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Cloud is Not Raining Revenues, It Is Possibly Leaking Money Instead

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Oct, 2013

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Globally, business organizations are moving towards Cloud-based services, which dramatically reduce their software and other computing costs. Recent reports indicate that Interest in the SaaS (software as a service) delivery model is growing drastically; by 2013 almost 85 percent of new vendors will be focused on SaaS services.

As the market for Cloud services accelerates, more players are positioning themselves to secure their role in the emerging marketplace. With the great potential of the Cloud set to be harnessed by newer players, the market will see the launch of several new services and offerings, setting the contours and boundaries of the industry.

The launch of new services will imply that several new processes across a number of partners’ platforms and multiple carriers will decide work flows. This set of processes can give rise to a new challenge for the Cloud service providers, cloud billing provider as well as customers: Optimized Revenue Management.

The institutionalization of these new processes and the change they bring to the eco-system has to be monitored closely to handle the revenue settlements and avoid leakages. This change points to the need for proven, mature and robust solutions in the areas of billing, CRM, service fulfillment, bandwidth optimization through policy management, provisioning and metering, among others.

In better harnessing the market and creating niches, new cloud service providers need to offer different kinds of services across the SaaS, PaaS and IaaS umbrellas, using innovative business and attractive pricing models.

During this process of launching newer services and flexible marketing plan launch, Cloud service providers have a real challenge in addressing the varied requirements of customers. Service providers need to cater to their customers’ need for a rich and diversified set of products and offerings to meet the changing business needs.

So while Cloud service providers are pushed by the market to quickly launch newer service offerings to respond to their customers, they are internally not ready with their infrastructure and process to quickly launch new services and provide varied cost options. They do so to win customers and retain existing one: but at a critical cost – revenue leakages.

A large section of Cloud service providers are not new businesses but those moving on to Cloud computing business from other existing business models, which implies they have existing legacy applications that may not fully support Cloud business needs. They either have to create new infrastructure or upgrade existing legacy systems by making necessary architectural changes to systems to meet customer requirements. During this process of change, companies will face major hurdles with existing legacy systems.

Some of these are:

  • Inability to add required (web-based) modules with rich interactivity
  • Less flexible in handling rapidly changing consumer requirements and business models
  • New standards / compliance / regulations /reporting, which can’t be implemented and supported on time
  • Involves longer manual integration processes
  • Merger and Acquisition – need to integrate business processes
  • High cost of maintaining legacy systems reducing available budget

With all these factors playing out fully in a rapidly growing and changing Cloud computing marketplace, the chances of revenue leakages are very high. A legacy system does not have the agility that most Cloud businesses require to support changes in processes and the consequent maintenance costs are too high. The answer to the entire posse of problems for the Cloud computing players is to either “build or buy” third party applications, which fit into existing ecosystem to run the business smoothly.

While making necessary changes, organizations can suffer some revenue leakages. So Cloud service providers needs help in identifying sources and points of leakage, quantifying the volume of revenue loss and identify ways to minimize and avoid leakages.

Revenue leakages may occur due to incorrect pricing, operational inefficiencies, missing transactions, non-priced transactions, uncollected revenues, among others. In various stages of customer relationship lifecycle, such as prospecting, on-boarding, transaction processing, billing and recovery, monitoring and service closure, there can be process cracks that give rise to revenue leakage.

An efficient system need to be in place in order to track and overcome all possible leakages. In cloud computing business, the primary tenet is for customers to pay as they use. The pay-per-use requires a fine granularity that allows visibility on resources being consumed with exactitude.

The Cloud Provider then charges for these resources with accuracy, neither more, nor less. Hence a right billing and monetization platform is the singular overall answer to overcome all the problems of leakages and loopholes.

Satish Garikipati is a consultant with SURE! (a Magnaquest product). SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

By : Satish Garikipati

Satish Garikipati is a consultant with SURE! (a Magnaquest product). SURE! is an internationally acclaimed player in comprehensive end-to-end Subscription Business Solutions for PayTV, Broadband and Cloud Computing businesses – through deployment of Metered Billing, CRM, Service Fulfillment, Value-Added Services, and Managed Services.

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