Billing-as-a-Service in the API Mashup World

Billing isn’t just a revenue counter or collector; it can be a revenue generator. In world of API-based service mash-ups, billing functionality is being embedded in other applications so that it is not just billing for service usage, but becomes part of the service itself. As what’s considered billing expands into subscriber management, product management, and analytics-based business intelligence, operators can offer transactional APIs that separate them from the pack and which less-well-capitalized competitors just can’t offer.

A Billing-Embedded-in-CRM Use Case
The industry is increasingly witnessing examples of the embedded billing model as more cloud-based billing applications come to market. One such example emerged in late April, when Transverse announced that its cloud-based TRACT billing platform was integrated as part of SugarCRM’s cloud-based CRM offering. At the time of the announcement, SugarCRM CTO and co-founder Clint Oram noted that this integration would “give SugarCRM users the ability to integrate billing – from simple subscriptions to complex activity-based plans – directly into the CRM tool.”

To understand what Oram meant, let’s depict a basic use-case. Much of what we see offered online consists of well defined products with a simple price, like a book for $9.99 or a pair of designer jeans that cost $100 (and which you never buy if you have small children in diapers). But, there are thousands of higher value offerings with more options and variable prices that are sold on a B2C or B2B basis. One group that comes to mind consists of investing strategy programs.

Imagine a slick twenty-something who represents your online brokerage calls you. He says he can offer you the firm’s online investor training classes and resources at a discounted price, and that he can create a tailored program for you based on your needs and interests. He’s not running through a call script, like many outbound call center agents, but he is using a CRM system to drive his interaction with you. After asking some qualifying questions, he builds a program for you from components he selects from a menu; plays around with some discounting functionality; and comes up with a price like $2,716.00. The number makes absolutely no sense, so it’s obviously some assembled and discounted total based on the components he chose for you.

Now let’s say, however unlikely, that you want to purchase this program. With billing capability tied into the CRM system, he can not only build and price a package for you, he can create a payment plan on the fly and accept your down payment on the spot via credit card, debit card, PayPal, or direct debit from your brokerage account. He can close the sale right then and there; that’s the value to the brokerage of having billing embedded in CRM. It’s not just about accepting a payment; it’s the whole process of structuring a unique product, giving it a discounted price, setting up a recurring payment plan, and accepting an initial payment on the spot. There are many possible scenarios like this, in both the B2C and B2B worlds, and they all benefit from having not just payment, but billing functionality embedded in whatever tool is used to sell something to a customer.

The Power of the API
Web services APIs are making these scenarios feasible. In the days where it required extensive, custom integration to wire together a billing engine with any other application, there was just too much cost and risk involved to offer this kind of functionality. But “web Services APIs have become extremely valuable in cloud environments, where different components can be made to work together by becoming services that integrate with third-party apps,” says Chris Couch, COO, for Transverse.

Because of web services APIs, integration has become a more functional and less literal concept. An API call needs to be secure, robust, scalable, and reliable. But, the effort, risk and expense reduction massively expands the possibilities for new mash-ups.

Initially, many mash-ups entered the market that involved apps aggregating data collected from a variety of APIs, like travel and weather information. But, as the market evolves to more transactional APIs, we see much more powerful services being exposed – like telco-grade billing systems.

Couch explains that this shift “enables both established companies with multi-vendor environments and younger companies starting from scratch to avoid the vendor lock-in that traditionally stifled innovation and flexibility.” Because integration is just an API call, it gives the mash-up provider the ability to switch relatively easily to a superior service if one becomes available, thus driving innovation and a highly competitive environment for mashed-up application services.

In this competitive environment, multi-tenancy becomes a critical factor. Couch says that “when cloud solutions are truly multi-tenant in nature, all tenants can realize the benefits of integration by running on one instance of a solution. Rather than each company having to invest in integrations or upgrades on a one-off basis, they collectively share the cost, risk and most importantly the benefits of the integrations.”

That’s great for end-users. From an operator’s point of view, multi-tenancy drives economies of scale that in turn drive margins. If billing functionality is offered via APIs on a per-transaction basis, then it becomes a volume game where the operator wants to capture as many transactions off its API as possible. The more users it can host per multi-tenant solution, the greater number of users it can host that effectively represent pure profit for every transaction they execute.

Billing More than Billing
Now, we all know that billing has become more than billing. So, these transactional APIs won’t just offer product, pricing and payment functionality. Couch argues that “ultimately, billing systems should evolve to provide subscriber data management, analysis and business intelligence, and the creation of entitlement- and personalization-oriented services.”

The more functionality like this that can exposed through APIs, the more operators can separate themselves from the hypercompetitive, low margin payments world, which offers relatively simple payment services. Operators can offer higher value transactions that give sellers across all markets the ability to personalize offers and pricing, launch highly targeted acquisition and loyalty campaigns, and even make contextual recommendations on the fly. The business intelligence and billing infrastructure required to create this kind of functionality is capital-intensive; fewer players can offer it. And, because it delivers more unique value to the seller, it should attract a higher price-per-transaction.

In the end, the Web API opportunity should be highly attractive to operators because it allows them to turn their billions-worth of business IT infrastructure into service offerings that less well capitalized and technically competent competitors just can’t offer. Everyone in the world will offer electronic payments and eWallets; not everyone will be able to offer them with business intelligence, personalization, and telco-grade subscriber management, product management, and plain old billing built-in.

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About Edward Finegold 122 Articles
Ed is now Director, Strategy for NetCracker. Previously, for 15 years he was a reporter, analyst and consultant focused on the OSS/BSS industry and a regular contributor to BillingViews.

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