Key Considerations to build an agile Subscription Management Solution

I am sharing my experience of implementation of SAP S/4HANA BRIM (Billing and Revenue Innovation Management) solution through 2 blog series.

Blog 1 offers the information on why Subscription services are gaining increased traction in the market and what are the key characteristic of the Subscription business so that a successful subscription business model and SAP BRIM system design can be created.

Blog 2 offers the information on Subscription business processes and how these are enabled in different SAP S/4HANA BRIM solution components. I also share the key learnings from the Implementation of SAP S/4HANA BRIM subscription solution for a leading Auto OEM company.

Blog 1: Key Considerations to build an agile Subscription Management Solution

The Subscription businesses is growing by leaps and bound and most of the organizations the world over are already offering or are planning to add subscription sales model for their traditional products.

Growing Trends in Subscription Offerings – Game Changer in Go-To-Market

  • From 2016 to 2019, in USA, the On-Demand economy nearly tripled and is expected to reach $335 billion. Subscription businesses have grown 5 to 8 times faster than traditional businesses. (Source: Subscription Economy Index Report 2021)
  • Organizations across all Industry sectors are either using or are planning Subscription offering and related projects to drive revenues
  • Growth Driver for Subscription Business:
    • Provides personalized repeat services and thus creates emotional connect with customers
    • Results in direct reach to customer avoiding multiple hops with cost reduction benefit being passed on to customers (B2B, B2C)
    • Adoption is fueled by Internet economy (e.g. mobile apps) which provides rapid scalability
    • Growth is accelerated due to impact of Covid pandemic (new normal)
    • Provides recurring revenue model to organizations resulting in higher predictability
    • Provides lower customer acquisition cost

Key Characteristics of Subscription Processes

  • Product Modelling: This is key item that defines how subscription will be offered, billed and invoiced in the market.
    • Define key characteristic parameters that defines the product/service
      • For example a rideshare service is characterized by Vehicle Type, Vehicle Class, Distance covered, Seating Capacity, AC/Non-AC etc.
      • It helps to keep your product/service masters to minimum
  • Define how product/services will be sold and availed by the customer
    • It could be through Mobile Apps, Website, Ecommerce Channels, thorough partners
    • Possible Customer segmentation e.g. B2B, B2C
    • How the billing plans will be offered e.g. Postpaid, Pre-Paid, pay as you go
  • Define how products/services usage will be tracked and how it will be billed
    • It is important to define how the usage data will be tracked. For example: the vehicle health is monitored by chips and sensors and is relayed to organization’s internal systems and from there Customer can see the same in their mobile apps
  • Bundle Products/Service creations (e.g. Product + Service ,Hardware + Software)
    • A bundled scenario is a gaining traction to sell the maintenance contract and other services alongside the sale of main product. E.g. Along with new vehicle sale the telematics and data services are also offered to the customers
  • Define product/service lifecycle (Initiation, Change, Suspension or withdrawal from Market)
    • It is important to plan that Subscription offering is flexible to adapt to changing market environment e.g. ability to offer, free trials, discounted offering, suspend or pause capabilities
  • Define Subscription Model and Contract management:
    • Define how Product/Service Offerings will be made available e.g. Tier of Platinum, Gold, Bronze package models or one time sales/consumption
    • Identify Customer Channels e.g. B2C/B2B/B2B2X
    • Based on defined periodic duration (e.g. monthly) or evergreen (until it is cancelled)
    • Based on agreed payment structure: (one of the below or combination)
      • One Time fee
      • Recurring fee
      • Usage based fee
      • Additional pricing components (e.g. for rideshare : Toll tax, fuel surcharge)
      • Free trials and market campaign offerings
    • Define the Subscription lifecycle and key governance parameters in terms of initiation, consumption, renewals ,  cancellation or On-hold
    • Channel partnering (Revenue sharing & partner settlement with partners, 3rd parties via whom Subscription product is also offered in market in addition to organization’s own channels)
  • Customer Interface/Market Presence: Define and Design channels on how customer will avail, order, consume, track and pay for the Subscription Products
    • Intuitive (easy to use) front end (Mostly Apps or Websites)
    • Ecommerce Channel (your own and/or leverage existing marketplace channels)
  • High usage data volume metering and processing requirements:
    • Requires technical systems to measure and monitor Subscription Product/Service consumption usage data
    • 24 x 7 availability of robust technical infrastructure
    • Multiple legacy metering and usage data monitoring systems may exist in an organization using different technology and this building integration with the billing and invoicing system is the key to success
  • On the fly Tax calculations & Auto generation of Customer Invoices
    • It is imperative that taxes are calculated on the subscription services on the fly based on usage data so that tax invoices can be created automatically. A robust tax engine along with well-defined integration with the invoicing system should be part of the subscription solution
  • Auto generation and transmission of Invoices
    • The subscription business should have the capability to Auto-generate the invoices with correct usage date, pricing and the taxes. The invoices should be auto transmitted to customers and be available in Apps/portals
  • “No-Touch” (High Automation) Design of Subscription Management Solution
    • Subscription processes deals with high volume of data processing, the manual intervention to react to errors will be extremely complicated and inefficient and thus it is recommended to design the underlying billing and invoicing system for automated processing of end to end processes (Subscription Contract to Usage data processing to Billing & Invoicing)

Conclusion: This blog will help to provide information on key characteristic of subscription processes and will help to understand upfront the key considerations that are required to build an agile Subscription Management solution. I encourage you to share your feedback or thoughts in a comment for this post.

For more information on SAP BRIM, please follow SAP Billing and Revenue Innovation Management environment Topic page (https://community.sap.com/topics/billing-revenue-innovation-management), post and answer questions here, and read other posts on the topic here.