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The Margin is a podcast from MGI Research that explores the evolving world of business monetization. Hosted by MGI Managing Directors Andrew Dailey and Igor Stenmark, the show features candid conversations with founders, CEOs, product leaders, and industry experts at the forefront of pricing, billing, and revenue operations. Each episode dives deep into the strategies, technologies, and trends shaping how companies generate, capture, and grow revenue—from subscription and usage-based models to AI-driven monetization. Whether you're in finance, product, or IT, The Margin offers practical insights to help you navigate complexity and drive growth in the digital economy.
Andrew Dailey: Welcome to The Margin, a podcast exploring the forces shaping business monetization. I'm Andrew Dailey, Managing Director and Analyst at MGI Research. Today, we're diving into the monetization challenges facing complex multi-channel organizations for mid-to-large size companies selling a mix of hardware, software, professional services and even financing traditional ERP systems struggle to support the needs of those businesses, its customers and its reselling partners, creating workarounds and customizations to the enterprise backbone becomes increasingly expensive and time consuming. And in the meantime, customers and partners grow frustrated. Business opportunities are lost. So is it possible to inject greater agility into the business and support today's complex monetization requirements without having to spend a fortune on ERP upgrades? Joining us today to unpack this challenge is Youssef Yaghmour, CEO and co-founder of BluLogix. Youssef has years of experience helping organizations navigate multi-channel monetization quote-to-cash. We'll discuss some of the strengths and weaknesses of current ERP systems, Youssef’s six pillars of intelligent revenue management, and strategies for improving the overall systems inside of these complex, sophisticated businesses. Youssef, welcome to The Margin.
Igor Stenmark: So to start, let's maybe do a little bit of definitional work here. So revenue management is not new. We've been trying to solve this problem for ages right. With tools that technology are changing and changing rapidly, especially now with AI being at we're at the edge here. How should people be thinking about revenue management from a modern perspective? What is kind of an interesting, creative, innovative way to approach this problem? How do you think people should be solving this problem?
YY: It's interesting that you mentioned AI in the question, because that's one of the it's one of the new challenges, or rather undecided paths, if you like, on the technology when it comes to numbers. We've seen a lot of success for AI, and I'm not shifting away from the revenue question. I'll get to that. But, since AI is an interesting subject, AI has presented to the technology world a lot of success and the generative text so far, and it added a lot of values. There's no doubt about that. But we still do not see successful implementation of AI in the numbers world. I think we still have some time to realize the value of that. However, having said that, and we will get to that when we talk about the prediction and the forecast side of revenue. It can be proven very useful when you talk about prediction. We actually in the company use AI to help us get some prediction data that we can give to customers. On the AI side, we combine what we call, margin analyzer. We track margin, and we will talk about that. At some point in this discussion. We take the data related to margins. We take the data related to forecast. We take the data related to channel and structure. We take the data that is being tracked as revenue recorded already. And we let AI help us given, given us some prediction model. This is how your future growth is going to look like. And these are some recommendations of areas that you need to focus on and learn from. That's how at least we've seen some implementation of AI for us. We've seen it in the tools. We're actually doing that as we speak. Going back to the revenue, people talk about ERP a lot and people talk about monetization tools. One of the wrong consumption in the industry. It's either or. And that's not the case. I think organizations, business organizations, and of course, channel-oriented businesses are a part of that. You cannot do without the ERP. And at the same time, ERP cannot replace and not cannot give you what monetization tools can give you today.
IS: Why? Why is that?
