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We often hear the buzzword phrases of customer service, quality of service, customer first and net promoter score, and both the B2C and B2B markets have been constantly changing, driven by more demanding customer expectations with the bar being set ever higher by new disrupters. Take the age-old example of Blockbuster, a model and brand that was globally successful and known, quickly disrupted when newcomers set the de facto bar: download a movie anywhere, anytime to a growing number of devices, cheaper, quicker and easier, with nothing to return to the shop, and the film you want always being available.

Customers are having that bar set by these new unicorn firms, such as Uber, Airbnb, Netflix, JustEat, eBay, Amazon…the list goes on. This means of course that existing legacy firms are now dealing with companies and people that have a natural in-built expectation for things to be easy, clear, customer friendly and ‘of the new world’.

A Titanic moment on the horizon?

This is not easy to achieve for a legacy business. The phrases ‘digital transformation’ and ‘digitally agile’ abound, as if this is just a button you can click to get there. For existing firms, making this leap can be a big one and a complex, costly and painful journey to undertake. New cloud-born firms design around the new world with processes, systems, people and attitudes aligned to efficiency and customer service – very often self-serve.

Take estate agents as an example. Having engaged with Purple Bricks recently and taken benefit of their online model of estate agency, I can personally see why the existing bricks and mortar estate agents should be massively worried. This new model costs the customer roughly a quarter of the commission, and is slick and effective with self-serve portals combining with a human touch for the initial engagement, and a very slick process flow to sell your property in the most effective way for both you as a customer but also them as a cost model. We had eight offers quickly, a good percentage over what traditional estate agents said to sell for, and we had visibility of all that was happening 24×7 – a very slick process.

The only thing holding this back is the nervousness of ‘don’t we need the traditional model to tell us all what to do and handhold us’. This was done as well and there was nothing complicated, as the traditionalists would want you to think. In meeting with several traditional agents, they were fast to bad mouth these new merchants; ‘It won’t work’, ‘they won’t affect us’ and – more ridiculously – ‘but they don’t have a high street window to put the photo of your property in!’

My message to all those traditionalists thinking ‘what iceberg?’ is to open your eyes: you are heading straight for it. As those who use the new offerings prove it and tell all their friends, more and more will try it, questioning why the old model is so expensive. The Blockbuster-Netflix change will set in. It is the customer that decides, and those decisions are being made easier with a wider gap in service quality versus price attracting customers away from traditional form factors, delivery models and brands, to new ways and new brands. Add to this millennials, generation Z, whatever term you wish to coin; they expect online, self-serve, fast, low cost, slick customer experiences.

Disrupting the disrupters

What will let new entrants down of course is the service quality provided. If this is lacking, customers likewise move fast with their feet and also their bad recommendations fire off faster than good. Coming in as a disrupter or an existing provider refreshing its market offering, customer service remains key. In this new world, dynamic customer service is not simply the ‘speaking to the customer’ experience; it is far wider and far more expensive.

Take a bricks and mortar retail store – its opening hours may be six or seven days a week, 9am to 5pm perhaps, and the customer service is the touchpoints of staff, often only at the point of paying. In the new world offerings, we expect 24×7 access, from anywhere, from any device, with multiple interaction points from easy self-service and search of answers, shared service from other customers, such as provided by GiffGaff and Livechat, as well as email and phone support ideally when it is required. On top of this of course is the delivery quality of that service, its availability, is speed of (online) response, underpinned by the SLAs and processes that make the whole experience seamless and enjoyable.

For the providers and businesses providing these services there is a new dynamic, new business metrics, new approaches of development and support required in order to be operationally and cost efficient. Offering one of these new experiences is one thing – doing it at a market competitive price is another. Deliver it at twice the price of a rival and you will find how fickle the new customer breed is, and how fast you can be displaced and made irrelevant.

For the unicorn disrupters, they first need to change the market dynamic and disrupt the status quo, while second is to maintain and retain this differential – change and change again, and be willing and able to do so in technology, process and service. We will see disrupters being disrupted themselves. Take for example JustEat and Hungry House in the UK – did they see UberEats coming? Will they be able to defend against it? Uber is now reshaping not as a taxi firm, but as a logistics firm – one with a technology platform, processes and brand that it can leverage into other markets.

