The Ultimate Guide to Billing for IT Services
Information technology (IT) services are becoming increasingly important in the modern era.
As businesses pursue new operational efficiencies, leaders are recognizing the importance of having robust internal IT service capabilities or dependable outsourced partners. Advances in software, cloud computing, and more, have made it easier than ever for companies of all sizes to access quality IT services from anywhere in the world.
According to Statista, IT services spending will reach $1.1 trillion in 2020. The space has grown by $200 billion since 2008 and is expected to grow another $110 billion between 2019 - 2021.
As the IT services sector evolves, providers will look to differentiate themselves with flexible pricing tactics and offerings. The days of rigid licensing models are long gone. IT services companies are tapping into new-age billing models to give clients more freedom around how they manage core IT infrastructure.
At BillingPlatform, we understand that IT services expertise does not translate to billing sophistication. Designing, deploying, and managing complex pricing tactics at scale requires significant experience and know-how. Those who wish to offer truly compelling packages to clients need more than out-of-the-box solutions designed for specific markets. They need customizable, industry-agnostic platforms capable of changing over the long term.
Here, we dig in and discuss the unique billing requirements of the IT services world. In this overview, we begin by answer the following questions:
- Why are IT services important?
- Who needs IT services?
- What are the different types of IT services?
- Who provides IT services?
- Why is billing for IT services unique?
- What types of billing models exist for IT services?
Why are IT services important?
Companies need reliable IT support for many reasons.
First, IT infrastructure is critical for data storage and management. We are generating more data than ever before (over 2.5 quintillion bytes per day), and those who use data effectively can create tremendous value for their organizations. Without reliable IT, businesses expose themselves to many different data-related risks, from lost files to system-wide breaches.
IT services providers can help enterprises establish secure databases so that they can gather and protect critical information at all times about their operations. Poor data management practices can wreak havoc on businesses that are trying to optimize and expand offerings in the current digital-forward landscape.
Second, most software today is deployed under the iterative development model. The world moves so fast that it no longer makes sense to develop static tools with limited lifecycles. Businesses need access to IT professionals who can solve complex technical challenges and enhance software on an ongoing basis.
The right IT services provider can fix technical bugs and glitches that prevent employees from being able to do their jobs. They can also update software, applications, and systems to support the business however it may be changing. Ultimately, companies need experts, either in-house or external, who can deliver high-end solutions and eliminate technology bottlenecks when they arise.
Third, IT is now at the center of innovation for many businesses. Leaders are pursuing Digital Transformation to keep up with disruptive business models and competition. IT service providers can foster innovation and enable companies to compete more aggressively.
At the same time, IT also allows leaders to track key performance metrics and evaluate the health of their organizations. Without capable IT professionals, companies can’t keep pace with competition or understand how they are performing relative to their peers. Continuous improvement requires IT help that can step in and add value at a moment's notice.
Who needs IT services?
IT services are crucial for many types of organizations, especially in the Digital Age. Both small businesses and global enterprises can benefit from having easy access to IT support.
For some, it makes sense to build essential IT capabilities in-house. For others, outsourcing to a professional IT services provider is the best use of company resources. The decision around what IT capabilities to maintain internally versus what to obtain externally depends on the individual company and industry.
Overall, the complexity and technical requirements of the core business model determine what leaders need in terms of IT services.
What are the different types of IT services?
IT services come in three primary categories:
- Application services
- Business process services
- Infrastructure services
are computer-based services provided over a network. Rather than host applications on-site, many businesses choose to pay for access instead of ownership so they don’t have to manage IT infrastructure themselves.
Business process services
are necessary activities that fall outside the core competencies of a particular company. Many organizations are beginning to outsource processes, such as accounting, supply chain management, and HR, to experts who only focus on those functions. Companies are also outsourcing data analysis, customer service, and lead generation at a higher rate.
cover the foundational technologies needed to run a business. Leaders can now offload management for critical IT infrastructure to those offering Infrastructure-as-a-service (IaaS) models that allow internal teams to focus less on administrative tasks and more on value creation.
Within each of these buckets, there are many IT services that address specific business needs. Below are a few examples:
- Backup recovery
- Content management
- Cloud services
- Data visualization
- Knowledge management
- Help desk support
- IT consulting
- Mobile device management
- Network security
Today, business leaders can find an outsourced IT solution for almost any need. The challenge lies in choosing the right partner for long-term success.
Who provides IT services?
When it comes to outsourced IT services, there are countless providers.
Some operate only in niche areas and industries, supporting enterprises with limited, yet focused portfolios of offerings. Others provide broad arrays of IT services and allow businesses to outsource whatever they want to offload from their internal teams.
For example, Amazon Web Services (AWS) and Google Cloud both sell a variety of cloud computing services that organizations can use to supplement small IT capability gaps or fulfill major needs. Companies like Microsoft, Oracle, and SAP have sold software products for decades that enhance specific business processes.
Leaders can also find boutique IT services providers if they don’t want to work with a large-scale powerhouse. The correct path depends entirely on the unique needs and preferences of the organization. There are no lack of options in the market, which is why companies need to take the time to closely evaluate the capabilities of potential outsourced partners.
Why is billing for IT services unique?
IT services providers can offer many different types of support, which is why they need to have flexible billing functions. Billing for IT services is unique because there are numerous ways to charge customers for every type of service offering.
For example, as-a-service models can all charge based on flat rates, usage, number of users, and more. Providers can bill for software or cloud-based applications based on tiers or a-la-carte menus. Some IT service providers are even charging by the second, offering unprecedented nuance in the pricing world.
Those who want to sell a comprehensive suite of IT services must have the ability to build product packages and catalogs that meet the needs of their customers without adding complexity to the revenue cycle. Legacy plug-and-play billing solutions don’t cut it anymore. Only adaptable, cloud-based billing platforms can fully enable modern IT service business models.
What types of billing models exist for IT services?
Cloud computing has completely opened up the billing possibilities for IT services.
In the past, many companies charged for software and applications based on fixed annual licensing fees. Now, providers can bill in a plethora of ways that extend flexibility to customers while still preserving profit margins.
The following are all common billing models used in the IT services space:
- Consumption, or usage-based, pricing
- Flat-rate pricing
- Incentive-based pricing
- Per-feature pricing
- Per-user, or per-active-user, pricing
- Shared risk-reward pricing
- Subscription pricing
- Tiered pricing
Taking advantage of one or more of these models across a vast portfolio of offerings is not easy. Even if IT services providers have top-level technical talent, they don’t have the capacity to invest significant energy into updating their billing systems to support new-age pricing models.
To truly maximize profit, they need a billing system that facilitates innovation without detracting from the core business. And that is hard to find.
The Ultimate Guide to Billing for IT Services
We’re just beginning to scratch the surface of billing for IT services. Choose from the links below to navigate ahead to a specific subject or go through our complete guide to understand why and IT services billing is being transformed.