Build vs. buy: Usage-based billing

When launching new products and features, or experimenting with pricing, software companies come to the same fork in the road: do we build a solution in-house to support pricing and billing, or purchase a solution that does it for us out of the box?

Orb works with several best-in-class software companies, like Replit, Vercel, and Pinecone. Of course, internally on the engineering team at Orb, we also make our own build vs. buy decisions. Through this experience, we've come to articulate a framework for thinking through each path’s respective tradeoffs. 

This guide is meant to serve as a resource for you and your team as you make this important decision.

Build or buy: the age-old question

Some organizations – often philosophically – choose to build critical functions or product surface areas in-house. In many cases, your own product and engineering team might be excited to tackle a new problem, making it tempting to do so.

Billing is a complex process that can seem deceptively easy to engineer at first; as your business evolves and requirements change, it's a system that requires a permanently staffed team. An internal build involves significant up-front investment, months of development, and a plan to manage challenges like bugs, maintenance of complex integrations, high compliance costs, and the end user experience. Maintaining the system often requires retaining specialized expertise within your team – when we talk to customers, their pre-Orb billing systems are some of the scariest parts of code in their codebase!

Despite these obstacles, building internally offers several advantages. Typically, companies choose to build at a very large, repeatable scale where it can reduce costs compared to purchasing. Building allows for fine-tuned customization and control over capabilities, so can reduce your dependency on a vendor.

The “right” decision depends on your unique product and business constraints and surface areas. Below is a list of pros and cons the Orb team has articulated for building versus buying a SaaS usage-based billing solution.

Reasons to buy usage-based billing solutions

• Need for expertise: Specialists offer advanced knowledge and the latest insights on what a billing solution should include, and pricing and billing trends they see in the market. ‍
• Risk management: Outsourcing reduces risks related to data handling and security, especially concerning audits and compliance.‍
• Resource constraints: Buying eliminates the need for hiring and training new specialized personnel.‍
• Agility: Purchased solutions are the product of multiple rounds of refinement across mature customer bases, and are quickly adaptable and scalable. ‍
• Urgency: Off-the-shelf solutions can be operational in a few weeks.

Challenges of buying usage-based billing solutions

• Organizations have limited influence over product features.
• Third-party data handling requires robust data governance.
• Companies must rely on external support services.

Reasons to build usage-based billing solutions

• Customer experience: If billing may be a touchy subject for your customers, building in-house means you can manage any potential upset rather than share that responsibility with a third party.
• In-house expertise: When you already have the necessary talent and expertise on payroll, building in-house can get started more quickly, and be maintained more sustainably.‍
• Complex integrations: If you have specific or complex integration requirements that are unsupported by market solutions, building or augmenting your billing platform would give you full customizability.

Challenges of building usage-based billing solutions

• Developing features and modules is costly and diverts focus from your core business investments. 
• Implementing pre-built solutions can take a few weeks, whereas in-house development may span months. 
• Maintenance is an ongoing cost, particularly if external expertise is required.
• Scaling an in-house build demands creating infrastructure; scaling a purchased solution involves subscription changes.

Specific considerations for usage-based billing solutions

Building a SaaS billing solution offers customization, seamless integration, tailored security, and long-term cost efficiency, with complete ownership and control. Meanwhile, buying provides quick deployment, lower initial costs, proven reliability, vendor support, and easy scalability, ensuring compliance and freeing up resources. 

Access to niche knowledge and current best practices in monetization and billing are added benefits, as billing vendors have a front row view into how the market is pricing their products, and are adept at financial regulations and compliance. Your team also eliminates the need to internalize that expertise for maintenance and can instead focus on core processes. 

The choice depends on business needs, budget, and goals. Consider the specific challenges billing introduces: 

• Compliance is costly and complex to maintain. 
• Beyond simple transactions, billing affects aspects like analytics, insights, and scheduling, necessitating a comprehensive approach and strategic integration.
• Outsourcing billing transfers risk to a third party, which demands a partner that specializes in maintaining compliance and security.

Investments in data control, security, and compliance are substantial, making in-house billing development costly. Conversely, market solutions may not offer the specific customizations your organization requires.

Checklist

To aid your selection, the Orb team has outlined a few key evaluation factors and how they swing the pendulum one way or the other.

• ‍Core component: Buy if billing isn’t central to your product's value proposition.‍
• Cost: Buy if it’s cheaper than building and maintaining.‍
• Time to market: Buy for faster implementation.‍
• Customization: Build for highly specific needs.‍
• Scalability: Buy if scaling in-house is challenging.‍
• Integration: Build for complex setups and tech stacks. ‍
• Risk management: Buy to minimize development risks.

Orb’s usage-based billing solution integrates seamlessly into your application, ensuring data security, scalability, and support for diverse pricing models. We leveraged our experience working with various SaaS and tech companies to develop a flexible and versatile billing option that delivers a robust alternative to internal development. Our solution also includes a sandbox so you can validate the product’s functionality before going live.

With Orb, you can: 

• Set up ingestion events and build metrics to create event streams, allowing Orb to automate usage and invoicing. Our event-based APIs handle even enterprise-level loads, enabling highly customizable billing at any scale. 
• Create a product catalog and assign metrics to pricing models and billable events.
• Utilize provision subscriptions with accrued usage and tracking for usage billing, platform access, etc., including capped tier pricing for API calls and AI usage. 
• Configure invoicing and payments so Orb can automatically process charges and issue invoices, eliminating manual data entry. Our integration into payment gateways supports automatic billing and customizable terms, along with collection options like dunning. 
• Integrate invoicing portals directly into the application for a seamless customer experience. 
• Enjoy complete revenue reporting that can be automated, with visibility at the event level, plus audit-safe amendments. 
• Extend functionality with a custom SQL metrics layer, enabling features like creating and updating custom pricing, automated invoicing even for complex customers and products, and seamless pricing updates across the catalog. 

Orb's flexible billing solution is based on usage and designed to integrate directly into SaaS applications to address even highly complex and custom payment and billing scenarios. 

How does the solution stack up against our checklist?

• Core competency: Billing is our core expertise, and all resources are dedicated to delivering superior functionality.
• Cost: Price depends on usage and hybrid seat pricing models, allowing businesses to scale costs according to needs.
• Time to market: Implementation varies from days to weeks, depending on software complexity and depth of integration. Orb saved organizations like Knock six months on their estimated time to market.
• Customization: With support for technical billing, custom SQL metrics for defining billable events, and workflows, Orb can accommodate any degree of billing complexity. 
• Scalability: Our customer base ranges from start-ups to enterprises, providing ample room for growth. 
• Integration: We offer out-of-the-box API and tool integration, which eliminates the need to build or maintain integrations with tools like QuickBooks, NetSuite, Stripe, Avalara, Anrok, TaxJar, and others.
• Risk management: With secured infrastructure, SOC 2 compliance, and data encryption in transit and at rest, Orb delivers immediate security. 

Next steps

Orb’s usage-based billing solution integrates easily with your existing tools and processes, secures your consumer data and privacy, accurately tracks customer usage, and enables growth. If you’re ready to elevate the financial side of your business while reducing the hassle, get in touch today.