A new whitepaper this week from the Incyte Group and sponsored by Aria Systems says more businesses are looking to go to market with products and services that generate recurring revenue. It also says that a surprising number of them aren't ready to deliver that model.
Their finding show that nearly one-half of all businesses in the United States (46.7 percent) are currently engaged at some level in recurring revenue-based offerings. They are either in the process of implementing or formulating the services (20 percent of the 46.7 percent) or are investigating these offering. The Report was conducted during the summer of 2011 in North America and was based on interactive input from decision makers in more than 3,000 companies.
Why? Two reasons. Reacting to the economics around the world companies are looking for predictability in their revenue streams. But they also are responding to customer preference for this type of pricing.
The approach taken by the majority of businesses was to define the offering, paying particular attention to defining its functional attributes and pricing levels, (2) Determine how customers will be acquired and (3) build the delivery infrastructure (more often than not, this required delivery infrastructure to be built and/or modified.)
More often than not, Incyte reported that companies discovered traditional billing systems were unable to handle the nuances associated with recurring revenue. Companies also found they needed to implement a customer support program, develop and implement methods for automatically renewing customer, develop and implement upsell/cross-sell capability, develop and implement customer self-serve capability and develop and implement a closed-loop marketing process.
The majority of companies were forced to expend tremendous resources and time to build proprietary systems and integrate them with existing enterprise applications in order to bring recurring revenue-based offerings to the market. Of the two types of recurring revenue solutions in the market today--on-premise billing applications and cloud-based billing applications--the latter are generally faster and less expensive to deploy, yet admittedly new and still maturing.
The report goes on to briefly evaluate some currently available cloud-based billing solutions. Further details are available here.
The report says that the basic differences between on-premise and cloud -based billing solutions is that conventional billing systems were designed to handle purchases on a transaction-by-transaction basis, but to generate recurring revenue billing systems must be able to handle billing for any transaction that occurs during the course of the customer (lifecycle) relationship.
Aria's take is that "the inability to handle billing throughout the entirety of the customer relationship and the recurring revenue monetization models are fundamental reasons why traditional billing systems are not always able to support recurring revenue-based offerings."
For the full 16-page whitepaper, click here.