Blog

The Ultimate Guide to Billing for IT Services

October 28, 2020

Unlike industries that solely sell products, you sell services. To be more precise, your business is about selling your expertise. How do you put a price on your talent? Charge too little and you may put your company in jeopardy. On the flipside, if you charge too much your customers may churn in favor of a less expensive IT service providers. At the center of this conundrum is your billing strategy. Let’s take an in-depth look at the importance of IT services, their unique billing requirements, the challenges providers face when billing for IT services and how to overcome them.

IT Services Are Essential

As technologies such as the Internet of Things (IoT), artificial intelligence (AI), machine-to-machine (M2M) communication, cybersecurity, and the management of big data among others continue to gain a foothold, there’s an evolution within the IT services sector. Providers need to differentiate themselves through their offerings and pricing tactics. Although IT service providers come in all shapes and sizes, the primary services offered can be divided into three broad categories.

  • Application Services Providers (ASPs): ASPs deliver application functionality and associated services over a network to multiple customers. They typically use a rental or usage-based transaction-pricing model. The ASP market is composed of a mix of service providers (Web hosting and IT outsourcing), independent software vendors and network/telecommunications providers.
  • Business Process Outsourcing (BPO): This is the outsourcing of core business functions to services providers. Think of accounting, payment processing, IT services, human resources, regulatory compliance, and quality assurance to name a few.
  • Infrastructure as a Service (IaaS): This is a form of cloud computing that provides virtualized computing resources via the Internet so you don’t have to worry about purchasing the hardware yourself. It’s one of three main categories of cloud computing services, alongside software as a service (SaaS) and platform as a service (PaaS).

Within each of these buckets, there are many IT services that address a variety of business needs, including:

  • Backup & recovery
  • Content management
  • Cloud services
  • Data visualization
  • Knowledge management
  • Help desk support
  • IT consulting
  • Mobile device management
  • Network security

Regardless of an organization’s need, there’s bound to be an outsourced IT solution for them. In addition to price, a key component of acquiring and retaining your customers is reliability. Although there are many aspects to reliability, we’ve boiled it down to three essential areas.

Infrastructure

IT infrastructure is critical for data storage and management. We generate more data than ever before (over 2.5 quintillion bytes per day). With no signs of slowing down, this figure is expected to rise to 463 exabytes by 2025. Businesses that use data effectively can create tremendous value for their organizations. However, without reliable IT services, businesses are at risk of exposing themselves to a variety of data-related incidents, from lost files to system-wide breaches.

A reliable IT services provider will offer solutions (software, applications, and systems) that enable employees to efficiently perform their jobs. Ultimately, companies need the expertise of providers who can deliver high-end solutions and eliminate technology bottlenecks when they arise.

Security & Compliance

IT services providers can help businesses establish and maintain secure databases so that they can gather and protect critical information. Poor data management practices can wreak havoc on an organization operating in our digital-forward landscape.

These providers also help ensure you meet compliance standards and keep you informed of the ever-changing industry regulations.

IT Consulting Services

IT is at the center of innovation for many businesses. To overcome disruptive business models and gain competitive advantage, businesses are increasingly implementing digital transformation strategies. With the right provider, companies can implement innovative solutions that enable them to compete more aggressively. All without distracting their internal teams from their day jobs.

Most software is deployed under an iterative development model. The world is moving at an accelerated pace, and yesterday’s static tools with limited lifecycles are no longer a viable option. To stay at the forefront of their sector, businesses need providers who can solve complex technical challenges and enhance software on an ongoing basis.

In addition, IT services providers can also help organizations track key performance metrics and evaluate the health of their business. When professional IT expertise isn’t part of the equation, companies struggle to understand how they are performing relative to their peers. This area requires continuous improvement measures from an experienced IT services provider who can step in and add value at a moment’s notice.

From small businesses to large enterprises, IT services are crucial for the health of nearly every organization – everywhere. Whether you’re providing a singular service or a combination of services, when it comes to billing for IT services you need a strategy that enables you to stand out in what’s becoming a crowded industry.

Why Billing For IT Services Is Unique

There are countless ways to charge customers for every type of service you offer, which adds to the complexity and uniqueness of billing for IT services. For this reason IT service providers need a solution that provides flexible billing functionality. For example, as-a-service models can charge based on flat rates, usage, number of users, and more. In addition, they can bill for software or cloud-based applications based on tiers or a-la-carte menus.

These billing models are in addition to some of the other common strategies, including incentive-based, per feature, shared risk-reward, and subscription. If we take pricing strategies one step further, some providers are charging by the second, a tactic that until recently was unprecedented. Taking advantage of one or more of these billing models across a vast portfolio of offerings isn’t easy and many times not straightforward.