What’s coming next? After food delivery, why not parcel delivery, flower delivery, and so on? Can you see a time when an Uber driver taxis someone from A to B, gets alerted to pick up a parcel near B that needs to go to C and when approaching there gets alerted for a food delivery near C to deliver – thus maximising the earnings and their utilisation of their third party driver community, and giving a single brand experience to customers with the same lead they have on technology utilisation?

For the customer of new services, there are also challenges. Data privacy is a concern – who is tracking what you do, what if that data is leaked, and what if their service is unavailable, or cannot get online – am I able to operate, or have I relied on it to totality? For the business user of new world services, the issues are more complex, from service quality for the business users, security of access and data, data sovereignty and governance, supplier and SLA management, and control and mitigation of shadow IT – an increasing problem with new services being licensed and accessed by employees on work devices on network and when mobile. Of course, it’s worth noting that the EU General Data Protection Regulation (GDPR) aims to make some of these issues easier from both the consumer and business side.

What this means for IT

In the corporate environment, the service demands are often on IT to fix things when they go wrong, even if the service is externally cloud-provided and often even if the department has procured it directly without IT’s knowledge. When there’s an issue, IT is called upon to resolve and help.

Increasingly, internal IT is going to grow into a service broker, mixing in-house skills with those from external cloud, IoT and mobile providers to enable a cohesive service experience for its business users, and hence onward to the customer. This is important as one service quality often begets the other – how many times have you heard on a phone enquiry that the operator’s system is running slow, or has crashed, or could you be transferred to another advisor?

Corporate IT more than ever is going to need to have the processes and tools to manage not only the traditional environment and user requests, but to encompass those of cloud, IoT and mobile services, as well as smarter, more self-serving users and users with a higher demand expectation on response times and quality of service. Internally facing IT will have to align with external business quality of service delivery onwards to customers, to choose adaptable and empowering ITSM and ITAM tools, and ITIL best practices, to empower their agility and capability to deal with this faster changing IT environment.

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“We change our behaviour when the pain of staying the same becomes greater than the pain of changing. Consequences give us the pain that motivates us to change” – Dr. Henry Cloud and Dr. John Townsend

Successful businesses require the ability to change and increasingly to adapt quickly, to be agile to new approaches and technologies and be flexible to the needs of the business and customers.

We are at the wake of monumental change and how businesses service and engage with the customer and employee alike are under upward pressure from users and customers who are driving a higher expectation on their provider where brand loyalty can wane quicker than ever before.

Of the Fortune 500 firms in 1955, come 2015 89% of the list has changed, having either gone bankrupt, merged, or exist but have fallen from the Fortune 500. The Fortune 500 is fast becoming the Digital 500 with new world entrants fast displacing the legacy firms. Unicorns like Salesforce, Facebook, Twitter, YouTube, Uber and the like are showing how business models are innovating and enabling disruption of the status quo more quickly than we have ever seen before. In July 2015, six companies accounted for 53% of the Nasdaq’s $664 billion market value (Amazon, Google, Apple, Facebook, Netflix and Gilead), five being high tech innovative firms and four of these who have been around on average 17 years).

Users and customers expect access anywhere, anytime, any device and from interfaces that engage them and make their lives easier delivering easy intuitive interaction.

Businesses that allow themselves to be constrained and held back by legacy attitudes, technology platforms and skills or contractual constraints are going to increasingly find themselves at risk of displacement and disruption by more agile, faster moving and adapting businesses.  We have seen enough evidence of this already across industries, with new entrants changing the delivery mechanism and form factor to customers – take Blockbuster Video gone to the likes of Netflix, Kodak to digital photography and a plethora of music outlets to the likes of iTunes.

New delivery models also bring with them new ways of interacting and enthusing customers to engage. Gamification is increasingly entering our lives, even if not labelled as such to the user. Take for example Waze, a satnav free application that rewards users with points and badges for reporting traffic and incidents thus delivering accurate information without the need to deploy expensive monitoring cameras.  

To serve users and customers in a way they want and expect to be serviced is going to be key and being open to utilising new technologies such as cloud, mobility, big data and to changing again and again where needed will be critical in the new economy.

In business we already see users bringing their own devices to use at work, departments deploying their own applications from the cloud on a credit card (shadow IT) claiming IT hasn’t moved quick enough or that they can do things easier at home where they choose the best application and device for the job without the normal corporate constraints applied to them. 

