SaaS Billing Systems Take Center Stage
Maybe a measure of the Software-as-a-Service (SaaS) movement’s success is the growing attention billing systems are now getting from a variety of sources.
Last week, Jamcracker unveiled its new WebStores which will provide front- and back-end service delivery infrastructure, billing and settlement, customer administration and support services for traditional channel companies who want to add on-demand applications to their existing software, hardware and service portfolios.
Today, OpSource announced that it has acquired privately-held and Dublin-based LeCayla Technologies, a provider of billing and customer on-boarding software for SaaS and Web-based applications, to strengthen OpSource’s Web application delivery platform. (Click here to read THINKstrategies’ 2006 profile of LeCayla, or listen to my 2007 podcast with LeCayla’s CEO, Conor Halpin.)
These are just the latest moves by a widening array of players who are offering storefront solutions to make it easier for SaaS vendors to sell and customers to buy their on-demand solutions.
My friend and colleague, Phil Wainewright, recently posted a blog examining Amazon’s DevPay billing and account management service aimed at making it easy for developers to get paid for applications they build on Amazon Web Services.
Why all the attention on a mundane topic like billing?
Now that SaaS is gaining broad-based market acceptance and adoption of SaaS-oriented solutions is accelerating, SaaS vendors are becoming more concerned about how to properly charge for their services and track customer usage.
But, billing for on-demand services isn’t like billing for traditional products. Unlike the static nature of traditional products, on-demand services is a high-transaction and highly dynamic business with lots of moving parts, such as varying packaging options and pricing schedules, never mind variable usage rates and measures. On-demand service providers, including SaaS vendors, are discovering that this business requires a sophisticated billing engine to successfully process transactions.
Most on-demand service providers, especially start-up SaaS vendors, cannot afford to build these kinds of systems themselves. They are operating in a highly competitive environment in which price sensitivity and customer abandonment are a constant concern. They have to focus their energies and limited financial resources on developing superior solutions rather than worrying about front- and back-office operations. So, they are looking for turnkey billing and customer management systems from third-parties which can be easily adopted and economically administered.
In response, SaaS platform players are extending their portfolios beyond software development tools and partner ecosystems to include billing and customer management systems.
Salesforce.com recognized this need and business opportunity in 2006 when it unveiled its AppStore idea. Although its announcement was among the first at the time, the company has said little about this capability since preferring to emphasize the broad-based capabilities of its Force.com platform.
Others are now stepping into the void with their own solutions. Specialists like Aria Systems are being fortified by VCs. eBay may direct some of its vast payment processing capabilities toward the SaaS market. And, traditional payment processing players, like AmEx and MasterCard, might move into the market via acquisition.
As the SaaS market matures, the winners will be those companies which have the most efficient and effective transaction management systems, as well as the strongest SaaS offerings.