Providers that 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 simply don’t cut it anymore. What’s needed are adaptable, cloud-based billing platforms, which can enable IT services business models today and into the future.

Why Billing For IT Services Has Special Requirements

Now more than ever, your customers expect flexibility when it comes to paying for IT products and services. As a result, billing requirements are changing for IT services providers. To stay competitive, they need billing solutions that are much more than static, back-office functions. Instead, they need billing systems that:

  • Facilitate innovation: IT service providers that serve a wide range of businesses must be able to respond to trends and quickly deploy new pricing tactics. Otherwise, they can’t serve clients effectively over the long term.
  • Integrate with other enterprise applications: To maximize revenue, IT service providers need billing solutions that can integrate seamlessly with their existing infrastructure. Billing data must be able to flow freely between critical applications, enhancing processes that impact multiple systems.
  • Enable multi-regional expansion: IT service providers that want to grow their client base by expanding globally need billing systems that support multiple languages and currencies. With a country-agnostic billing solution, IT services companies can effortlessly tap into new markets and customer segments.
  • Protect customer data: A topic that all too frequently makes the news, IT service providers must be able to protect private billing information and limit access only to those who need it. Data breaches can negatively affect a company’s reputation, put their customers at risk, and result in financial damage.

Now that we’ve reviewed billing requirements specific to IT services providers, let’s take a look at why the following billing capabilities are essential.

  • Sophisticated account management: IT services providers often need separate contracts with different units within the same enterprise. Some even have unique obligations for various teams within the same business unit. Given these scenarios, it’s vital to have flexible account management capabilities that enable them to manage complex contracts, establish hierarchies, define custom payment terms, and tie billing data to individual accounts.
  • Robust mediation: IT services providers are at the forefront of billing innovation. They are continually exploring new ways to charge customers based on how they use certain products and services. Robust mediation capability is now a must-have for any provider that wants to bill based on end-user consumption. Through mediation, these companies can transform raw usage data to billable information. For example, they can charge by the second for cloud computing services or per database query. In many ways, mediation is key for unlocking billing innovation in the IT services world.
  • Workflow automation: IT services providers that operate at scale must be able to create automated workflows that can execute complex billing tasks without manual intervention. Automation is the only way for IT services companies to manage numerous pricing tactics without burdening finance teams. A well-designed workflow engine is easy to navigate, and simplifies the configuration of workflows for any process.
  • Real-time reporting: Those who can collect and synthesize billing data effectively are able to evaluate pricing tactics, even after they’ve been deployed. IT services providers require real-time reporting capabilities that enable them to visualize key performance metrics about every product and pricing tactic. Those who can’t dig into billing productivity leave growth opportunities on the table or allow wasteful practices to persist within their businesses. In addition, IT services companies need to be able to study trends relating to their as-a-service or product-specific offerings so that they can develop more strategic pricing.

IT services billing is certainly complex and not without its share of challenges. Challenges that with the right tools can be overcome.

Billing For IT Services Poses Challenges For Providers

Even though IT services providers are often the ones pushing the boundaries of digital transformation, the industry still faces many pitfalls without the right billing solution. It takes robust billing capabilities to fully address and alleviate hurdles related to pricing innovation and recurring revenue. In this section we’re going to take a look at the hurdles these providers are contending with, and how they can overcome them by differentiating how their products and services are priced.

It’s no secret, IT services pricing is complex. This niche has the opportunity to offer highly tailored and unique pricing because of the nature of their offerings. They can charge access to as-a-service products and cloud-based applications in numerous ways. For example, they can meter usage in multiple ways – bill per user, per time unit, or per activity. And, how they charge is dependent on how their clients use their services.

Without the right billing solution, deploying and managing multiple pricing tactics can quickly overwhelm a finance team. Evaluating the performance of different products or studying customer segments is near impossible if IT services providers don’t have complete control over their pricing.

Sophisticated billing solutions that use automation, configurable revenue recognition, built-in mediation and advanced account management can dramatically reduce the burden of supporting complicated billing tactics, such as formula-based ratings or usage-based billing. Are you ready to take advantage of IT services innovation?

Your Billing Platform Is Key To Innovation And Next-Gen Pricing

At BillingPlatform, we understand the billing challenges facing today’s IT service providers. We know that they have to strike the balance between giving customers the flexibility they want with getting paid fairly for their expertise. Unfortunately, most providers lack the dynamic billing capability they need to accelerate innovation without overburdening the enterprise.

It’s true, billing has become the new frontier of value creation. It enables IT service providers to attract and retain customers by offering compelling, personalized pricing tactics. BillingPlatform is the only cloud-based solution capable of evolving with IT companies, and giving them the power they need to launch their most innovative business models. When you partner with us, nothing is out of reach for ambitious IT service providers who want to take advantage of next-gen pricing today.

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