Expensive Billing in Service Management. And how to avoid it.

Billing complexity increases for managed service providers as customer agreements shift from simpler services to more complicated value-driven service chains. If manually calculating invoices from spreadsheets and documents, IT service providers may generally use 10-15 analysts per $125M of billable revenue.

Billable components of contracts include people, hardware, licensing, development and an array of variables where costs, transfer pricing and sales pricing can and do change on a regular basis. Inaccuracies not only prove frustrating for customers, but can incur costs for a provider who needs to calculate, charge and reconcile customer invoices. Typically improvements in billing can result in a 50% reduction in adjustment written off through bill reconcilation due to data inaccuracy.

Even internal corporate service providers often shrink in stature when a major stakeholder and bill payer asks "What am I paying for again?" while pointing to some large under-defined chargeback.

The Challenges of Custom Customer Fit Packages

IT outsourcing is estimated to grow for the coming years as technology becomes more central and more important to most businesses. The emergence of cloud computing, the improvement in integration technologies and diminishing challenges in using multiple solutions enable more and more complex technology architectures and infrastructures. IT organizations are expected to continue to transform from project business model to a service delivery models.

While opportunities continue to grow for MSP's to grab market share, so does the risk to charging appropriately and accurately.

A Move Towards Best in Breed Applications, Services and Solutions

Control billing costs, delight customers, and enable improved invoice quality not just by incremental improvement in the functions of billing, but instead, by addressing the orchestration that needs to take place in your order-to-cash processes and service related revenue management. These components include:

• Contract management
• Service level agreements
• Service operations
• Billing and reconciliation

Contract management is becoming more of a procurement and business driven activity includes detailed price lists, payment information and service specifications along with legal provisions and terms. Often all of these efforts in authoring, negotiation, implementation, evaluation, and retirement reside in a word document and hope for truly ensuring compliance.

Crucial Issues for Contract Compliance Management

Service level agreements may include additional information about...

• a definition of services
• performance measurement
• problem management
• customer duties
• warranties
• disaster recovery
• termination of agreements
• financial discounts or incentives based upon performance criteria.

How Can Expensive Billing Be Avoided or Fixed?

If there are financial consequences to the billing component, these too do less good as a document or spreadsheet than in a digitized format that can correlate performance to charging.

Service operations are often directly related to ITIL processes and certifications but is that and more depending on the type of enterprise or corporate services. The number one service operations imperative is to ensure sustainable delivery of services to customers at a cost less than the funds used to create and deliver. This means operations must capture or curate not only the costs, prices, and transfer prices, but any key criteria that is used to define the value being delivered to your customer.

The process, consequently, needs to be able to calculate the necessary line items at the level of detail, cost, and price necessary. A growing number of customers also expect their service providers to be able to split their contract according to their own, often changing, organizational structure and cost centers - even down to user level. If billing is manual, hundreds of bills and hundreds of detail excel spreadsheets may have to be produced for a single contract.

A tuly streamlined process with appropriate automation support can discover unbilled revenue of up to 10%, improve cash flow by 20 - 30 days and reduce maintenance of unused services and systems.

Automation Here We Come

That's where the technology steps in. Any competent tools that can be put in place of arduous manual labor is more than just a cost saving activity. New opportunities utilising automation technologies is worth looking into.