YY: I'll tell you. I'll tell you because that's a very interesting question. Let's try to explain the difference between ERP and monetization tools. ERP starts when the revenue is generated, i.e. when the invoice is generated. ERP tools are not designed to help businesses in the business process prior to that. And I would talk about that in a minute. When the invoice is generated, that's when ERP plays a role, and that's when it becomes to track, invoices and revenue for you. And there's a lot of tools that have been designed for that, but it's only designed for that when you ask ERP systems to do something prior to generation of invoice, that's when you face challenges with the RRP. It's very good at what it does when the revenue, i.e. the invoice is generated. That's what it's designed to do. Whereas monetization tools and monetization tools are things that include catalog. This is where you define what you sell. Catalog is about defining what you sell, defining how you sell it and define it, how much you sell it for. That's what essentially the catalog is. So translating your traditional or transaction channel business and converting that into today's world, which is more like subscription usage, consumption, recurring revenue, that conversion requires a very powerful catalog tool, which is, like I said, what you sell, how you sell it and how much you sell it for, then you've got billing. Of course, that's the probably most common components of monetization tools. How do you generate the invoices from all the data feeds that you get from different sources? Then you get the service management, you can't generate accurate billing without managing the service lifecycle. When do you turn the service on? How do you turn the service on? Where which platform do you turn it on? What are the intricacies, dependencies and interconnect action between all these components? Then you have the customer lifecycle management, including channel. Because customers today are not necessarily customers that you directly manage, but also customers that come to you through the channel, which is becoming a very important. I mean, traditionally, depending on the industry channel has contributed to something between 30 to 40% of businesses and in some cases it goes to 60%. So you can't really grow this business without being able to manage or enable or empower channel. So that becomes part of the sales cycle and parts of the customer lifecycle management. Then obviously you get as part of that all the revenue management. But revenue management and what I'll come to a point where what's the difference between the revenue management. You can get an ERP and the revenue management you can get in and monetization tools. ERP generally gives you a data when you close the models. There are so many good examples of that that you don't really get accurate data from ERP until you actually close a, I could say the month of the business, you close the month, you know how much the cost was and you know how much the revenue was, and you know your other costs. And then you create your balance sheet, and you start looking at your revenue. This is a bit too late for the business that we live in today. You need this information life real time on a daily basis. And ERP cannot produce that. They're not designed basically for that. And this is where the value of the revenue management that you get from monetization tools. So these are just definitions. That's the difference between what you get from a monetization tool and when you get what you get coming up.
IS: Yeah, absolutely. I want to get maybe talk a bit more about, how revenue management is evolving and specifically with kind of a and you mentioned this with timing aspect, how people used to use revenue management, the advent of a cycle where it's a month for quarter or a year, and nowadays, companies want to sort of use it, much more frequently, maybe not real time, but say quick time and mystery always reminds me of an anecdote you probably heard me share about before. I remember when, in 2008-2009 timeframe, U.S. government took over General Motors because it was failing badly during the financial crisis and we appointed the former, private equity executive, Steve Rattner, who was formerly a New York Times journalist as well and they made him tsar of GM. And his very first question to finance department at GM was “what is our cash position?” And the response from the finance department was, “it will take us 60 days to figure this out.” And at this point, Steve, who was a relatively mild mannered, very kind of cerebral kind of a guy, just literally explodes because he was like, “this cannot be! We have to be able to see where our revenue is, what our costs are. I'm not saying real time, but within a day I should be able to know, where do we stand? Because I have to make decisions. I have to rescue this. I realize everybody loses their jobs.” So that's been kind of an undercurrent in a lot of evolution of modern finance automation software, including monetization, including revenue management. But how realistic do you think this is? Is this something that is more in our mind and this is probably some years away, or are we much closer to it already today?
YY: I think the simple answer to that is the same tool that you should be using to calculate your invoice and revenue is the tool that has to calculate and track your cost. And at the same time, when you actually generate the invoice to the customer or to the reseller, that is when you have to calculate the cost at the granular level. If you do not do that, then you're going to always be behind on a comprehensive revenue management strategy. And there are multiple pillars for revenue management. You can't just look at one aspect of it. But then let me share with you a story for one of the resellers of a big provider in the industry, and they came to us with the solution. What was the challenge? They're buying from this big service provider for a price of X, and they're selling it for a price of Y, and there is a margin of 20% that they're putting basically on top on top of that. And in some cases they have to give discounts. So they probably go down to 10%. But months later when the ERP system or their accounting system actually does close the books, and they look at the invoice that comes to them from that upstream provider and the invoice that they generate to the customer, they look at it. And in some cases they're actually losing money. They're losing money. So where does this 20% margin or 15% margin or 10% margin going? It's disappearing somewhere. And because you don't have the granular data to analyze--
IS: The lack of timing really costs you money.
