MSPs: Is Managing Your Cloud Billing Costing You Too Much?
by Karen Turtle, on 13-Dec-2019 16:42:17
Many MSPs are relying on existing business systems and processes to manage a recurring revenue model that has its own distinct and increasingly complex set of rules as cloud subscriptions become ever more flexible and varied.
Making your current systems work by adding manual processes to manage this complexity can be costly in a variety of ways. Here we look at the impact recurring cloud billing can have on your business, and specifically on staff efficiency and cost per invoice produced.
How Many Accountants Should It Take to Process Cloud Billing?
Customers want to buy differently, which means that MSPs are charging differently. Before, MSPs were managing large upfront fees for annual or multi-year contracts, enjoying the generous margins associated with managed services from software licensing.
Processing an invoice for an average business could cost around $US100— normally an acceptable amount for a quarterly or annual bill.
Then came cloud and the OpEx model, allowing customers to shift their IT spending away from larger one-off capital expenses to leasing a service in a subscription basis, incurring smaller, more variable costs.
Table 1: CapEx vs Opex
Customers are also buying an ever-wider range of cloud services, charged per transaction, per plan, compute hours, and resources used. Customers often upgrade, downgrade, renew and suspend these services, adding further billing complexity.
Instead of one annual invoice for one large bill that has a few line items, MSPs are contending with a higher volume of lower monthly bills that can have hundreds of line items. And, because cloud usage varies from month to month, these line items and their corresponding costs can be very hard to reconcile.
Small Invoice Totals, Big Invoicing Costs
The invoice that cost US$100 to produce for one customer annually now multiplies by 12. The time spent deciphering complex cloud vendor reconciliation and usage files ups the invoicing cost even further—not just in terms of labor—but because the process itself is error-prone.
Existing systems and manual processes don’t, therefore, work well for cloud computing and recurring SaaS services. The transition to a subscription-driven model requires a subscription management solution—ideally one that’s built around MSP’s specific requirements.
A quality MSP subscription billing solution can:
- Integrate a fragmented supply chain.
- Eliminate costly manual billing processes.
- Maintain 100% billing accuracy.
- Speed up billing significantly, independent of how big or fast a business grows.
- Process a range of pricing models, including consumption-based billing.
- Manage the sale of any product or service, including bundles.
The move to a recurring model should not mean that MSP margins are squeezed or costing staff excessive amounts of time to process. Quite the opposite—with the right strategy and a robust automation solution, cloud services are an important opportunity for MSPs to get closer to their customers and grow long-term recurring revenue.
Find out how Cloudmore can support you with cloud billing.
Download our billing guide here.