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Author's profile photo Christian Horak

Agile Monetization Engines – The next logical evolution of Commerce

The transformation of commerce continues at a relentless pace. If you look at commerce innovation from a historical perspective, the biggest enablers for companies to innovate and take their business to the next level of productivity were  ERP and Supply Chain Management the 90’s, and CRM, Analytics and E-Commerce systems in the early 2000’s. So what will be the next big category to emerge along the established players? I believe that category to be Agile Monetization Engines. Let me explain.

Most of the commercial systems deployed in the market today still are following the paradigm of customers consuming a product or service based on relatively stable contracts. The idea of engaging with the market based on metered usage, resource consumption or even outcomes is still a fairly new concept, mainly originating in very large enterprises, for example Utilities or Software Companies.

When we engage with customers, the problems arising from new ways of creating and monetizing value are still framed in the established terminology like Billing, Quote to Cash, Charging, Revenue Recognition, etc. The word monetization is still mostly used in the context of purely digital products. But there is a shift happening from what I can perceive in the conversations and content I monitor as part of my Solution Management role in the Quote to Cash team at SAP.

  • Subscription as a business model is moving out from a niche status into a mainstream concern for companies in any industry and any size as customers get used to the consumption models based on usage or outcomes.
  • There is a disruptive conceptual shift from revenue to recurring revenue streams
  • Most companies still operate on decades-old business models, brittle compliance frameworks and fragile integration interfaces that are not ready to “snap into” a consumption based monetization model.
  • The Quote-to-Cash process in transforming companies is under duress, and has to be reviewed and adapted end-to-end to achieve integrated compliance, automation and scalability, including a holistic view of the connected modules that make up an agile monetization engine including:
    • Configure Price Quote (CPQ)
    • Variant Configuration
    • Order Management
    • Subscription Billing
    • Entitlement Management
    • Usage Data Collection and Mediation
    • Contract Accounting and Invoicing
    • Revenue Recognition
    • Cash Management

Here is a link to a video from a analyst specialized on the topic of agile monetization platforms

What is the main take away? What does this mean for the rest of the 2020’s?

  • The transformation to an agile monetization model is a cross-functional effort on the customer side involving the executive office, as well as sales, product marketing, product management, strategy, finance, development, supply chain management and partners
  • The transformation is not trivial. Just adding-on disconnected functional modules will not achieve the transparency and scalability needed for a mission-critical transformation of the order to cash process
  • Just like customers in the 90’s replaced their home-grown, patchwork systems with integrated ERP systems, the 2020’s will see the emergence of integrated Agile Monetization Engines that cover the end-to-end process of Quote-To-Cash with a holistic approach

Analogy: The move to an Agile Monetization approach is like building an autopilot into an aircraft. Unlike a GPS system in a car, that can just be attached to the windscreen as add-on, an autopilot is harder to add-on since it need to be connected to all systems that keep the airplane safely in the air. Built-in is better than bolt-on, especially when it comes to mission-critical systems that need to achieve the balance of being able to change course in mid-flight without compromising safety and compliance.

What do you think? What am I missing? Will Agile Monetization Engines (AME) a new three-letter-acronym to stand next to the giants of ERP, CRM and SCM?

I’d like to hear your feedback and also know what aspects of the AME topic we should drill down on next.


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      Author's profile photo Holger Ochsenknecht
      Holger Ochsenknecht

      I think the paradigm shift is even more profund:

      Going from one time box sales to recurring subscriptions means at least 2 things.

      A) If it is a consumable (let's say pet food) - the customer will never buy another brand, because the product will arrive at your doorstep without you doing anything. So "pet food" disappears from your weekly shopping list ... and you will stay with the subscribed brand, reducing churn.

      B) Industrial Investment Goods (let's say fork lifts/production robots) - the customer does NOT have to spend a huge amount of Capex at the start, but can move the invest to Opex - better for the books. The Seller can e.g. replace the machine with a newer Model in a definde timeframe (good for the customer) - and then can sell the older machine on the 2nd Hand Mkt. or other further profitable uses.

      Author's profile photo Christian Horak
      Christian Horak
      Blog Post Author

      Indeed. That is one of the reasons I think the term "Quote to Cash" does not quite capture the depth of the transformation here. This is a topic that spans multiple areas of competence, not just Sales and Finance, but also Technology, since the monetization requires deep analytics and big data as well as usage data collection. Often, the new business models come up with new "solutions" before the customer is even aware they need it. Therefore I call this an "engine" because there are many moving parts that need to be connected before you can extract useful "work" from it.


      Author's profile photo Uwe Erdtmann
      Uwe Erdtmann

      Chris, I agree with you that the term Quote-to-Cash his a quite sober (nevertheless correct) description of the process we are looking at here. It lacks the potential that these news ways of monetisation can bring to businesses that allow themselves to start such a journey.

      The term "Agile Monetisation" is a much better fit for my taste.

      Author's profile photo Christian Horak
      Christian Horak
      Blog Post Author

      It will be interesting to see what happens in this space in the next few years. In some conversations some people called this the amazonification of the world i.e. where every brand is expected to know you intimately, and offer whatever you want nea instantly. This is breaking down barriers between industries and business models in an ever accellerating way manner where each brand almost becomes a commerce hub for their loyal subscriber base. This is more like personal B2C supply chain management.

      Author's profile photo Christian Horak
      Christian Horak
      Blog Post Author

      I also updated the blog post to add a video link to the analyst vendor MGI who specialize on this topic and provide an outside in market perspective