The Connected Web

Listen to my interview with Ed Sullivan, CEO and founder of SaaS provider Aria Systems, which last week released the latest version of its A+ Billing Platform.

In this podcast, hear why enterprises are starting to closely monitor provisioning and usage of networked resources such as applications, and learn how the advent of cloud platforms and mashups is making the task of accounting and billing for service usage far more complex than ever before.

Listen to or download the 7:44 minute podcast below:

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PW: So Ed, what sort of online applications do customers typically need to bill for? And do you just deal with ISVs [independent software vendors] or do you ever see enterprise IT as well?

ES: Well, we bill for the traditional SaaS companies. And one of the ways we help them is, enabling them to bill for usage-based billing, flat-rate billing and subscriptions. We're seeing startup SaaS companies. We're seeing small- to medium-size market companies that are either startups or existing ISVs trying to convert their business to a SaaS model — or a subscription-based model even if it's not 'purely' SaaS.

But yeah, we also see — it's interesting — because we do much more than just billing, we're seeing larger companies interested in our application. When I talk to CIOs of large companies, a lot of them are challenged with managing their internal IT resources, stuff that happens behind the firewall — let alone them dealing with employees using cloud-based services or cloud-based applications, which reside outside the firewall. So our lifecycle management approach helps solve this problem for them.

So the problem is to do with actually measuring what people are using rather than actually physically billing them for it? Because if it's an internal use case then there's no billing involved, I suppose.

True, exactly. But the enterprise is — if you think about it — [for] everything we provide, even the billing piece, enterprises have a lot in common with some our telco customers, our gaming customers and some of our SaaS enterprises that are small and large. In that they need to securely sign up employees — employees versus customers; they need to manage access to services; and these services might be internal services that they have — VPNs, access to data, access to business intelligence — or they may be services that are outside the enterprise.

An instance is Salesforce.com or some other application that's not inside the firewall and not managed by the IT organization. But the big difference, as you pointed out, [is] that in these cases, we're not generating the bill or an invoice, we're creating a statement, which gets allocated to an internal call center.

Right. Okay. So it's more about controlling who is accessing, and when they're accessing, and how much they're accessing, and doing that so that [information] can be put together in a report at the end of the month rather than [being] something which necessarily goes to creating an invoice. But there's all of the other things to do with provisioning, and who's entitled, and who's no longer entitled — all that kind of thing — that needs to be dealt with.

Yeah, and it can get pretty complex when you think about the different roles that different employees may play. For instance, one of the conversations I had was with a public utility, where they may have people that are out in the field fixing problems with networks, and they may need like a Nextel phone, and access to inventory software that may be a SaaS-based application. Whereas an internal executive or manager may need a Blackberry, and access to a Blackberry enterprise server, and VPN, and then get onto Salesforce.com. So being able to not just track that usage but manage entitlement and turn things on, based on roles, is a critical piece of what we provide.

And of course, all of this [is] in the context of IT becoming seen more as a service and a set of services that might be coming from inside or outside — because of all of this cloud talk that people are indulging in these days — and therefore [there is] more of a need to do this kind of measurement. Whereas in the past, I suppose, you used to just switch on someone's allocation and then switch it off when they left the company. But in between, you didn't particularly need to measure what was going on.

That's correct. And a lot of times, it was a guess. They didn't have a way to accurately account for it, so there is a lot of cost savings and security — large companies that are publicly traded have Sarbanes-Oxley issues — that we help enforce.

This kind of utility notion presumably is affecting the way that SaaS vendors go out to market as well. I mean how do you see the cloud impacting the on-demand providers in their business models?

Well, it's interesting. We see the emergence of the platform-as-a-service providers and the cloud enablers driving the envelope of what 'the billing requirements' are. For instance, without these mashed-up three-dimensional clouds, the old billing paradigm was a one-to-one relationship where a software vendor provided a bill to its customers and maybe managed — did a little bit of channel management, etcetera — and I call that vertical billing.

But with the emergence of these cloud providers, they have an additional billing challenge, where they have to do horizontal billing, where they have to manage partners, resellers, and even sometimes developers that are building applications on these clouds that they want to monetize beyond just what that cloud can measure.

For instance, a lot of the cloud providers can only bill for how many servers do you have or how much storage or bandwidth or processing capacity. But if you build an application on that cloud which — and you want to bill by the number of seats that you provide, or you bill by the number of transactions, they don't have the ability to do that.

We also give our clients the ability — and these cloud providers the ability — to have sort of an AppExchange-meets-iTunes, where developers can come in, create a plug-in, create an extension to an application, and then monetize it — both vertically between the provider and the customer, but [also] horizontally between many partners that may have little pieces of applications that get kind of mashed together, if you will, to provide a total solution.

Right. Okay. So what's going through my mind is this notion of mashups meeting this multi-tier environment, so that you're combining services at the back-end and then you're pushing them out at various tiers of provision on the front end. And that, of course, becomes a much more complex billing and monitoring challenge than traditional — what did you call it? — the traditional kind of vertical billing environment.

Yes, exactly. And when you throw things on like revenue recognition and how do your customers get charged, it actually is more than just a pure billing or pure monetization problem, it's a provisioning problem. You need to be able to strictly account for when the service was turned on, and be able to turn customers off, or turn things off once the entitlement is expired, or people don't pay their bill.

Right. Yes, and therefore, it becomes something which is not just tacking on an invoice at the end but very much integrated more closely into the whole issue of people's entitlement and people being provisioned and monitoring their usage right through the process.

Yes, so I think SaaS companies are quickly going through the transition that telecoms companies went through in the 80s and 90s, where they went from just pure billing to a billing and operational support system. And that's what we provide. We're not just a billing [system], we have all the operational support pieces including provisioning, and data tracking and reporting.