Aria SystemsFeatured Vendor
Since 2018, there has been a significant increase in companies evaluating and implementing a recurring business model, which includes subscription, consumption, and membership models. The main drivers have been:
For example, the software industry is deep into its transformation from selling software as a classic perpetual license and maintenance to selling as a recurring subscription. From IDC’s 2022 Worldwide Software Business Model Forecast published in July, 65% of all software revenue was from a subscription model at the end of 2021, with just 35% of revenue coming from the classic perpetual license and maintenance model. Over the next five years, revenues from the subscription model are expected to grow at 17.9% CAGR, while revenues from the license and maintenance model are expected to decrease at -9.4% CAGR.
Orchestration of the Recurring Revenue Lifecycle
One big lesson that any company has learned from adopting and operating a recurring business model is the importance of efficiently managing all the steps in the recurring revenue management lifecycle (see Figure 2). This lifecycle process is so much more than billing, as it is ultimately about keeping a customer happy so they will renew and expand their relationship. To automate this lifecycle at scale, additional functions are needed, such as manage churn/risk, collect payment, settle with partners, guide pricing and deals, understand opportunity, and manage usage data to offer new consumption models.
The rapid adoption and success of the recurring business model has caused many subscription management applications to become a platform of applications that address more of the capabilities in the lifecycle. Having more of the capabilities you need on one platform can significantly increase the success, efficiency, time to value, and the ability to learn and act using insights driven workflows across the customer’s lifecycle to make it more intelligent and personalized.
This cycle of IDC MarketScape on subscription management applications, we are splitting the vendors into two IDC MarketScapes: SME and Enterprise-focused vendors (see the Market Definition section near the end of this document for segmentation), and we’re adding a focus on the vendors current ability to support the usage/consumption pricing model. From the 2022 IDC SaaSPath survey of 125 subscription billing customers, 38% of companies plan to offer consumption pricing in the next two years, and 54% of them need better systems to help them track and analyze the usage data to enable the model.
The vendors in this IDC MarketScape of Enterprise-focused Subscription and Usage Management (SUM) applications are targeting enterprise sized companies that have more complex and higher performance monetization needs. In 2021, these 12 vendors monetized over $335 billion in revenue for over 1,500 companies. The largest industries served were software/technology (29%), followed by transportation (21%), telecom (20%), and manufacturing (15%). In 2022, vendors are still replacing spreadsheets and custom billing applications 55% of the time; if your company is still using an old or manual process, you are not alone.
Vendors reported that 79% of companies use an external system integrator to implement an enterprise-focused SUM application, as the project affects many business applications…along with how the company operates, sells, and measures success. Moving to a recurring model is a huge commitment and must be carefully and quickly accomplished. Therefore, look for vendors that have experience (people and technology) in your industry and have prebuilt integrations to your company’s systems.
The following are new trends in enterprise-focused SUM applications:
Every business should consider how it could offer a recurring business model. If your company is currently using spreadsheets or older custom applications for transacting recurring business models, a subscription and usage management application will greatly enhance the success, efficiency, and agility of your recurring business model. Consider the points discussed in the sections that follow when deciding on a subscription management application.
Begin with the end in mind. Clearly define your business and pricing model requirements in terms of present and future needs. A goal should be to automate as much of the quote-to-cash process as possible for efficiency and to leverage data to make intelligent decisions faster. Since this process is different for each company, seek guidance from systems integrators, vendors, and their implementation partners for input to create a plan to get there.
Change management is extremely important to be prioritized in your game plan. Transitioning to a recurring business model can affect most departments in a company (including IT, finance, support, sales, marketing, product/R&D), change the way people work and how the business tracks performance, and impact sales incentives. IDC recommends engaging stakeholders early to set vision and get engagement to ensure personnel change is aligned with technology change timelines.
