’ B- or C-team. We strongly recommend that the client build an A-team and demand that the vendor bring their A-team. Billing is hard enough, why not set your project up for success by staffing it with great resources?

Vendor Direction – Are you B2C and the vendor is doubling down on B2B? Uh oh. Are you relying on their self-care portal and they decide they are getting out of that business? Whoops. Make sure you get a full readout of their 3- to 5-year direction, from a corporate and product perspective.

Big Fish/Small Fish – Do you have visibility to the vendor executives?

Let’s assume your company is in line with the direction of the vendor. Do you have a crisp understanding of the vendor’s mechanism for making enhancements to their core product offering, and your ability to impact the product road map? Many of the billing vendors today are happy to work in a collaborative nature to co-develop functionality in this rapidly changing ecosystem. Too frequently, clients have this conversation in the middle of the implementation. Make this discussion part of your evaluation up front. This is an opportunity for a win-win between the client and vendor.

Conclusion

So the above are the bones of our evaluation process. We capture all of this information and provide summary information for our clients to review among the key stakeholders. We don’t believe that you pick the winner because someone scores an 82 versus a 77. It is a bit more complicated than that. But when we put the above criteria side by side, typically there is a clear winner, with potentially a couple others that are in range.

I hope some of you find this useful. This is an area that clients and vendors alike want to see improved. We’d love to get some feedback.

Tom Stergios is the Vice President of Quote to Cash for Advanced Technology Group (ATG) and the general manager of the Missoula Solution Center. Tom has more than 25 years of experience with service providers in billing and the quote-to-cash space.

www.atginfo.com