YY: So when we did the analysis was it was basically very simple. I was just about to say the name. I'm glad I didn't. When the service provider was sending the invoice, they were adding a recovery fee of 13% to the invoice. It's not in the price list. When you look at the price list, the price is X, mark it up. Your Y is actually X plus 20%. But in the invoice there is an extra fee that is appearing there in the invoice, which is 13%, which is any capital margin. So when you come three months later to try to analyze that, to try to analyze that, you're actually not realizing where the revenue is because you're still comparing the cost that you think is in the price list and the and the price that you're selling it. We took their data. We configured it because we have a component in the system that's called margin analyzer, which is basically the way to generate the cost. At the same time, you generate the invoice and the system shows you here is your revenue and here is your cost. And there is a third component to that. Here is the cost that came to you from the vendor. And it does compare these three points.
IS: I'm listening to you and it occurs to me like we always say why say monetization or revenue management specialized tool versus ERP. And it's almost sounds to me like you both should be asking questions like why ERP? If you can only record things at fixed intervals and you know it does a lot in general ledger management and allocation of different expenses and so on. But it sounds like a lot of these monetization tools can nowadays handle a good chunk of what ERP is supposed to do. Am I wrong?
YY: Well, the assumption is not right—is not accurate.
IS: Okay.
YY: Monetization tools are not intended to give you a balance sheet. They're not intended to track your payroll. They're not intended to generate your revenue booking versus, versus GAAP, accounting. They're not intended to calculate basically your GAAP compliance. They're not intended to calculate your other third-party cost. It's not meant for that. That's what ERP does. At the end. You need a trial balance and a balance sheet that you have to generate on a monthly basis to run your business. And that's what ERP is for. That is not what monetization is for. And this is where you draw the line. You need both tools.
IS: I want to go back and talk about, kind of your definition of how you guys see it with six pillars of revenue management.
YY: What we consider revenue management is the following tools one, the margin analyzer. It starts with being able to track the cost in real time, along with bidding. In other words, the system, when it generates an invoice, it has to also calculate the cost and be able to produce basically the delta, which is what we call the margin, the margin between your version of calculating the cost and the vendor's cost that is provided to you through an invoice or some electronic bit. So that's the first that's the first component. The second component, monetization tools has different ways to interface with an ERP, but we find the most effective way to do that is by actually having a built in GL interface that is in the monetization tools, which reflects the same chart of account that does exist in the ERP. It makes the integration easier. You don't have to manipulate data on the fly when you're pushing data and synchronization, synchronizing data between the two systems. So that's the second, the second piece of it. And it has to be with every one of these components that I'm talking about, there has to be a hierarchy behind it. That supports that, especially when you have a channel which is the third component of revenue management. The third one has to do with revenue recognition. It's an integral part. Today you sell a subscription for a year in advance. You have to realize—
IS: Even if you're dealing with usage revenue.
YY: Absolutely. It's a liability—
IS: Prepaid. And you have to—things happen. Transactions happen.
YY: Exactly, exactly. Revenue. That's basically revenue recognition. Then there are two aspects related to the actual revenue transaction. One called revenue tracking, which is everything. Every revenue aspect that you've generated so far. So you want to be able to track it based on the hierarchy that we just talked about. And if you have a channel, you want to know which revenue came from, which channel. And if you combine that with basically the margin analyzer, okay, which channel is giving me more revenue and which channel is giving me higher margin and which product against these basically hierarchies. So it goes into the analysis. And the last piece of it is what we call revenue forecast. And we have two aspects of that revenue forecast. The first part of it is for my existing orders, contracts and customers. And with active services. What is my revenue forecast going to look like over a period of time to come? Six months, a year, two years, three years, taking into account everything that might terminate and you have a termination date for every contract that might have an expiry. If you actually have good tools to track that, you know very well when you have to talk to your customers to renew something that is active today. So the renewal management, we consider it part of that, revenue forecast. And there is the final aspect of it which is called revenue prediction. Okay. Now the revenue the difference between forecast and prediction is what forecast is based on actual active services and data that I have. But prediction is okay. How do I grow my business beyond what I already have, and which sector channel outlet service product should I focus on and even market trend? So we combine margin analyzer with hierarchy and revenue tracking and revenue forecast to generate using AI what your prediction should look like. Our main focus on the next gen revenue management in our platform tool is actually focusing on that piece, because it's a very valuable capability that we intend to provide.
