Revenue Management Challenges Cost High Tech Companies Billions, According to New Model N Research

The survey investigates the ways that companies are dealing with revenue management and how they can do better and explores the role that technology will have in revenue management moving forward.

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Model N Inc. announced details of a new executive report, the “2020 State of Revenue,” created to examine revenue management trends in the high tech industry. Fielded in Q1 of 2020 by Dimensional Research and Model N to more than 300 senior executives in the U.S., the survey investigates the ways that companies are dealing with revenue management and how they can do better and explores the role that technology will have in revenue management moving forward.

Overall, findings from the survey indicate that C-suite executives struggle to achieve effective revenue management, and 89% say they are losing billions of dollars through revenue leakage. Some 75% know they “leave money on the table” and must do better. Even worse, those surveyed state that they don’t know how to fix revenue management issues, underscoring the need for new technologies and solutions to help capture and manage revenue.

Revenue and price management challenges

Some 82% say that revenue management has become increasingly difficult, and they estimate the impact of losses due to revenue leakage to be in the billions of dollars. Amid this increasingly demanding environment, executives report that optimizing and managing revenue is a challenge. Specifically:

  • 98% of executives say they face challenges with revenue management
  • 73% agree that pricing decisions leave money on the table
  • 90% of executives state they are embarrassed by pricing inconsistencies that are visible to customers

Price management is another critical area where companies face revenue management challenges, as the vast majority (96%) of companies in Model N’s study report that they face price management issues. In addition, the number of individual revenue execution moments has increased by more than 10 times in just five years, according to 76% of survey respondents. For some 20% of companies, the increase in revenue execution moments has been more than 50 times as many, a phenomenal rate of change in only a few years.

Execs know revenue management needs improvement

Regardless of recent advances in technology – particularly around data and analytics – about two-thirds (65%) of executives surveyed are actually less confident in the accuracy of their revenue reports today than they were five years ago. Specifically:

  • 95% report that they face issues with revenue leakage
  • 63% expect that closing all revenue leakage would impact revenues by 4% or more
  • 75% say they know they leave money on the table, yet they do not know how to fix it
  • Only 40% of executives believe they can effectively use their quoting, pricing and incentives processes and tools to improve topline and gross margin

Technology can improve outcomes

For technology companies, the most significant impacts on the way that pricing and channels are managed revolve around artificial intelligence (AI), digital transformation and geopolitical disruption, such as Brexit, the “trade wars” and unforeseen changes to U.S. trade policies. Survey results state that:

  • 99% of executives feel they would benefit from additional revenue management capabilities, and can identify places they can improve revenue management
  • 91% agree that cloud is the ideal approach to revenue management technology
  • 61% report that better technology would add millions of dollars to their company’s top line revenues

The results also illustrate that high tech executives are hungry for more and better-quality decision-making data. Some 48% report they need to make decisions with incomplete information, and 41% say that they spend too much time chasing down information from people and systems; only 36% of executives say that they have a single, integrated application for revenue management. Contract, deal and channel management have the biggest impact on the ability to improve revenue management. Tech executives’ top priorities for improving revenue management include:

  • Greater visibility into channel sales
  • Improving the speed of doing business through the channels
  • Improving company ability to handle a high volume of contracts and pricing
  • Improving volume discount controls

“Technology companies face a complex and ever-changing global market for their goods, made increasingly difficult by poor controls over volume-based pricing discounts and poor visibility into channels sales, not to mention ‘black swan’ events like sudden shifts in trade policy,” commented Chanan Greenberg, SVP and GM High Tech at Model N. “High tech business leaders know they can do better when it comes to revenue management but remain unsure about just how to unify their process, people and systems silos to gain the visibility and control they need to be competitive. But that’s where new methods like leveraging an end-to-end integrated approach that breaks down functional silos to control price concessions, align volume performance, and incentives as a single continuum with the power of AI can be highly effective, even in today’s turbulent times.”

Fielded by Dimensional Research in January, the online survey polled a total of 306 qualified individuals in the U.S. with direct responsibility for revenue management in an executive role. The primary research goal of the survey was to capture hard data to understand trends with revenue management among key industries. A variety of questions were asked on a range of topics, including current approach to revenue management, opportunities to improve, and the role of technology. Certain questions were repeated from a similar 2019 survey to enable trend analysis.