Understanding Subscription Monetization

Let’s review our business situation with our order agent James Taylor at Print2You.

Each month the correct recurring fee for the printing service is created automatically by the subscription.

The customer ACME Inc. is using the printing service for printing black and white and colored pages.

Let's analyse how the printing scenarios of ACME Inc. influence the allowance of the subscription and the how the revenue discount for usage is applied to the calculated charges for usage.

• SAP Convergent Mediation collects and evaluates printing usage data based on its relevance.

• Error data, such as interrupted prints, are recorded but considered irrelevant for rating.

• The usage data is aggregated to cut down the volume of rated records.

• The prepared usage data records are sent to SAP Entitlement Management for threshold control related to printer maintenance.

• Whenever the maintenance threshold is exceeded, SAP Entitlement Management triggers a new service order via SAP S/4HANA Cloud Service.

• The same usage records also go to SAP Subscription Billing where they help monitor the depletion of the allowed print pages.

• When the allowed number of prints is reached, the pages - whether black and white or color - are rated based on the pricing in the subscription’s rate plan.

• SAP Subscription Billing collects and aggregates the recurring service fee and any additional charges for excess printed pages in a pre-billed document.

• This pre-bill is later transferred to SAP S4HANA Cloud at month-end, resulting in a single invoice.

• All charges, be it for service, usage, or recurring, get consolidated in SAP S4HANA Cloud in a customer invoice.

• SAP S/4HANA Cloud controls all subsequent financial processes.

Print2You provides printing as a service products based on monthly subscription models. The monthly fee is based the selected hardware and included usage. 

Two hardware types (Standard and Premium) are available and two price models (Standard and Premium).

The subscription has a duration for the subscription of 12 months.

The company ACME Inc. is a company that needs printing for their offices. The IT Department of the company decides to order the Premium Printer with price model professional for printer maintenance, included printed pages and extra fees for more printed pages.

Let’s see how SAP Subscription Billing prorates recurring monthly fees.

The prorating process in SAP Subscription Billing allocates recurring monthly fees according to the portion of the billing period that the customer used. Key to this process is the master data for subscription, primarily the start date and the billing cycle. To illustrate, we can take the above example of a subscription that begins on May 16th with a monthly billing cycle.

Prorating becomes particularly beneficial when a customer subscribes to a service mid-month. Instead of being billed for the entire month, the customer is only charged for the segment of the month during which they used the service. For instance, a full month's worth of service in June incurs a recurring fee of 460 USD. This exact amount is calculated and charged again for the month of July if the customer continues using the service for the entire month.

Similarly, prorating applies in full if a customer decides to cancel their subscription mid-month. In this case, instead of paying the full fee of 460 USD, the customer is only required to pay 230 USD, reflecting the half month's utilization of the service.

Ultimately, this prorated accounting approach facilitates precise billing, thus fostering an environment of transparency and enhancing overall customer satisfaction.

Now that we have a better understanding of how prorating plays a role in subscription billing, let’s consider three printing scenarios for allowance reduction, rating, and discounting.

The following printing scenarios represent different printing as a service usages for black and white and color prints. Scenarios 1 and 2 maintain printing volumes within the included service subscription allowance. Remember, our subscription allowances are 1,000 black and white and 200 color printed pages.

• 600 black and white pages printed.
• Allowance for black and white pages are reduced from 1000 to 400.
• 600 prints free of charge (included in the service).

• 150 color pages printed.
• Allowance for color pages are reduced from 200 to 50.
• 150 prints free of charge (included in the service).

Let’s say ACME Inc. prints 2,900 additional black and white pages. Overages are rated in subscription billing according to the usage pricing.

These additional pages trigger an extra fee according to a three-tiered discount.

• Additional 2,900 black and white pages printed.

• Allowance for black and white pages reduced from 400 to 0.

• 400 pages free of charge (2,500 overage triggers an extra fee).

For example:

These additional 2,500 black and white pages are rated 2 cent per page for an extra fee of 50 USD. The aggregated revenue is 50 USD, which reflects a tiered discount of 1.70 USD.

At the end of the month, an automated process closes the bill in SAP Subscription Billing and transfers the aggregated billing. Let’s review ACME Inc.'s usage in subscription billing.

1. ACME has enjoyed extensive use of their new printer. They’ve printed 600 black and white pages, 150 color pages, and an additional 2,900 black and white pages. SAP Convergent Mediation collects this usage data and evaluates the data according to relevance. For example, if a print was interrupted by an error, this error data is recorded and deemed irrelevant for rating. Pages are aggregated to reduce the number of data records that are rated.
2. After a set number of pages are printed, usage data records are sent to SAP Entitlement Management for threshold control that prompts SAP S/4HANA Cloud service to create a service order for the maintenance of the printer.
3. Usage data records are also sent to SAP Subscription Billing for the reduction of the number of included printed pages. When an allowance is consumed or expired, extra pages are rated according to the subscription assigned price in the rate plan.

   The subscription recurring fee and any additional cost for printed pages are aggregated in SAP Subscription Billing as a pre-bill document.

4. At the end of the month the bill is transferred to SAP S/4HANA Cloud for the creation of a single invoice.

Please complete the following simulation which will show you how to change an allowance and show usage in subscription and EMS landscapes.

Now that you can change an allowance and know how to show usage in subscription and EMS landscapes, please complete the next simulation which will show you how to close a bill.