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Forrester Opportunity Snapshot: A Custom Study Commissioned By Gotransverse | November 2018

Capitalize On Your Digital Transformation With Usage-Based Models

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OVERVIEW SITUATION APPROACH OPPORTUNITY CONCLUSIONS



OverviewDigital transformation is here, and it has heralded the creation of new digital products and services that companies can capitalize on to grow revenues and boost customer loyalty. As more firms incorporate digital products and services into their offerings, usage- and consumption-based business models will become their preferred models, with adoption growing rapidly. Usage-based pricing models provide unique customer- and business-related benefits, but adoption requires experimentation and optimization as firms reimagine their value propositions and business models. Successfully maintaining a usage-based business model hinges on the flexibility of billing systems which can enable firms to easily adapt as customer and business needs change. A technology partner can help firms plan and refine their adoption strategy, using their pricing model expertise to make sure firms can maximize their returns on monetization strategies for digital products and services.

In October 2018, Gotransverse commissioned Forrester Consulting to evaluate the current adoption, challenges, and benefits of usage-based business models.

Geography› US: 100%

Company revenues› $50M to $199M: 35%› $200M to $499M: 35%› $500M to $999M: 18%› $1B+: 13%

Respondent title› C-level executive: 19%› Vice president: 30%› Director: 51%

Department› IT: 32%› Business (inclusive of operations, C-level/board, finance/accounting, and marketing): 68%

Note: Percentages may not total 100 because of rounding.

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Usage-Based Pricing Model Adoption Is On The Horizon Digital products and services are opening the door to new revenue streams and increased customer loyalty — for those firms that know how to effectively monetize them. Advancements in data analytics, internet of things, mobility, and cloud computing are opening the flood gates for firms to fine tune their business models around the actual usage and consumption of their products or services. To this end, firms are looking to adopt a usage- or consumption-based business model in the near future. Our survey shows that 72% of respondents who are not using a usage-based model today plan to within the next two years.

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Satisfaction Is High With Usage-Based Business ModelsUsage-based models are proving their worth. Firms that have adopted usage- or consumption-based pricing, either as their standalone business model or as part of a hybrid selling model, are happy with the results.

Our survey shows that over two-thirds of adopters are satisfied that it is the right business model for them, with almost a quarter firms reporting high satisfaction.

24% of firms are very satisfied with their usage-based model, and an additional 44% say they are satisfied.

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A Consultative Technology Partner Can Help Overcome Usage-Based UncertaintyFor most firms, the adoption of a usage- or consumption-based business model requires a step into the unknown: a reimagining of their value proposition and how their business works. Uncertainty-related challenges plague usage-based pricing adoption, as firms must ask themselves many questions that they may not have solid answers to:

• Will the revenue from the model be predictable? (36%)

• What should we monetize and how? (29%)

• How well does a usage-based model align to our value proposition? (27%)

• How will a usage-based model work with our business? (27%)

• What software support will we need for our usage-based model? (29%)

A billing platform that offers consultative guidance can help firms answer these tough questions and use their expertise to guide firms through model adoption, as well as provide ongoing support.

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Usage-Based Models Offer Important Product- And Insight-Related BenefitsUsage-based models open up the possibility of new products and services and can give potential customers the confidence to convert since they’re in control of their usage. Adopters cite the following product-related benefits as the top benefits of a usage-based model:

• Lower barrier to adoption of products (71%).

• Expanded product offerings (63%).

• Increased revenue (61%).

In addition, usage-based business models also provide a wealth of new data on both a company’s products and services, as well as on their customers who use those products and services. Over half of firms in our survey that have adopted usage-based models say the model has provided:

• Customer insights for better relationship management (53%).

• Business insights for strategic decision making (51%).

These new insights translate into many business benefits, including enhancing the rest of the benefits our respondents cited: faster time-to-market (50%), and new product innovation (40%).

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Successful Usage-Based Pricing Models Require Flexible, Configurable Billing SolutionsGiven that uncertainty is the main challenge to adoption, firms looking to leverage usage-based pricing models can especially benefit from the experiences of those who have come before them. Firms that have adopted usage-based pricing models say that flexibility and configurability of billing technology is crucial to success. Billing solutions designed to allow frequent and easy updates enable firms to monetize flexibly as they evolve their products and services. And usage-based pricing models are especially suited to allow firms capitalize on the customer and product insights available to them as they navigate their digital transformations.

68% of companies find it important to have software that is configurable and flexible to accommodate learnings when moving to a usage-based model.

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ConclusionAdoption of a usage-based business model can seem like a daunting task, but most adopters agree that the payoff is well worth the effort. Firms that adopt usage-based business models use the customer and business insights that they receive from the model to improve their customer experience, their products and business strategy, and to grow revenues. As more firms create new digital products and services which are especially suited to usage-based models, we expect adoption of these business models to increase significantly.

Firms considering the adoption of usage- or consumption-based business models can benefit from the experience of experts and firms that have completed their adoption. Successful implementation of a usage-based model requires trial and error — figuring out what to monetize and how, how a usage-model best works for the business, and how to correctly predict revenue from the model. Adopters know that having a billing system that is flexible and easily configurable is key to navigating the early days of model adoption — when firms are still working out the best way to implement usage-based billing on an ongoing basis as their businesses and customer relationships evolve. Trusted, consultative technology partners can help firms plan and execute their usage-based model and help them leverage the right model to capitalize on their digital transformation.

Methodology

This Opportunity Snapshot was commissioned by Gotransverse. To create this profile, Forrester surveyed 170 IT and business decision makers (director+) responsible for their organization’s billing strategy or systems, or users of the system on a daily basis, at US firms with greater than $50M in annual revenues. Firms from the financial services, healthcare, and utilities industries were excluded from the study. The custom survey began and was completed in October 2018.

Project Director:Andrew Magarie, Market Impact Senior Consultant

Contributing Research: Forrester’s eBusiness and Channel Strategy research group

ABOUT FORRESTER CONSULTINGForrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organizations. Ranging in scope from a short strategy session to custom projects, Forrester’s Consulting services connect youdirectly with research analysts who apply expert insight to your specific business challenges. For more information, visit forrester.com/consulting.© 2018, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView, TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective companies. For additional information, go to forrester.com. [E-40983]

forrester opportunity snapshot: a custom study ......overview. digital transformation is here, and...

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