PAYG Payback: how business benefits from consumption-based billing

Blog by: Ruth Playle, Head of Service Operations, Adept4 - 26-Jun-2017

Technology has given us access to more information and with that knowledge comes the ability to take action. It’s this that has created the notion of the real-time enterprise: a business so responsive that it can fulfil orders as needed. But if there’s one area that’s hindering our progress towards this nirvana by depriving us of actionable intelligence it’s billing.

Many SMEs are still tied in to fixed cost models. Infrastructure contracts that involve large amounts of spend, with contract lock-in equating to an owned infrastructure that then needs to be maintained, with all the unknown and unpredictable costs associated with that. Services and licenses that are bought for fixed terms, and similarly prescriptive rigid support contracts. These contracts may span three or five years. Some will be annual and others monthly, yet even monthly bills can be restrictive, with pro rata charges that prevent the business from making changes without incurring punitive fees.

Hindered development

This is at odds with the way businesses want and need to operate. Business intelligence and analytics are allowing businesses to anticipate and plan for changes in demand for their services or products. Therefore companies need to be able expand or shrink their service provisioning to meet changes in demand and/or to manage their cash flow.

Current billing practices are preventing this by not providing the granularity of information needed and preventing change, hindering business development. Greater transparency can allow the business to: 

  • Assess usage to help ramp services up or down
  • Corroborate bills and prevent fraud
  • Tailor plans on a per user basis
  • Use consumption to inform future investment

This kind of cost control can transform the business, allowing it to utilise IT to maximum effect at minimum cost. This can only be achieved through a Pay As You Go (PAYG) model which requires billing to be itemised based on consumption rather than a flat rate fee.

PAYG can still operate on a monthly bill cycle, for ease of accounting, but it provides the business with more flexibility. Services can be flexed up and down in line with business requirements without any hidden costs. This positions the business to rapidly adapt to changes in the market, providing greater agility. 

Consumption billing

Unfortunately, that kind of consumption model just isn’t accommodated by the majority of IT services. You may be able to get PAYG for telephony but few providers will bill on a PAYG basis for infrastructure, networking, data and storage, device management, cloud, and applications. It’s a sector that is very much focused on hefty fixed cost models, long-term contracts and lock-in to both contracts and support staff.

It was this rationale – the need for consumable IT as a Service – the led to the formation of Adept4. We provide greater transparency and flexibility across a range of IT services by allowing our customers to flex up or down within their contract or framework. The type of billing we offer can be illustrated by referring to one our application offerings – Microsoft Office 365 – which utilises the same principles.

Office 365 is a pay for what you use service, so as your workforce changes your 365 subscription changes with it meaning you only pay for what you require and on a per user basis. This means that each employee can be given the software license they need, allowing you to vary provisioning across the enterprise, so that the HR function has a different level of license to that taken by Reception, for instance.

When it comes to billing, Office 365 offers monthly or annual billing. Bills show the total invoice amount due, payment due date and the rolling account balance on any unpaid bills. You can also view historic bills. Bills are accessible from the Microsoft Office 365 Admin Center from where you can view the quantity of licenses you have, those purchased during the service period, and the number of users, and change these. It’s possible to choose service add-ons, add or remove users, or switch plans for all users, or add subscriptions for select users from here, giving the enterprise the ability to scale or reduce service provisioning.

Planning and progress

Now imagine that level of flexibility across the entire information estate. Our granular reporting gives visibility into how solutions are being consumed to help us anticipate capacity demands but it also means we can pass on that visibility to you in the form of dynamic reports which detail the status of the service in real-time. Granular reporting also ensures you are charged exactly on usage and we incorporate direct cross referencing with invoicing to make sure the bill is accurate.

Once you have that type of cost control, you can begin to do some interesting things. You can plan for spikes in demand such as when you need to take onboard temporary personnel, perhaps to meet seasonal changes. You can monitor spend, implement cost cutting measures and determine where that investment should go. You can experiment, without fear of tie-in, to discover if ramping up one area of the business could generate better returns.

Billing on a consumption basis like this provides transparency, giving the business access to information that it can utilise, and the flexibility to act on information to ramp up or reduce provisioning. It makes the business agile, allowing it to adapt to market demands and scale to meet them so that billing becomes a service in its own right and moves IT from being a cost to a strategic business asset. 

Topics: XaaS

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