Dynamic billing moves to the cloud

Susana Schwartz
21 Mar 2011

With so many cloud providers competing to enable richer applications and services through public and private clouds, telecom cloud service providers have to quickly respond to market pressures (e.g., thinning margins, capacity demands) and monetize cloud computing so they can differentiate themselves from cloud giants like Amazon, Google, Microsoft and IBM.

It won't be much longer that telcos can sustain the practice of building out networks to sustain OTT services for which they earn no revenue. For them, monetization through the cloud has to become a primary focus.

Many telecom operators are on the right path, beginning to differentiate themselves by monetizing capabilities around hardware, software and services they have built from hosted offerings and long-term, trusted relationships with enterprises. These include scalable operations, trusted, intimate relationships with enterprise customers, complex forms of licensing, experience handling sensitive data on behalf of customers and a proven track record with large-scale service delivery.

The next step is monetizing these capabilities through the cloud to overcome thinning margins and the onslaught of competition from traditional and non-traditional players. Operators are well positioned to take a good piece of the cloud market if they are smart about how the differentiate from large IT and internet players. According to IDC, revenue for private clouds predicted to grow to $11.8 billion in 2014 while revenue for public clouds is expected to hit $718 million in 2014.

"Accommodating change is going to be the No. 1 capability for monetizing the cloud because as soon as a telco makes a strategic change to its cloud offering, its competitors will make a strategic change too," said MetraTech CEO Scott Swartz. He cites the elements of "constant change" as shrinking margins, commoditization, bundling and reselling of other companies' products, changing retail billing and wholesale billing models, and emerging channels and compensation types.

To response to that constant change, Swartz espouses an architectural approach - one that centers around dynamic billing as a differentiator (see sidebar, "Beyond 'standard features'").

As operators come under increasing pressure to efficiently monetize their businesses fast, and as they become squeezed by increasing traffic volumes and price-per-unit decreases, they are being forced to step outside their comfort zone, having for the first time in their history to sell services they do not own or control. As this trend move forward, Swartz believes monetization will require two angles: billing on one side, and compensation, settlement, revenue sharing and commissioning on the other.

"Successfully monetizing the cloud will be about more than just billing, revenue and profitability, as cash flow will be of great importance," says Swartz. "If you bill out one side, but owe money for what you distribute and mark up on the other, then you have to be careful about how you negotiate your deals for settlement and compensation with partners. If you settle slower than what you are able to bill and collect, then you'll have a good cash flow; if the opposite, than you'll have a bad cash flow."


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