The demand for cloud-based billing and order management systems is accelerating as more and more businesses large and small recognize the critical importance of offering a much wider range of pricing/business models to their customers. The earliest adopter of the Salesforce.com platform, ChikPea is benefiting from this shift to cloud-based solutions. To give us insight into the dynamics of monetization on the Force.com platform, we invited ChikPea CEO Adam Kleinberg to join us for 20 Questions—an MGI Research Interview Series with leading technology industry executives, innovators, and investors.
An excerpt from the interview appears below. The complete interview is available to subscribers.
Andrew Dailey: As CEO, give us a quantitative sense of ChikPea’s business today?
Adam Kleinberg: Since the day it was founded, ChikPea has been growing exponentially. Today we operate across multiple verticals and have created a name for ourselves in the areas of telecom and general billing. We operate in three continents with customers in Europe, North America, and Asia. We have a development office in India with sales and marketing offices in the US and in Asia.
Andrew Dailey: ChikPea is one of the few companies that is in the subscription billing market and also has both quoting and an in-depth order management solution. What is the genesis of this combination?
Adam Kleinberg: We didn’t start in billing. In fact, when Bhaskar Roy, our co-founder, approached me and said “I have this idea,” it’s because both of us were in telecom. I was a telecom project manager at Bank of America for many years and knew a lot about the in-depth nature of telecommunication networking. Bhaskar had been in companies like Teleco and Fiji Telecom, deploying Siebel and Oracle solutions.
The idea was a way to replace the two order management choices the SMB had, the ubiquitous Excel spreadsheet or the extremely expensive Siebel/Oracle option. The market needed an affordable—and more adaptable—quoting and order system. So, we built a telecom order system. We named it TOM, using the industry’s acronym to emphasize that ours is a focused telecom industry order management process. While we started as a telecom order management solution, things evolved quickly. In one of our early sales, we found ourselves in the same room with Zuora and Salesforce, all trying to sell to a single customer, a large internet provider.
The client said, “Wait a second. I have to buy Zuora for billing, Salesforce for CRM, and ChikPea for order management? That’s insane!” We left that meeting with a new idea: we could use all the data we had from the order and install base capture to send out the invoices and perform recurring billing. We combined our order management knowledge with our billing expertise in the telecom industry and created a billing system that could be added onto the order management product. That’s what makes us unique. Whether it takes one click or three months to complete the required order fulfillment process, the output is a subscription that begins with an order request. The bill is the output of an order. The subscription is the output of a provisioning exercise. So that’s what we do today and that’s how we got here.
Andrew Dailey: How do you define the markets you are trying to address? What are the key growth drivers in these markets?
Adam Kleinberg: The key growth driver for us has been the incredible growth in subscription billing. Almost every sector is recognizing the value of recurring revenue and the need for recurring/subscription pricing models (what we call rate codes)—a demand we are well positioned to meet. The industry could be software, healthcare, life sciences, telecom, or a physical asset that has support contracts or training contracts or leasing contracts. We handle everybody from small and mid-size businesses up to the enterprise class—any company that realizes it has been leaving money on the table all these years from not taking advantage of varying rate codes and new pricing models. When companies come against the limitations of their normal billing system, when they want to move toward comparative billing, comparative pricing with volume or tiered or hierarchical pricing, or when they face billing challenges that have stymied our competitors, that’s when they come to us. These are our markets, companies that have been told they need to scale back to change their price modeling goals because the systems they have or are reviewing can’t meet their goals.
Andrew Dailey: What’s the typical use case for a ChikPea customer?
Adam Kleinberg: A typical use case for us is a company that has a usage-based billing challenge that exceeds the capacity of its present billing system. For instance, the company wants its billing system to consume usage from various sources (click counts, orders placed, megabytes consumed, insured family members, etc.), consolidate those amounts by client, calculate the rated values for each one of those amounts, and produce a single invoice. In some cases, a calculated subscriber’s invoice needs to roll up from the child level at a regional office or department to the central office level, and combining with others into a single bill. When they try our competitors’ systems, they discover they are still not able to diversify and unitize the subscription to the lowest trackable level. A customer will say, “Out of the 12 buildings that my office consists of, I want to know about one particular building’s recurring costs. What is its utilization? What’s its billable value? And I want to know how these change over the next three months.” That’s just not something normal billing systems can do. Some companies may have already tried to convert into what people are promoting as the modern billing system, but the conversion didn’t capture the complexity required. Many of our competitors that come from supply chain or accounting are not experienced in meeting intricate requirements. What is worse (and very common) is the need to perform a fulfillment activity on one line item in an order which, until finished, prevents the ability to invoice the client. Sometime the requirement includes capturing an upfront amount that is applied to the remaining subscription after the order is complete. These examples are more the rule than the exception. Because we come from telecom, we see complexity all the time. We are used to it. That’s why companies come to us. Every ChikPea customer and reviewer says the same: “ChikPea gets it.”