Refer to Figure 2 in the Appendix as a guide to understand the out-of-the-box capabilities of each vendor. If you are a B2C company, then integrated collections, dunning, and churn management features should be high on your list. If you plan to use the consumption model, then you will need mediation features. If you have a B2B2x model, then partner settlement will be important. Security is always a very important criteria for selecting a SaaS vendor, therefore refer to Table 2 in the Appendix for guide for the security certifications each vendor had at the time of publishing.
After a thorough evaluation of Aria Systems’ strategies and capabilities, IDC has positioned the company in the Leaders category within the 2022 IDC MarketScape for Enterprise-Focused Subscription and Usage Management Applications.
Aria Systems, a privately held company based in San Francisco, California, was established in 2002. Aria Systems is focused on addressing complex B2B, B2C, and B2B2X use cases for large enterprise customers. Aria Systems’ subscription and usage management offering is packaged as the Aria Cloud-based Billing and Monetization Platform. Aria Systems now has three industry-focused solutions: Aria Media and Publishing Suite, Aria for Communications (Telecom), and Aria for Marketplaces. Aria Systems recently introduced a data feed option to stream any monetization data to a data lake (e.g., Snowflake, Databricks) at near real time so that customers can analyze monetization data with other enterprise data. The company’s suite of subscription-related modules can be found in the Appendix (refer to Table 1).
The vendor list for this evaluation consists of enterprise-focused subscription and usage management vendors that include these criteria:
For the purposes of this analysis, IDC divided potential key measures for success into two primary categories: capabilities and strategies.
Positioning on the y-axis reflects the vendor’s current capabilities and menu of services and how well aligned the vendor is to customer needs. The capabilities category focuses on the capabilities of the company and product today. Under this category, IDC analysts will look at how well a vendor is building/delivering capabilities that enable it to execute its chosen strategy in the market.
Positioning on the x-axis or strategies axis indicates how well the vendor’s future strategy aligns with what customers will require in three to five years. The strategies category focuses on high-level decisions and underlying assumptions about offerings, customer segments, and business and go-to-market plans for the next three to five years.
The size of the individual vendor markers in the IDC MarketScape represent the market share of each individual vendor within the specific market segment being assessed.
IDC MarketScape criteria selection, weightings, and vendor scores represent well-researched IDC judgment about the market and specific vendors. IDC analysts tailor the range of standard characteristics by which vendors are measured through structured discussions, surveys, and interviews with market leaders, participants and end users. Market weightings are based on user interviews, buyer surveys and the input of IDC experts in each market. IDC analysts base individual vendor scores, and ultimately vendor positions on the IDC MarketScape, on detailed surveys and interviews with the vendors, publicly available information and end-user experiences in an effort to provide an accurate and consistent assessment of each vendor’s characteristics, behavior and capability.
Subscription and usage management applications are software platforms that efficiently monetize recurring business and pricing models. These applications allow the creation and management of an offer, which is often the performance obligations of a contract, and includes the products/services sold, pricing model, timing, usage, and entitlement/provisioning. The pricing model can be onetime, subscription, consumption outcome, or a combination of models. The offer can be sold over any channel.
The application serves as the central point for offer creation and amendments, billing, rating, invoicing, basic entitlement, payment, collections, analytics, and revenue management to calculate the correct amount of revenue to recognize based on the value delivered to the customer. Increasingly, these applications are taking on additional roles, including life-cycle pricing (promotional pricing), recommending upselling/cross-selling, data mediation (aggregate usage data), partner settlement, configure price quote (CPQ), and providing deep integration with CRM and ecommerce packages.
IDC segments the subscription and usage management application marketplace into two market segments:
Subscription and usage management are functions within IDC’s monetization management ecosystem (for more details, see Figure 2 in The Monetization Ecosystem — 2021 Edition, IDC #US46247921, June 2021). This ecosystem depicts the major monetization functions along with the adjacent input and output functions. These functions are within the domain of the vendor and show the cash flow from left to right. The left side of the graphic shows the customer-facing functions that capture opportunity. On the right side, the finance and accounting functions show which are outputs of the monetization system (see Figure 3).