IS: Specifically speaking about multichannel companies, companies that sell direct, they may be selling for a distributor or selling for an agent. For a marketplace, perhaps. How is revenue management, in your view, different in terms of a scope of a problem, kind of, with scale of complexity that you’re dealing with?
YY: When you’re thinking about the right monetization tool, which can handle channel, you really need to think that when you have a channel, the agents that you might have, the resellers that you might have, they're basically not equipped to have the technology infrastructure that you have as a service provider. They're likely to rely on you giving them these kind of tools, providing them with managed services. So that they can their business can be enabled and empowered. As a matter of fact, as a service provider that has a channel, it is in your interest to provide your resellers and your agents and your channel down the line these kind of tools, because it helps them sell more of your products. It helps them basically grow your business, essentially. So that's the first aspect in the revenue management that does not exist in other businesses. You need to be able to enable those channels and provide them the right tools to actually enable their business. So that's the right aspect. But when you get that, let's take an example. If a channel is selling something for you, they're buying something from you as a provider and they're selling it to the customer. When you look at that, there is at least two transactions, one transaction between that channel and the reseller and the end customer. And there is a transaction between you as a service provider and that. So without the underlying structure and hierarchy that knows how to do cipher between these two transactions, you have a mixed revenue. That is misleading. This revenue is not really multiplied. It's not twice. If you don't have the right way to say this is my revenue as a service provider, and this is the resellers revenue, and you've got a way to actually separate the two, then you can't really manage the revenue correctly and you don't have an accurate representation of your revenue. That's one of the that's one of the aspects of that. But like I said, it doesn't just start with the invoice or the actual revenue that is generated. You really have to start, enabling that from the very beginning, which is when you define all these pricing and bundles, which is part of the part of the catalog. So hierarchy or structure is an essential capability that you have to have so that you can empower the channel and track revenue accurately, and even project what kind of revenue that you're going to see, in the future, being able to record it based on that hierarchy or that structure and being able to provide the tools to manage the downstream and the structure basically from A to Z.
IS: Do you think most channel-based businesses understand this business aspect of what we're dealing with? I'm sure ones that are very sophisticated as well established probably do, but sort of going beyond that. Like we sometimes get questions like, “I have to buy a monetization system. Do you want me to pay for monetization tool for all of my distribution partners? Why should I pay for that? Let them pay for it.” And we try to sort of get into this conversation saying, “well, that could be a strategic weapon. It does require an investment, but ultimately you could probably make it cost neutral down the line.” What's your sense of that?
YY: I'll start with the last point, which is cost neutral because it's natural. And it's basically a standard practice today that you can provide or add to the invoice or recovery fee. So if you design the business correctly and if you know how to manage the cycle end to end, you can actually recoup this entire investment and just make it part of the invoice. And this is quite a standard practice today. As a matter of fact, it's one of the recommendations that we provide to our customers.
IS: So they can add a fee to the settlement with a distributor.
YY: Exactly.
IS: And you can recoup at the master level.
YY: Exactly, exactly. And that's and that's acceptable and that's tax deductible by the way on the business. So, right, it has some advantages when you actually do that. But go back to the original question. Basically, it isn't just the cost of that. Those resellers and those, service providers will come to us. They know they have a bidding problem. They know they've got a scalability problem. They come to us and they're unable to grow. They're unable to manage the business. They have a lot of gaps. They have revenue leaks; the resellers are starting to complain. They have the symptoms, but they don't really come to us with clear requirements. And frankly speaking, we've now—it's been a while. We've created a model in the implementation and our onboarding that actually addresses that cycle. They come to us with the symptoms of the problem. They don't know what the requirements are. They don't know what they need. So we start by providing basically best practices and recommendations. Obviously there is no—and we strongly believe in that—there is no one size fits all. There is no one solution that fits everybody pre-configured. There is a degree of configuration. It's better if the system is highly configurable and instead of customization, because once you go into a customization cycle that's difficult to maintain and it's highly costly. So they come to us with the symptoms, we go in with the recommendation. That's why we created a model where we actually engage with the service providers by helping them defining the requirements that they need, understanding their business, understanding the current state, and then actually coming back to them with a recommended future state. It's pretty much giving them those recommendations, sharing experiences that we've acquired over the years of doing that repeatedly with different service providers and different customers and even from our own analysis of these problems. So now they come to us with no clear requirement definition, only with the symptoms of the problems, the biggest of which is revenue leak, the biggest of the second biggest is probably scalability challenges. That's how it starts. But we go in with recommendations.
