Billing and Pricing for the new economy : what price for the pound of a cloud
Cloud and SaaS have been the most discussed concepts in the last few years. A lot of startups and almost all the big names in technology have offerings in these areas. Beyond technology the X-as-a-service i.e. “pay as you go” business model is being adopted by a lot more companies. If you look closely there is a common theme in all of this
– usage based pricing or pay-as-you-go
– flexible pricing to take care of innovative business models
– faster deployment cycle (hours and days instead of months)
In the last few years I have been leading the deployments of such a solution at various organizations. I find myself explaining the solution to lot of my friends so thought of writing a small post on SCN. SAP Convergent Charging which is part of a bigger Offer-to-cash scenario along with SAP Convergent Invoicing. Convergent Charging takes care of the pricing, rating and charging while Convergent Invoicing takes care of the billing and invoicing piece. I would focus this post on the pricing and rating side of things.
Let me give some examples of the kind of business where such a solution is desired
Printer and Copier maker – as a printer and copier maker you want to have an offering where you install the printer at the customer site and along with a local partner charge the customer based on the usage. Local partner takes care of the support. This model can be used in other cases too e.g. MRI machines.
App stores – prime example of usage based pricing where the customers is billed on the amount/number of apps, songs, books or other media downloaded. Revenue sharing among various parties like platform provider, content provider, advertisement agency etc. are involved in this. Think of the complexities when all these parties are international with different tax jurisdictions
Product-as-a-Service – this is the software-as-a-service model and the provider organization may choose to implement various pricing strategies e.g. usage based, monthly subscription or a combination of each
Online and Mobile Advertising – we are all aware of the CPM and CPC in the online or mobile advertising world. You could choose to implement some really interesting pricing algorithms beyond the simple click measure with various revenue sharing and multiple currencies
Some of the other examples I personally know are postal solutions, railway ticketing, financial solution etc. I should not forget to mention that the grand daddy of usage based pricing is Telco plans. I could give a lot more examples but suffice it to say that we have developed the solution in such a way that it can model any of the real life scenarios. Another thing, for some of the examples like Cloud or advertising the number of transactions per second could be very high. Recently a benchmark was published in which we achieved 700,000 tps (http://www.sap.com/corporate-en/press.epx?PressID=17890) . Just to put things in perspective that is every man, woman and child doing 8 transactions per day (considering the population to be 7 Billion and 86400 seconds in day)
In the next post I would describe some of the functional details of how we do this in SAP Convergent Charging.
Next Generation Billing – http://www.sap.com/solutions/business-process/next-generation-billing/index.epx
Follow on Twitter – @SAP_NextGenbill
Update 1: Moved here based on Richard Hirsch’s suggestion