Change is never easy where you have to conform to policies, security requirements, standards, decision processes and budgets and it is going to get harder with the ever higher demands and expectations of users and customers. Resisting change or finding reasons not to do it will carry less and less weight. Businesses are going to have to become agile and to find ways to offload workloads to others to allow themselves to focus on the needs of the business, to become unconstrained and more flexible.

Technology is moving at an increasing pace and introducing new concepts, approaches and capabilities that can make a big difference to the success of a business. You need to harness change to your advantage and use it as a positive tool against less capable competitors and IT needs to become a change agent, not a barrier.

Already we have a mix of new world mechanisms including cloud, virtualisation, mobility, Internet of Things (IoT), big data, gamification, social media, smart devices, 3D printing and virtual reality at the forefront with more to come as innovation accelerates.

Businesses that want to be successful in the coming years need to keep up with technology and quickly learn to use it to their advantage. If you find yourself justifying to your business or users reasons why you cannot change, ask whether you are taking the easy option for the wrong reasons.

IT needs to keep up with the speed of business and support the needs to be successful and no longer be constrained by contractual boundaries, shortage of localised skills or existing platform limitations. The need to build agility into decisions you make is going to become increasingly part of the selection process.

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Cloud solutions, be they SaaS (software as a service), PaaS (platform as a service) or IaaS (infrastructure as a service), and public, private or hybrid in some way, are all growing at a pace with the options available to customers from a wide range of providers growing on a monthly basis. We are seeing innovation, immense computing power available affordably to all, and delivery of mobile on demand access to both business and consumer communities.

Many assume that in the cloud world the panacea is available now, pay for what you use as you use it, switch services at a whim with little commitment and technically easy to switch-over and swap services at the click of a switch or at least close to it. We are not yet living in this utopia and their remain many challenges driven by over promised and assumptions made under the cloud banner. Ideally the objectives of cloud are elasticity, multi-tenancy, flexibility, on demand usage and pay per use and today we see varying levels of achieving these across different offerings and vendors.

Cloud is certainly delivering less costly technology options, increasing competition, rapid and quick changing products and innovation. We are seeing B2C influencing B2B like never before, with increased (and demanded) web and mobile apps access and user experience appearing increasingly high on the list along with self service an expectation wherever possible.  Customers expect easier ways to buy and digest the IT they want and need, lower costs, more self service and easy ordering and tracking.

Getting to the ‘pay as you go’ utility cloud model is crucial for maximising the market reach that cloud can bring to the biggest market segment of SME/B businesses, allowing them to innovate their digital services more cost effectively than was ever possible. Instead of being limited by cost, any firm can be empowered to use vast computing power, when and where needed at a fraction of the cost. Today what is missing is the bridge between the 1 or 3 year typical paid up front commitments of a SaaS vendor and the other end of the scale of unpredictable hourly usage billing.

This all leads to a need to link pricing to value, to simplify pricing as far as is possible, for transparent pricing and multiple payment options. Increased growth and commodity trading of cloud services would benefit both buyers and sellers, driving standardisation, interoperability and integrations, price reductions and flexibility, but the industry’s current pricing models are to varying degrees standing in the way of this tipping point.  

Cloud pricing is not a licensing fee nor an annual maintenance fee, but a usage fee, a subscription based payment for a right to use for a period of time. In cloud there are many pricing models already existing from freemium, flat rate, and subscriptions to perpetual , multi-tier packages based on functionality, per user per click and CPU power/storage used.  In the PaaS and IaaS worlds there is a mix of billing on offer, monthly, quarterly, annual, pay as you go and pay for what you use models.  in IaaS charging models billing may include CPU usage, server type, storage, backup, SLA variations and in PaaS billing takes these same factors into account adding charges for operating system, solution stacks, hardware architecture and framework costs.

For example Rackspace, Google and the Amazons of the IaaS/PaaS world all offer cloud calculators that make it easy to select the options, components and variants and see quickly the monthly charge to expect – an example can be seen from Rackspace here.  You can select as a customer different entry points and upgrade paths, be billed by consumed usage and choose options for billing and pricing to best suit your demands. 

