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As we wrap up our exploration into the transformative shift from subscription-based to consumption-based model, it's time to delve into the operational changes that come with this transition. Many companies, like New Relic, are pioneering this change, and today we bring you insights from Ted Noble, SVP of Revenue Operations at New Relic, who shares his experiences and offers advice for fellow RevOps leaders considering this shift.
The Driving Force Behind the Shift
The primary motivation behind transitioning to a consumption-based model, as we've previously discussed, is to cultivate a model of shared success, where both customers and the company mutually benefit from the deployment and usage of products. This is a significant departure from the traditional subscription model, which often left customers questioning the value of their contracts and dealing with unused "shelfware."
Navigating the Operational Shift
As emphasized in our previous post, this transition isn't merely about adjusting pricing and packaging. It calls for a comprehensive revision of the company's operations, encompassing buying programs, contract structures, team roles, and processes for measurement and transaction. For instance, New Relic transitioned from having 12 different SKUs with various pricing levers to a single-platform pricing model, entailing product changes and unified user experiences.
Ensuring Data Accuracy and Overcoming Financial Hurdles
One key challenge in this process was ensuring accurate data for billing purposes. In a consumption-based model, it's crucial to have precise usage data for customers, a stark contrast to the subscription model, where estimates may suffice. Another challenge was managing financial aspects such as revenue recognition and go-to-market strategies.
Partnering with Aviso
During the transition, New Relic partnered with Aviso’s AI-driven revenue operations platform, to build a custom consumption forecasting tool. Noble praised Aviso for allowing easy access to CRM data and enabling efficient navigation and visualization of opportunities and accounts.
“Being a consumption business, we needed to forecast consumption. And that data sits in our EDW in Snowflake. And so, Aviso was the only company that we could push the data into Aviso from EDW and apply the AI ML out the box, and then return the data back into our EDW — Ted Noble.”
Platform Versus Point Solutions
The debate between a platform-like approach and point solutions is a pertinent issue in the sales and RevOps world. Aviso's platform provides a more comprehensive solution compared to point solutions, reducing the need for reps to swivel across multiple tools. Noble stressed the preference for platforms, with point solutions considered only if no current technology can fulfill the requirements. Too many tools can lead to clutter and abandonment, making it even more critical to optimize the use of existing platforms.
Facilitating the Transition for Reps
To ease reps into the shift from point solutions to Aviso's platform, New Relic focused on user-friendliness, seamless switching between consumption and ACR, and maintaining consistent forecasting processes. By creating a streamlined user experience, the company facilitated the adoption of the new consumption-based model and the platform that supports it.
Conclusion
The move to a consumption-based model marks a significant shift in the way businesses engage with their customers. By aligning the interests of both parties, companies like New Relic are fostering long-term relationships and promoting mutual success. For RevOps leaders looking to make the transition, it's essential to consider not only the pricing model but also the operational changes necessary to support it, as well as the technology partners who can help drive this transformation.
Aviso’s consumption forecasting model helps overcome the challenges associated with forecasting customers’ consumption and helps achieve predictable revenue by providing real-time visibility and robust insights.
Curious about how AI can help you increase the accuracy of your consumption-based forecast? Sign up for a product walk-through of Aviso AI.