Lawnmowers and analytics - Zuora's broad church of Subscription Economy companies
- Summary:
- We like use case exemplars. Zuora CEO Tien Tzuo had a few up his sleeve yesterday.
Regular readers will know that at diginomica we’re enormous advocates of the idea that the customer is the best evangelist for any tech company pitching its wares. A good use case is worth its weight in gold and the more individual that use case is, the better.
My favorite customer example of 2018 - to date - came from Zuora CEO Tien Tzuo, who offered up the real-world exemplar of the manufacturer of porta potties to demonstrate that the Subscription Economy model can extend to a broad church of companies.
Yesterday Zuora turned in its second set of quarterly numbers as a public company - a loss of $19.6 million on revenues of $57.8 million. On the post-announcement analyst call, Tzuo came armed with customer references to drop into the conversation (in between plugging his new book!). They were a mix of new wins and extensions of older ones. Tzuo noted:
There are homegrown solutions. Sometimes these are legacy telco billing solutions. And we’re also playing in greenfield environment, where maybe it’s a launch of a new product or [customers] have a whole bunch of manual processes.
First up was a company that has a long history, Wisconsin-based Briggs & Stratton. Who is Briggs and Stratton? Tzuo said:
They are the world's largest producer of lawn mower engines. They were founded in 1908. Like a lot of other industrial manufacturers that we work with, Briggs & Stratton has spent the last few years investing heavily in outbidding older products, in this case, lawn mowers with sensors and connectivity. Now, you might ask, well, so what?
Well, it turns out that Briggs & Stratton sells a lot of commercial landscapers, large fleets of these lawn mowers. What we did is we just helped them launch a new IoT platform. It’s called InfoHub for Commercial Turf. So now for these commercial landscapers, InfoHub helps these teams track their equipment usage in real time.
As for the subscription angle, Tzuo added:
Visualize all these new data services and help these turf companies do things like slight potential maintenance issues, maximize productivity, reduce costs and increase their profitability. So when we talk to Briggs and & Stratton today, they talked about going beyond just products, delivering outcomes for their customers and we're helping them transform and embrace this new emerging business model.
Then there was tech hardware firm Hitachi Vantara, the new name for the unified Pentaho, Hitachi Data Systems and Hitachi Insight Group. Tzuo explained:
[Like] a lot of these big hardware companies, Hitachi is really trying to diversify their revenue with software and digital services. And this is where Hitachi Vantara comes in. These guys provide data center solutions, IoT, Big Data solutions. And as they go through this digital transformation, moving towards these consumption-based business models, they're facing a lot of the same complexities and challenges.
In this case, these were around billing and revenue recognition, with all the work around the latter being done manually and offline, said Tzuo:
In fact, Vantara had over 50 to 60 revenue accountants around the world, just to keep up with all the contract changes and amendments. Now, you throw in statutory compliance, different international regulations, IFRS 15, ASC 606, it was just too much. And so, Hitachi Vantara turned to Zuora because they realized that we were the only provider with both the knowledge and a proven track record and a technology that can scale with their business, all while letting them hit their aggressive timelines.
Greenfield and expansions
Next up was Philadelphia-based Clarivate Analytics, a $1 billion B2B company recently spun out of Thomson Reuters’ IP and Science Division, which provides trusted insights and analytics for lots of areas, ranging from scientific and academic research to intellectual property services to plan protection. This was a case of a firm being given a fresh start, said Tzuo:
The key here is because Clarivate is spinning out of Thomson Reuters, this gave Clarivate this unique greenfield opportunity to start fresh with a whole new set of systems. And as they looked at their architectures, they thought,’Well, why would we tie ourselves to the same ERP systems that we were stuck with at Thomson Reuters. Why would we spend millions of dollars of hardcore of all customizations needed to make SAP work, especially since we're a subscription business, not a parts business?
So in this case, they turned to Deloitte Digital as a transformation partner and that’s when we came in. Because as an alternative to these premise-based ERP systems, Deloitte provided Clarivate a new architecture, 100% cloud, designed specifically for subscription businesses and it had Zuora Billing included as part of the platform, which also included things like Salesforce and the cloud-based General Electric.
Now, we think that this is where the world is going to a modern three cloud architecture that enables companies to driving new dynamic business models and gives them a chance to get out of their SAP, Oracle traps.
Finally, as an example of land-and-expand, the use case was Boston-based IT management firm Continuum, focused on Managed Service Providers.
They started working with us first with Zuora billing in just one of their divisions, which at the time represented 5% of continuing revenues. This was a couple of years ago and the rest of Continuum’s revenues continue to run through its home-grown billing system.
Now, recently, Continuum, as a company, they’ve been out here [California] and this is when they realized that this home grown system, it just couldn’t handle their 35% annual growth rate. We already had Zuora running for a small part of their business. It was up to us to convince their management team that putting all the revenues into Zuora to help them scale through the significant growth they expected over the next few years. So today, the company is set up to run 100% of its business in Zuora, which allows us to grow within that.
My take
Some nice use case exemplars on show. Oh - and Tien has a new book out! :-)