IS: We see many companies trying to introduce new, much more advanced pricing methodologies. Not just basic subscriptions, but tiers, ramps, usage outcomes based, different bundles. How does all of that affect one's ability to manage revenue in a predictable, consistent manner?
YY: It's a very it's a very good point. Flexible pricing sometimes referred to in the industry as dynamic pricing, the ability to have a flexible tool to define pricing, create pricing on the fly, discounts special rates sectors, industry deals, customized negotiation salespeople are not known to have, basically almost rebellious reaction against any pricing control. They want all the flexibility in the world that does exist so that they can have the flexibility to sell. And to some extent, you don't want to you don't want to limit that because you want to give them all the flexibility to close deals. What happens if you open that or with no control? And the word that I'm going to use here is consistency. Without tracking and consistency, you end up with a model that is very manual down the line. If you have given a special price for every sale and for every order, just imagine two years down the line when you try to update the cost. Let's say your cost from a vendor or your underlying cost of a service that you provide has changed. How do you go and reflect that? If at the end everything you did was manual and was specially created for every order, you practically lose control. So you have to strike a balance between that dynamic pricing, flexibility, and consistency of that. And you can only do it if you have the right tool that actually tells you, well, if you want that flexibility, let me give you some consistency control, I'm going to call it. It's probably not a very common term and it requires definition. I'll explain it using an example. You go to a customer, and you sell that customer service X. At the time of negotiation, you're going to the customer, you say, I'm going to give you this item instead of $100 retail, I'm going to give it to you for 87.5. Six months down the line, another person from the same organization is coming to buy the same service. The least that you want to consider is the system should tell you when you've sold this item for 87.5 in the past, you might want to consider sticking to that so that everything is consistent. Maybe instead of making or overriding the price or coming up with a dynamic new configuration of the price every time you sell, it's to say that's what you bought it at six months ago and here is what I'm going to give to you. They might come to you and say, “well, I'm going to buy 500 items this time. Last time it was only 100.” You can respond if you have consistency control, you can say, “I'll give you 2% discount, I'll give you 5% discount.” So adding that consistency component to the dynamic pricing and the phrase pricing flexibility gives you the control and scalability you want. And central management, if you like, of pricing down the line.
IS: Absolutely. I want to sort of take you up on the idea of talking about data. None of this stuff we're describing here, like near real time revenue management, dynamic pricing, revenue recognition, none of it’s billing, none of that really happens unless you have clean data. But data by definition is not clean. But with data elements that make up calculation of a price calculation, an invoice, calculation of revenue recognition, all of those things can come from various disparate data places. Data sources could be both semantically and syntactically completely misaligned. What should companies think about when they embark on sort of building a sophisticated monetization capability? Whatever necessary and sufficient elements will I need for data management to make this a success?
YY: It's another great question, Igor. I know that from all the discussions that you and I have on different occasions. Let me—just to realize the scale of the problem, the magnitude of the problem in in our experience, when we are onboarding new customers or new set of data, a sub project for an existing customer, I can tell you that it's probably 20% configuration when we do the onboarding. I'm not talking about the requirement phase in the implementation. It's probably 20 to 30% configuration and 70 to 80% data problems. The time 80%, 70 to 80% of the actual project implementation time for us goes on data related issues. And you mentioned that data by nature is not clean. It's actually not clean. It's not consistent, and it's not compatible. To add to it, it's not available when you need it. So there's also a timing element, to all of that, the right solution is you really have to have element of data management component in the implementation. And that should be an integral part of any monetization solution that businesses should look for. And more importantly, when you have channel, because when you have channel, you've got more systems to talk to, more data sources that you have to deal with whether you're actually importing those data into the system or you're exporting the data to the system. In our logic for handling that, we rely on a process-oriented data management, not a data manipulation stop. We would rather create an automation, a wizard, a process that actually takes the data in multiple stages and fix or deal with these five different components of data lifecycle that actually just write code that does data mediation alone, so that we can deal with the timing issue separately from the data incompatibility issue, separately from the inconsistency, separately from the incompleteness, because you get the data and you have 70% of what you need, and if you're missing 30%, it's as good as zero, because without the 30%, you won't be able to process it. And you have to be able to extrapolate this missing data from existing systems, from third parties, all of that. When you do it through a process, you've got the flexibility to deal with any exception and basically any unknown. So that's the concept that we follow when we solve this problem. But data staging and data mediation and data management is has to be an integral part of any full monetization suite that the businesses should implement, especially service providers was channel capability.
