Navigating the Subscription Economy: How Mid-Sized Professional Services Firms Can Adapt

Understanding the Impact of the Subscription Economy

As cloud technology and AI become the primary means of delivering software and services, professional services firms are facing new challenges. The subscription economy is reshaping how these firms operate. Clients now expect more flexibility in their service engagements. They demand various options, including:

• One-time services

• Milestone-based delivery

• Time and expense

• Subscription

• Usage-based

• Outcome-based

• Multi-modal (a combination of the above in a single contract)

  
  

In the past, service agencies could dictate their preferred working methods. Today, clients are asking for more choices. This shift forces firms to prepare for multi-modal options. Unfortunately, many smaller firms are unprepared. They struggle with pricing, execution, and billing.

The Evolution of Service Delivery Models

Historically, professional services were billed as one-time services, project milestones, or time and material. This led to the rise of Professional Services Automation (PSA) software. With the advent of cloud technology, SaaS products and subscription billing became the standard. Subscription billing is now competitive, and usage billing offers differentiation.

Each engagement type requires specific pricing, contracting, execution, and billing mechanisms. Most smaller firms are equipped to handle only one or two engagement types. For instance, a SaaS provider might focus solely on subscription billing. A marketing agency may prefer time and expense billing, while a system integrator might concentrate on milestone billing.

It's clear that service providers must adapt to their clients' preferences. They need to be ready for any engagement and billing model. Hybrid contracting and billing capabilities are no longer optional; they are essential.

The Competitive Advantage of Multi-Modal Billing

Smart vendors leverage multi-modal capabilities to differentiate themselves. This strategy helps them secure larger deals against competitors. Clients often prefer usage-based or fixed-bid arrangements for predictable budgeting and cash flow management. Vendors confident in their offerings can make commitments that sweeten the deal. However, a lack of options can result in lost deals or reduced margins.

Multi-modal or hybrid billing—the ability to contract, execute, and bill across various engagement forms—requires automation. The entire revenue management cycle must be optimized for each engagement model. A single contract may encompass multiple deliverables, each with a different engagement model. Automating these processes is crucial for survival in the evolving hybrid landscape.

The Challenges of Manual Systems

Unfortunately, few products meet the requirements for effective multi-modal billing. Many service firms resort to manual processes for contracting, execution, and calculations. Most only automate invoice generation because their accounting systems necessitate it. This reliance on manual systems leads to significant drawbacks:

• Revenue leakage

• Lower price realization

• Customer disputes and dissatisfaction

• Delayed billing

• Reduced working capital

• High administrative costs

• Lost deals

  
  

The software capable of managing the full cycle with all combinations tends to be expensive, accessible mainly to Tier 1 customers. Mid-sized firms often rely on custom development for automation but struggle to maintain or enhance these legacy applications. Consequently, many firms still use spreadsheets instead of fully automating their processes.

Embracing Automation with Stragiliti

Stragiliti offers a solution. It is a hybrid Revenue Management and Billing Software that automates any form of engagement. It covers all types of billing—service, project milestones, time and expense, subscription, and usage-based. Stragiliti features a modular design, allowing firms to start small with a lower budget in a pay-as-you-go model. As they grow, they can scale up to handle increased complexity and volume.

Built on a low-code platform, Stragiliti ensures flexibility, scalability, performance, quality, and security. It is ideal for small and medium service providers who recognize that hybrid models are essential in today's rapidly changing subscription and AI-driven economy. For more details, visit Stragiliti Revenue Management and Billing.

Conclusion: Preparing for the Future

The subscription economy is here to stay. Professional services firms must adapt to survive. Embracing multi-modal billing and automating processes will be critical for success. By leveraging advanced software like Stragiliti, firms can enhance their efficiency and innovation. This will help them deliver projects faster and more affordably, positioning them as leaders in the evolving landscape.