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Data for subscriptions podcast - Episode #18

Unravelling the Complexities of Usage Billing


Igor Stenmark

Igor Stenmark
Co-founder & Managing Partner, MGI Research

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Episode description

Unravelling the Complexities of Usage Billing

As businesses increasingly adopt hybrid models with usage-based services, grasping the intricacies of usage billing becomes exceptionally crucial. In this podcast conversation featuring Igor Stenmark from MGI Research, we demystify the nuances of usage billing and explore prevalent challenges when initiating or expanding a subscription business utilizing usage-based models.


What would you say are the primary drivers for moving towards usage-based billing?

Usage-based models really help align the economic interests of the actual customers and the seller, so basically saying “If you use more, you pay more. If you use less, you pay less,” as well as additional increased supply of capability in this area. We see more people trying to build this internally. In some cases, we see more startups that have come to the market offering this capability to target markets, but previously were not consumers of usage-based business models. So it’s kind of multiple forces that’s propelling this forward.

Let’s talk about the common challenges when people want to get started with the usage phase.

One of the most important things that companies need to plan for is to have a clear understanding of what pricing models we’re going to deploy; what’s the pricing complexity and data situation. Billing is one one-size-fits-all. You can have a variety of… think of it as a spectrum of complexity. Are you okay doing a very simple, basic usage feed once a month? That’s fairly easy to do. Most products today can handle that. Versus do you want to do something that will measure your consumption in real-time or quick-time?

How come, in your experience, it is so that businesses that are literally turning around billions in revenue, are still sitting with some data challenges and issues?

Most companies, even best-run companies with really solid IT infrastructure and really competent teams, focus on data is often, we find, is an afterthought. It’s really attended to once something begins to fall down or once we realize that something is not working right. It’s very often not a proactive exercise and it’s not a continuous exercise, and that’s what it needs to be. It needs to be kind of done in advance proactively on a continuous basis.