Andrew Dailey: What are the essential components of a modern billing and order management configuration, and how do you define that platform?
Adam Kleinberg: Let me approach this historically. Back in the early days of Sales Force Automation (SFA), people like Thom Siebel built Customer Relationship Management applications. Since then, these solutions have been designed for one purpose: to sell a one-time, high-priced asset to a customer. All the tools served that purpose. They were made to detail the customer, to sell to them, take capture service requests, and to market to the same customer the next model.
The new subscribership onboarding model is vastly different. It must allow for a multitude of variables that one-time sales don’t need to entertain. A business must now negotiate and work with the client at every level of the subscription. You have to create unique pricing options to meet the subscriber’s ability to pay. That means quoting and using pricing catalogs like they are products themselves. A person may want solution X but needs it in a pay-as-you-go model while his peer wants to pay a flat quarterly price. Next is the provisioning stage; convert to an order, and the order could be unique, based not only on the product but also on the location of deployment, if there is a trial associated, and the uniqueness of the configuration. You may have to take an upfront payment. You may have charge as you go with milestones, and/or you may have to set a close-out payment and overages. The conclusion is the conversion into the subscription and ongoing billing. At the subscription level, you now have a live client utilizing the service. It’s a bidirectional relationship. The customer may call because the consumption expectations change: “We overuse this monthly, we’ve overused for the last three quarters, please do something for me.” Marketing or sales may see under-utilization or over-utilization and needs to preemptively contact the subscriber directly: “You are not using it the way we contracted. We should do something because you are paying more than you need to. Maybe you are not using the right product or the right price model.” These exchanges require change management. There is now a real need to alter the subscription frequently while keeping it co-terminus to the end of the contract or maybe extending the contract as part of the courtesy of changing. These are the requirements of the new monetization—bidirectional communication and frequent adjustments between the producer and the utilizer. It is what we call SRM, Subscriber Relations Management, a system that focuses on all aspects of subscriber relations—quote, order, service, delivery, billing, subscription management, and collections. The organizations served could be anyone—a university, church, a software company, a telecom firm, a health care firm, or a biosciences product. Medical devices are a great example—anything that requires constant monitoring both by the user and supplier. That’s the new monetization, that’s what we call SRM, and that’s where we focus. The funny part is, telecom has been doing it since Bell Telephone.
Andrew Dailey: For your billing system, what differentiates ChikPea from its competitors?
Adam Kleinberg: Number one is our price catalog. Number two is that we can deliver a demo within 48 hours of a request and show the customer what they are looking for, regardless of the challenge. The fact that we are completely 100% native on the Salesforce platform means that if the client gives us an onsite, on-demand challenge right there we can do it whether it is creating an additional field, creating additional connections between one object and another—we can do that onsite, live during the demonstration. Number three is that customers do not have to change their business to use our product. We listen for the business need behind the request, recognize it, and show how it can be accomplished.
Andrew Dailey: Where is the growth in your business? Where do you see it in terms of which vertical industries, by geography, by product line? Where do you see the most demand for ChikPea?
Adam Kleinberg: Life sciences is picking up significantly, specifically healthcare. We are not necessarily part of the healthcare life cycle. That’s a completely other billing model because it includes insurance, but we are part of a secondary layer, the B2B billing. Telecom is also consistently a large growth area because you’ve got companies that are now realizing that they could be relinquishing a lot of their own development investments to purchase SaaS. The software industry itself has always been a strong area, and now that it is recognizing the value of recurring billing models, it’s even stronger. And of course digital streaming media is always there.
Andrew Dailey: Where do you see ChikPea in three years?
Adam Kleinberg: The statistics indicate the billing business can grow to over six billion dollars in the next three to five years. This consistent growth will allow our billing section to add the new feature sets we have on our roadmap. This growth will make us unique in some areas because we will be focusing on consolidating features sets that companies must now seek elsewhere. I think telecom or management groups will see ChikPea as one of the most successful players in downstream order processing. We want to be the company people use not just for writing quotes or sending out bills, but also the company people use to oversee the deployment and implementation of their services. This means having tools that integrate with third party suppliers, legal departments, and offering features that expand our core business.
Andrew Dailey: What is your vision for billing and monetization going forward?
Adam Kleinberg: Right now, billing and monetization are approached from the finance department only. That’s wrong. Finance knows accounting and revenue management. Billing belongs in marketing, sales, and operations. Billing is customer-facing, which means marketing. It means customer retention, renewals. It means communicating back to the sales department and product development. I look at billing as a way of showing subscribers, “This is what we’ve done for you. We hope you agree and can see how it is reflected on this invoice. If you don’t agree, we want to know, and maybe why we should consider a different pricing model.” I view billing in the context of subscriber relationship management (SRM) and not only part of the finance department.