Should you Build or Buy the Billing System?
Building home-grown billing systems is a good idea until a two-month sprint becomes a full-blown one involving at least 10 engineers and extending way beyond 12 months.
Most organizations start with “just-good-enough” billing systems that works well enough—up to the point your business starts to scale up.
As you acquire more customers and start integrating with more tools and databases, not to mention experimenting with flexible pricing strategies, your billing workflows only get more and more complex.
This is why we find many businesses at a crossroads where they have to decide between continuing to build an in-house billing system or switching to a vendor with an off-the-shelf solution.
We’re putting an end to this dilemma…
In this webinar, we briefly cover
- The need to think long-term about billing
- Stakeholders in billing systems
- When building in-house makes sense
- Why moving to a good billing vendor could solve your billing worries
- How to choose a billing vendor? [+ Evaluation tips]
Speakers
Mountu Jinwala, Engineering Manager at Confluent
Built the consumption based billing system @Confluent, financial forecasting system @Netflix and real time bidding system at @eBay Ads.
Hosted by
Apurv Bansal and Saurabh Agrawal, Founders at Zenskar
Webinar Summary
1. How do you decide whether to build or buy a billing system for your company?
Building or buying a billing system depends heavily on the complexity of your product and its pricing structure. When I was at Confluent, we had a highly complex system with many dimensions such as region, cloud provider, and networking factors. For startups or smaller companies, it might be wiser to buy from vendors, as building in-house can take a year and cost significantly more in terms of engineering resources. The opportunity cost is critical, as spending that time building could delay product launches. For large-scale companies with diverse product offerings, building might be necessary, especially if it leads to greater flexibility and control. Always consider the scalability of your product and its future needs.
2. What are the key challenges in building a scalable billing system?
Scalability is critical when designing a billing system. I have seen many systems become difficult to modify as the business evolves, which creates barriers for future changes. At Netflix, I led a financial forecasting engine and we ensured flexibility by focusing on application programming interfaces that could handle frequent adjustments. A common issue is that engineering teams end up spending time on operational tasks rather than future development. Ensuring your billing system supports automation and self-service is crucial. You also need to implement robust testing to ensure backward compatibility when new versions are released, reducing errors during software upgrades.
3. What’s the role of external vendors in a growing business, especially for billing systems?
When I was at eBay and Netflix, we worked with external vendors to avoid the complexity of managing billing in-house. For smaller companies, external vendors are often the more cost-effective choice. They bring scalability and reduce the time to market. At eBay, we integrated PayPal as our payment gateway instead of building an in-house solution. As your business grows, however, you may need to reassess this strategy. Sometimes, if your pricing model becomes too complex, vendors might not support it. In such cases, building in-house becomes more appealing.
4. How do you align billing systems with changing product strategies?
Alignment between the billing system and the product team is crucial. When I led product launches at Confluent, we had to ensure the billing system could handle various customer models, especially for product-led growth strategies. For instance, at Netflix, we had to accommodate the usage-based billing system for content. If your billing system is flexible and can quickly adapt to changes in product features and pricing, it significantly enhances business agility. A hybrid approach, where part of the system is built in-house and other parts are outsourced, can also work well if you need flexibility but don't want to lose the benefits of using proven external systems.
5. How do you manage internal stakeholders when implementing a new billing system?
Internally, the key stakeholders for any billing system are the product, engineering, and finance teams. At Netflix and Confluent, the product team worked with the engineering team to design the features, but it was the finance team that ensured compliance and revenue recognition. A clear communication channel between product, finance, and engineering is necessary. For instance, if product managers proposed a new pricing feature, the billing team had to assess if it was feasible and if the system could handle the new changes. Any misalignment could lead to delays or errors. Regular check-ins and feedback loops help ensure the system evolves in line with business needs.
6. How do you ensure customer transparency in billing?
Customer transparency is key. At Confluent, we focused on providing our customers with clear billing data, helping them understand where their money was going. This transparency allows customers to optimize their usage and ensures they get value for the services they pay for. We often used detailed reports and dashboards for customers to monitor their usage, so they were empowered to adjust their behavior. It's important that these reports are easy to read and customizable based on the customer's needs.
7. What role does automation play in modern billing systems?
Automation is central to reducing manual errors and improving operational efficiency. When I was at Netflix and Confluent, automation played a major role in reducing human intervention in the billing process. For example, billing data used to take weeks to manually process, but by automating the process, we reduced it to a matter of days. Implementing automated refunds and self-service capabilities for customers is also crucial for enhancing user experience. This way, internal teams spend less time on manual tasks and can focus on product development.
8. What are the key considerations when integrating billing systems with other platforms like customer relationship management or accounting systems?
When I led financial forecasting at Netflix, integrating billing with systems like Salesforce and NetSuite was critical for efficient revenue recognition and forecasting. Billing systems need to sync seamlessly with customer relationship management tools to ensure that the data is accurate and up-to-date. For example, Confluent integrated its billing system with customer usage data, which then flowed into Salesforce for sales teams to track renewals and upsells. Having a unified system that reduces silos is key to ensuring smooth operations across departments.
9. How do you handle complex pricing models in billing systems?
Complex pricing models, like usage-based billing, require highly customizable billing systems. At eBay, we worked on designing a platform that could handle millions of different pricing models, such as ad campaign optimization and user-based pricing. Billing systems need to be flexible enough to accommodate these models and scale with growing customer demands. For instance, at Confluent, we implemented a system that handled API calls, data storage, and networking, all with different pricing dimensions.
10. What advice would you give to finance leaders evaluating billing solutions?
I’d recommend looking at the total cost of ownership when evaluating solutions. It’s not just about the upfront cost but the long-term impact on your engineering team and the ability to scale. For example, at Netflix, we realized that using third-party billing vendors was more efficient and cost-effective than building it in-house, especially when considering the maintenance and continuous updates required for in-house systems. If you can reduce time to market and operational overhead by using an external solution, it often makes more sense than building a custom one.
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