Cloud Vs. On-prem Billing Solutions – What Should You Choose When?

Billing and accounting tools have been a part of the standard business process from the time trade started…think written ledgers, calculators, and other adding machines.

The story today is quite different.

The advent of technologies like the cloud and the rise of the subscription economy have disrupted billing and revenue management. Along with this, there is the push towards delivering elevated customer experiences through seamless communication.

The cloud has been the enabler of efficiencies and has become the secret sauce to keeping customers happy when it comes to billing solutions. However, historically billing software has been mostly on-premise, which means that the software and data are stored in a local server for organizations to access and work on.

With 93% of enterprise businesses already using some form of a cloud-based system, choosing between a cloud vs. an on-premise billing solution can feel like a challenge. Those battling whether to choose a cloud or an on-premise solution can consider the following points to make the decision easier.

Cloud vs. on-premise – what’s the big difference?

Making the right decision on whether a cloud or an on-prem solution is the right choice begins with understanding the difference between the two models. In cloud-based billing solutions, all the tools, information and billing specific data are hosted by a vendor. You don’t have to manage the server room and can employ a third-party for management of the same.
On the other hand, an on-premise solution commits the local ownership of data, hardware, and software where everything runs on machines in the organization’s facility with no third-party involvement and access.
Here are 3 aspects organizations should consider while deciding if a cloud or on-prem solution is right for your business.

When managing costs is key

One of the key drivers of cloud adoption has been the perceived cost savings. Cloud has a significantly lower entry cost with minimized initial capital outlay. The total cost of ownership for cloud-based billing solutions becomes much lesser since organizations do not have to bother about capital expenses on hardware and software, high operating expenses, and indirect costs associated with potential downtime, server hardware, power consumption, and space.

The TCO is much higher in on-premise billing solutions. While operating costs might seem lower, you have to consider that ‘people’ who run the operations become the largest operating expense for self-managed, on-premises billing solutions. Along with that, costs associated with hardware, power, and space have to be shouldered by the organization as well.

Furthermore, you also have to look at billing accuracy and out-of-the-box functionality that contribute to overall costs. Cloud-based billing solutions are plug and play systems and can be up and running in hardly any time reducing the overall costs.

When flexibility and scalability are business drivers

Becoming agile towards change is a strategic agenda since business success has become directly proportional to the organization’s capacity to accommodate change to foster growth. Accommodating growing product portfolios with flexible billing and subscription plans is becoming imperative to drive customer experience and satisfaction. Cloud-based billing enables elastic scalability to effectively expand or reduce the billing system temporarily manage elements like seasonal variations in trade etc.

Cloud-based billing solutions are designed to accommodate change and can capably manage the shifting needs of organizations. These systems are easily scalable and can manage the nuances of the subscription economy. The flexibility to scale up or down, easily add or remove new products to the subscription, renew or cancel plans, update or change payment methods and build multiple billing models according to business and customer needs are possible with cloud-based billing solutions.

The cloud also helps organizations configure flexible subscription plans and multiple complex products with varying charge types. Robust cloud-based solutions also give you the capability to create product variations in different currencies, assign relevant tax codes for specific regions, and drive localization easily.

On-premise solutions, on the other hand, do not provide this level of scalability and need organizations to intervene each time they have to deal with it. You purchase what you need for more capacity and have to keep it even when the market contracts. Adjusting on-premise solutions to organizational needs can become restrictive, and you often end up wasting resources on the capacity you do not require.

Those organizations who have varying capacity requirements, need greater agility to manage their product and billing portfolio, and want to offer greater billing configurability should look at cloud solutions. Those with a more or less fixed product and billing requirements can think of looking at on-premise billing solutions with pre-defined sizing. Businesses looking at growing in international markets also benefit from the scalability provided by the cloud. Cloud-based solutions do not need organizations to install servers in new locations as with on-premise solutions as adding international capacity to a cloud-based billing system is an easy and seamless process.

Ensuring compliance and regulatory frameworks and data security

Compliance adherence and data security are business-critical today. These were also the Achilles’ heel of cloud solutions until some time back. While this has completely changed, organizations working in highly regulated industries with greater concerns on privacy are more driven to look at on-premise billing solutions. This is so because enterprises can retain complete control of their data and what happens to it, whether it is for better or for worse, with on-premise solutions.

With cloud-based solutions, the data and its encryption keys reside with the third-party provider. As such, for highly regulated industries such as government or banking agencies, on-premise seems like the only option. For example, banks in countries like Saudi Arabia have to stay limited to only on-premise solutions because of their security and compliance norms.

Organizations also have to look at region-specific compliance and regulatory norms and ensure that they allow for data to be stored in different locations. Those regions that do not allow this will have to look at on-premise solutions. It becomes imperative for organizations that have to follow regulations such as HIPAA (Health Insurance Portability and Accountability Act) to know where their data is at all times and, hence, lend themselves better to on-premise solutions. However, cloud vendors are increasingly complying to such regulations and allow architecture to drive data residency requirements. Even hybrid architectures are getting more popular.

Additionally, organizations looking to choose between an on-premise and a cloud-based system have to also consider the ease of integration of the billing system with their existing operations to avoid disruption of services. All systems need to work together and seamlessly to deliver the best customer experience. If it does not, then organizations have to manually transfer all data between systems which leads to unnecessary costs and downtime.

Cloud solutions typically integrate easily with other systems such as ERP, CRM, payment and tax gateways, and the like. It is also easier to get up and running since they allow for seamless and automated data transfer between systems.

Today the billing universe has become increasingly complex. Customers are demanding more permutations and combinations from providers, along with highly personalized experiences, on-demand service, real-time support, mobile integration, and global coverage.

With the rise of the global economy, looking at cloud-based billing solutions emerge as a more viable option to drive better business outcomes by increasing agility to launch new products and manage rapid growth.

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