Netflix And Tacos: The Drivers Of Innovation In Subscription And Billing Management

Innovation Netflix And Tacos: The Drivers Of Innovation In Subscription And Billing Management Sayer Martin Forbes Councils Member Forbes Technology Council COUNCIL POST Expertise from Forbes Councils members, operated under license. Opinions expressed are those of the author. | Membership (fee-based) May 27, 2022, 08:00am EDT | Share to Facebook Share to Twitter Share to Linkedin Product Leader at Conga | Investor | Autodidact.

getty Billing and subscriptions might seem like a mundane topic, so my guess is most of you reading this article came for Netflix and tacos. Stick around, they’re coming. Like me, many of you haven’t thought much about what happens behind the scenes to calculate and deliver the bills you mostly recycle (if paper) or delete (if email) each month—unless there’s a problem you must contact the provider to resolve.

Yet, the processes that generate the massive number of bills that are sent out and paid annually from businesses large and small would make this topic worthy of a How It’s Made episode if it were not now mostly software. Accurate, timely billing for a business is like electricity for a building: crucial but noticed mostly in its absence. The history of billing and its current state revolves around accounting software, specialist providers and custom development.

A billing system becomes necessary when a new company or business model is created, and customers must be billed accurately and on a timely basis so the business can get paid. Custom development—whether in-house or contracted through IT firms—is still common for businesses with use cases that can’t be handled by off-the-shelf accounting software or specialist providers. Justifying the DIY approach, though, is becoming more difficult.

There are a few industries served by specialist providers, such as medical billing and communications, for which outsourced billing first emerged. With respect to the latter, so-called customer management companies have served telecom providers since the early 1990s, as telecom businesses have used a combination of one-time, usage-based and fixed-rate pricing models for many years. For example, CSG Systems was initially formed as part of payments company First Data in the 1970s.

It became a standalone company in the early 1990s and emerged as the largest provider to focus on telecommunication companies at one point. In those early days, CSG and others like CableData were used primarily to print and mail statements, process payments and handle customer billing issues. It made a great deal of sense for businesses to outsource these non-core operations—themselves a massive undertaking—to a specialist provider that benefited from scale advantages.

Recommended For You 1 Google Issues Warning For 2 Billion Chrome Users More stories like this Fewer stories like this 2 Forget The MacBook Pro, Apple Has Bigger Plans More stories like this Fewer stories like this 3 Google Discounts Pixel 6, Nest & Pixel Buds In Limited-Time Sale Event More stories like this Fewer stories like this The past decade has mostly been a variation on that theme, applied to a broader set of industries. Over that time, the cost of technology has dropped and become more of a variable (vs. fixed) cost, and electronic (vs.

physical) delivery and payments now dominate. Meanwhile, the degree of software specialization continues to rise and the cost of software developers (to build and maintain custom code) has skyrocketed. Against this backdrop, third-party billing software has become increasingly compelling.

Over the last several years, the largest growth engine in the billing market has been subscription management. Zuora, whose founders came from Salesforce. com, was a pioneer in subscription billing.

Salesforce’s billing and invoicing system had to be built from scratch to facilitate the then-nascent business model for software—now called software as a service (SaaS). Although Zuora was not directly spun out of Salesforce as CSG was from First Data, it’s a similar story of custom development leading to a standalone business—and Salesforce is now a Zuora customer. Today, consumers have become accustomed to subscriptions like Netflix and Amazon Prime, leading more companies to experiment with business models that might have seemed strange just a few years earlier.

For example, Taco Bell announced its first-ever taco subscription . For a company that’s primarily operated only at the point of sale with no (explicitly) recurring revenue sources, billing for subscriptions requires new software, systems and processes. Similarly, we’ve seen this with Alaska Airlines’ Flight Pass and rumblings of a subscription iPhone .

As the prevalence of the subscription model grows across industries, more billing software providers have entered the fray. There are now 84 subscription management companies, according to G2 Crowd’s compilation . Entry barriers are low and competition fierce, especially for the simpler subscription use cases that are now largely commoditized.

In a future article, I’ll discuss more about the billing market, different vendors and the niches they serve, as well as the size of this market. At the end of the day, billing has always been about getting paid for products or services. But the devil is in the details.

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