Getting rid of that

Rafael Ruffolo

15 years ago

An in-house subscription billing platform will only take a growing business so far, according to Untangle Inc.

The San Mateo, Calif.-based firm, which provides paid and free open source security and filtering apps via subscription, had tested the limits of its “home-brewed” system, which it said was basically run by spreadsheets and QuickBooks software.

“As a business, we have a pretty complex, multi-channel model, where we sell directly via the Web, through resellers in some countries and through distributors and resellers in others,” said Mark Floisand, chief operating officer at Untangle.

This multi-channel approach, coupled with the company’s “freemium” business model — where some products are provided free and premium products are paid for — catapulted the need for a customizable subscription billing platform.

“Knowing we can effectively market a particular subscription product with a channel discount when it needs to go through our reseller partners was absolutely critical for us,” Floisand said, adding that the ability to automate the billing process was just as important.

The ability to offer variable prices and plans almost on-the-fly prompted Untangle to seek out Vancouver-based IP Applications Corp. and its subscription billing platform.

In addition to being able to launch new subscription offerings quickly and monitor existing subscriptions in real-time, Floisand said being able to use IPA’s open billing API to integrate IPA’s platform into its online storefront played huge factor in the vendor selection process.

Floisand advised companies that might be in a similar situation with their in-house subscription billing system to classify this type of customization as a “must-have” rather than a “want.”

“A second tip would be from a compliance standpoint,” he said, adding that IPA’s compliance with the Payment Card Industry’s Data Security Standard was absolutely critical. “We wanted to grow with someone who was PCI-complaint. We’re a relatively small organization and what we didn’t want to do was have to go through the in-house investment of PCI on our own billing system.”

Under PCI DSS, all companies that accept credit cards must comply with 12 security requirements, which include maintaining a secure network via firewall, encryption of cardholder data, and strong access control measures. The standard was developed by the major credit card companies in order to standardize credit card data protection. Prior to PCI DSS, each card company had their own set of requirements.

For John Jacobson, president and CEO at IPA, many organizations that begin rolling out subscription-based products and services are too focused on the product itself to put together a solid subscription billing system on their own, Jacobson said.

“That only works until you hit the point where you need to scale, and then you realize you’re going to need to hire an army of people to keep things going,” he said, adding that automation quickly becomes a crucial aspect for any subscription billing platform.

Jacobson estimated that about 20 per cent of its customers fall into the same boat as Untangle as a “freemium” subscription provider. The biggest challenges for these companies, he said, is retaining customers and keeping track of subscriptions that are approaching their expiry date.