IS: So it sounds like even if you're not a channel-oriented company, if you have a complex business model, you should start thinking about it in integrating, some sort of mediation capability, data mediation, community into your finance automation.
YY: Well, there is at least—in any organization, there is at least four systems that you have to deal with in addition to the monetization tools. And sometimes it's actually much more than that. Everybody knows that without CRM you don't have a platform, right? So you have to integrate the monetization tools or the CRM without integration, you don't have a full cycle. On the other side, you have the ERP. And we just talked about that. So there's one system that feeds customers and prospects and opportunities into the billing could be even a CPQ part of that, whether you put the CPQ here or there. And on the other side, you've got the ERP system. Another essential platform is if you're selling a service, then you've got a platform that delivers that service. So that is a third-party system that you have to deal with. You're getting all the service details to and from, and it is part of what you do. And if you're doing that, you've got some kind of task management that you have to have because you're managing resources or managing all of that.
IS: So, let's say a company comes to you and says, “all right, we want to build this modern agile, maybe not real time, but quick time revenue management system. We want to be able to do things like forecasting and simulation and very precise recognition, whether you guys do it or we pipe its data into another system—invoicing, billing. Where do we start? What should we be focused on?” Whatever dos and don'ts. What are the elements of wisdom which you've sort of derived from having done this in the field for many years now?
YY: So those five components that we talked about in the monetization tools are basically what they need to look at. But since we're talking about channel and channel challenges, we have to add that as another as another requirement because channel does that. So they need to look at a system that has a very powerful, very powerful capabilities related to the catalog, because that's where you define your pricing. That's where you define, like you said, what do you sell, how you sell it and how much you sell it for. And that includes discounts that includes pricing that excludes bundles, that includes the price changes, that includes forecast, it includes hierarchy, all of that. Then obviously we're not going to miss that. The billing piece of it, that's just a core capability that has to exist. Then customer proper customer lifecycle management, with the channel, then with channel capability and then proper service lifecycle management. If you don't track the service and create a link between the service that you're selling and the invoices and the revenue that you're generating, you will end up with a lot of revenue leaks and gaps between what you sell. I'll give you an example from the industry. We had, fleet management company that came to use the system, basically, when they came to us with the original case, they had 1200 trucks—I'm sorry, they had 900 trucks, but they had 1200 subscriptions with carrier providers. So they would actually give a fleet tracking tool and put it in every truck. So if you actually have 900 trucks, you probably need just 900 plus a few backup units, let's say maybe 950, maybe a thousand. But why 1200? Right? It turned out that when a device was broken, there was simply throw it away, bring another device and install it. But they don't know which one to go back to the carrier and terminate because the service tracking of that device is not related to the invoice. The inventory that manages that basically is a completely manual one that is sitting outside of that of that cycle. That's why we believe service lifecycle management should be part of what you're looking for. It's part of the service. Service management is not just provisioning. It's actually digital asset management or virtually inventory. Virtual inventory should be part of that if you really are looking for the right system. Then, obviously, the last piece is the revenue management with all the components we talked about.
IS: Youssef, thank you so much for your time and sharing your wisdom and expertise in this area.
YY: Of course.
IS: Thank you so much. I hope we get a chance to do this many more times again.
YY: Always a pleasure.
AD: Thank you for listening to the margin. If you have questions about today's episode, or if you'd like to schedule a call with an MGI analyst, reach out to us at insights@mgiresearch.com. You can also reach us on LinkedIn, Facebook, and X and you can find more information about our research and advisory work at mgiresearch.com. Until next time.