In cloud, it’s the reseller who could face bill shock

Last year, I wrote about the credit risk of cloud. Besides this, many cloud service provider models pose another challenge to MSPs and resellers keen to harness recurring cloud revenues: how to bill and collect customer revenues.

Why is this such a challenge? Surely it can’t be difficult to bill a customer a monthly fee for Office 365 – any accounting system can manage that. 

True, automatically raising an invoice for a customer with 10 users at a fixed monthly fee is simple. However, that customer may add extra licences, upgrade versions, cancel, or buy some services at one price and others at a different price. The modest license margin would hardly cover the cost of managing the billing, customer service and inherent queries and complaints. Is this a once-a-year hassle? No, every month.

The debacle in the making is far greater. Office 365 now includes telephony, with Skype for Businese. When you first use it, you receive 60 minutes “off net” free (Skype to Skype calls are free, but if you call a landline or mobile, there are call fees). 

After the 60 minutes are used, vendors will need to send CDRs (call detail records) received from the telcos, with a wholesale cost for every call. Distributors will add a margin and bill their resellers, who then add their margin and bill their customers – just as you get from a telco.

Besides the complexity of hundreds or even thousands of CDRs, imagine the customer service nightmare when a forgotten international call is queried? Telco’s massive call centres handle such issues today, but that burden and cost will shift to cloud resellers. Integrated telephony will not be the only challenge. On-demand cloud services with variable usage (or metered usage) will create similar billing and customer service hassles that will drain resellers’ profits.  

However, the picture gets darker. As cloud service providers add products from multiple vendors, all with combinations of metered, variable usage billing “feeds” as well as set monthly subscriptions, more and more marketing offerings will include “free trials” that convert to paid after a few weeks or months. Additionally, resellers and managed service providers then need to add their support, training and professional services – and later financing, insurances and other charges. 

Managing this complexity and resulting payments, credit, queries and disputes make sophisticated cloud services billing and collection capabilities critical. 

One of the largest distributors provides a free billing system, but resellers can’t add their own services, and the solution provided cannot support variable usage or metered service.  Another offers an invoicing service for a fee, but only for fixed monthly license fees. – no usage nor resellers services. 

Global software vendors are very keen to harness the market credibility, personal relationships, hands-on technical expertise and trusted relationships that managed service providers and resellers have built at the core of their business, especially in the SMB market. Using the lure of recurring revenues, vendors have shifted the burden of billing and collection – as well as credit risk – on to the channel. 

To avoid this debacle and potential business ramifications, resellers need to fully investigate how vendors and distributors will support the cloud services model they are so eager to promote. 

Graeme Boorer is an internationally recognised speaker, writer and consultant with experience gained in more than 50 engagements across 17 industries. Graeme helps enterprises design and implement scalable business models that deliver high value with low risk across the distribution channel