With SaaS ,the largest cloud market segment thus far, the cloud provider is responsible for all components, Platform, Infrastructure and Application, delivering it as a package. In this sector we are not seeing the billing flexibility seen in general across the cloud market, possibly as many of the providers have come from a software vendor background and whilst they can see customers migrating from their software paid up front licenses to a cloud model (theirs or a competitors) they do not want to fully cannibalise their revenue and cash flow models, by taking customer payments from  fully up front license bills to smaller usage bills split down to monthly fees.

Another reason we may not be  seeing the flexibility is that to handle such flexible or portioned billing models, it is imperative that the back end automation of provisioning, measurement, reporting and billing is in place and delivers with ease the tracking, consolidation and collections as doing this in any way manually will quickly cost the provider highly and outweigh the gained customers.  Imagine a mobile phone operator for example where you could not get itemised or accurate billing with the incredible number of customers they deal with! Flexible cloud billing and the delivery there of, has inherent complexities which are comparable to convergent telecom billing and should not be underestimated.

In the SaaS space today, the customer is typically seeing a flat rate bill, usually per user per year (although often represented as per user per month for comparison, it is more usual that only annual billing is on option from most SaaS vendors such as Salesforce for example). It is essential that the cloud provider themselves understand the detailed usage breakdown of components in their system, so as to establish the right business model, capacity planning and architecture, but little of this is being shown to the customer even if they do care, or ask to see it.

The cloud form factor has been disruptive already in many other markets and vendors and in the SaaS space we can expect to see disruptions from within, as new or existing vendors choose to lead the way in providing more flexible models to the customer, perhaps giving an option of annual, quarterly and monthly billing alongside a usage billing model with each having their own premiums, similar to we see in the insurance market (where a monthly billed insurance will cost more over a 12 month period than a straight up front 12 month premium!).

It may very well be a telco provider stepping into the cloud space that drives this market disruption (after all they already operate, engage and have the engines to support such potentially complex billing models) and forces others to follow. We are already seeing the likes of telcos and vendors such as Ericsson stepping up their game in the cloud arena, not willing to miss out on such a lucrative and fast growth market segment.

A good example of a SaaS vendor leading the way and disrupting the status quo is Kahootz, a British cloud collaboration vendor who through strong success and engagement with the public sector chose to offer SaaS ‘on a true utility billing model’ to disrupt and gain customer growth and adoption. By offering their ‘pay as you go’ active pricing for larger clients they bring a low commitment (10 users for 3 months) with easy in and out of contracts they allow charging only for users who actually log in during a given month, meaning no paying for unused licenses (the old shelf-ware of the software market) , no double counting of users whilst providing customers monthly usage reports. They achieved this by identifying this as an upside win-win for them and the end user market and have seen consistent growth from it since its launch.  

Such identification of a customer pent demand makes an ideal driver to find a way to play. The public sector market being prime, where there are often demand spikes, with more licenses needed for short term projects and dips at other times of the year. Add to this the additional pressures to be accountable for tax payer spending and there is an identifiable  push from this area of the market for more flexible and customer beneficial pricing.

We will see more vendors taking such initiatives and the cloud market maturing and becoming more flexible as it progresses and this will lead to greater price transparency and options for the customer. We are also likely and will need to see a greater comparability of pricing between providers as we are starting to see in other utility markets, which will enable clients to fairly compare the offerings not only from a price, but a quality of service aspect also.

Billing and pricing are key aspects that will lead to a cloud provider reflecting its true costs through its customer facing model and a lack of accuracy and diligence around these will likely lead to either an impact on the provider’s competitiveness through overcharging or to the nature of its survival through possible undercharging.

A more mature evolvement of the cloud billing models will not only benefit the customer in flexibility and price competitiveness, it will also allow providers to better understand and analyse usage patterns through data aggregation and real time analysis, thus ensuring that these more flexible models impact their business in a positive way and not the in the perceived negative manner most resist it for today.  Add into this mix the possibility of selling and billing your cloud offering through additional 3rd party channels to market; be they resellers, Xsps or technology partners and having systems that make this easy and accurate is even more essential.

What’s for sure is that we are very likely to see a different landscape for cloud billing and pricing a decade from now (consider where we were a decade ago!) and it will be interesting to see which providers step up to  the plate and are able to drive innovation in billing and not just the cloud service itself.