Cloud-billing is receiving a fair amount of hype, but it may be warranted. There are many good arguments for keeping core billing operations intact. But cloud billers are benefiting from good timing; CSPs need new billing capabilities their traditional platforms were not designed to accommodate. New service, product, pricing, and customer models that are appropriate to services like SaaS applications, M2M, and digital content put so much stress on traditional billing environments, there’s just too much risk in cracking them open. Billing systems also sit at the heart of many business processes that a CSP cannot afford to disrupt. Instead, they’re turning to cloud billers to help them launch new offerings with separate billing stacks that are parallel to their core billing operations but which enhance their core billing capabilities. I had a long chat with Deb Osswald, IDC’s Research VP for CSP Operations about this topic and others and she shed significant light on the phenomenon.
New Silos Are Necessary
CSPs are willingly creating new silos in the cloud to address their new and changing billing needs. Osswald says the practice of creating silos to take on new services obviously isn’t new – we saw it in the early days of IP services with billing platforms that emerged in the late 1990s and early 2000s. But, she says, “with the cloud, it’s more cost-effective and a faster time to market approach.”
The downside, potentially, is a loss of efficiency. “Because you’re managing more vendors and more stacks, there’s some operational overhead there,” she says, “but I’d submit with full confidence that the pros outweigh the cons.” A cloud-based solution is something that many different groups within a CSP’s business can potentially access, for functionality or data, or both. In previous eras, a new silo could be inaccessible. But, Osswald says, “the technology doesn’t preclude use as it once did.” She notes that “today’s mediation and real-time capabilities” as well as “analytics” are propelled by current “high speed processing and in-memory database technologies and, more importantly, by the pressing need CSPs have to harness all of the valuable data at their disposal.” So, CSPs “can do things with the data in an unhampered fashion.” Osswald argues, “the silo can become a net positive in that it can support product diversity and new revenue generation, although I am not generally a fan of creating more silos due to the inefficiency and incremental operational overhead and expenses they have the potential to create.”
Playing Catch Up
As much as she supports an architectural mantra that says “do it once, do it right,” Osswald says she believes “it makes a lot of sense to look at cloud billing for a separate operation.” Much of the reason cloud-based billing makes sense in the current market environment is because time is of the essence, and CSPs are already behind the curve when it comes to introducing new categories of services. “The cloud guys are basically benefitting because the CSPs dragged their feet for the last decade, and only now really feel the urgency. They are now finally ready to launch new services that are often sourced from third parties, and SaaS billing gives them a chance to do so much more quickly and cost-effectively than their traditional billing infrastructure is likely to allow,” Osswald says.
Is IT Playing Along?
As new silos emerge and live in the cloud, a big question is how IT groups – historically known for preferring to control their own domains – feel about it. “IT groups have often been slow to support outside alternatives,” Osswald explains, “but I’d say you have to guess that the IT folks, for job security purposes, are starting to evolve past the days when they’d fight tooth and nail to do new things in-house because they know the cloud, outsourcing, and supporting other remote IT alternatives is the way of the future. As such, they are cooperating and even facilitating setting up separate cloud billing environments and the like because they are under pressure to support the growth of the business more than ever before and to be more open and flexible, from an IT architecture perspective.”
The key nuance of this trend toward cloud billing is that we’re not yet necessarily talking about putting the multi-billion dollar/euro/pound/rupee/yen, etc. operations in the cloud. It’s a situation where CSPs are having their hands forced, and are finding reasonable and attractive options in the marketplace that meet their immediate (and long-term) needs. What it means to long term core billing architecture remains to be seen, but Osswald believes that “technology has advanced to the point where it is now easy enough to integrate/access data from multiple sources and feed it into analytics, billing, and CRM systems so CSPs shouldn’t dismiss the notion of a separate cloud billing operation due to siloed data concerns.” What will happen to these adjunct cloud billers once they reach large transaction and subscriber volumes? And how will core billing infrastructure adapt over time to a marketplace that will look entirely different in five years? These are some more of the big questions that are making billing very interesting once again.