Zuora fleshes out platform play with 'tuck-in technology' deal with Live Objects

Profile picture for user slauchlan By Stuart Lauchlan May 27, 2021
Summary:
A tech tuck-in to broaden platform appeal as Zuora drills down on three key vertical markets.

Tien Tzuo CEO Zuora speaks at Subscribed 2019
(Tien Tzuo CEO Zuora speaks at Subscribed 2019 - image via Zuora)

Subscription management firm Zuora has purchased the intellectual property assets from Live Objects, a business process platform that uses AI to help companies understand, visualize and optimize complex business processes spanning across systems.

It’s a move pitched by CEO Tien Tzuo as a “tuck-in technology” addition to the firm’s wider platform strategy: 

Over half our customers are automating and simplifying their IT processes with our platform workflows. We processed over eight million invoices on the peak day this quarter across our platform. And last quarter, approximately half-a-billion workflow tasks were executed, saving our customers time and money. And this is where the acquisition of Live Objects, intellectual property assets come in.

He adds: 

What the Live Objects team has built is an AI-driven process engine that we believe will allow our customers in the central platform to visualize the processes that are behind the awesome subscriber experiences that they are designing. To discover and map new hidden processes, including the ones that span multiple systems like CRM, ERP, or other fulfillment provision systems, will allow them to detect anomalies in these processes when they meet the customer dissatisfaction or inefficiencies. 

We all know that customer expectations continue to rise, call it the Amazon Instacart effect. Those companies that offer the best subscriber experiences are the ones who will win. The central platform, including the new capabilities that the Live Objects acquisition gives us, is what enables our customers to deliver those differentiated subscriber experiences.

Q1 number crunching

The addition to the platform offering was announced as Zuora reported its latest quarterly numbers, turning in a loss of $17.7 million for its Q1, compared to a loss of $17.5 million for the comparable year-ago period. Total revenue was up 9% year-on-year to $80.3 million, while subscription revenue was $65.1 million, up 14% year-on-year.

Other stats of note from Q1; 

  • A total of 677 customers with ACV equal to or greater than $100,000, up 5% year-on-year.
  • $17.0 billion of transaction volume through Zuora’s billing platform during Q1, an increase of 38% year-over-year.
  • New customer wins included auto manufacturer Suzuki, Mainichi Newspapers in publishing and in technology, Gainsight, part of the Vista Equity group.

Those three wins map onto what Tzuo cites as Zuora’s three core verticals: 

We believe, based on our data, that these are the fastest growing verticals in the Subscription Economy, [showing] the fastest adoption of subscription business models - it's technology; it's media; it's manufacturing driven by the Internet of Things.

Customers are increasingly coming to Zuora to tap into its expertise on all matters to do with subscription models, he adds, not just for its products: 

We translated our 13 years of experience into blueprints that we call ‘the journey to usership’. This blueprint is what we use to accelerate our customers on the path to building successful subscription businesses. 

He points to a number of examples of this in practice: 

In Q1, a global CPG company partnered with our Subscribed Strategy Group (SSG) to completely revamp their company's subscription offering, including its overall subscriber experience. We also had a consumer robotics company partnering with SSG to educate their executives on the implications of recurring revenue on their financial metrics.

And finally, we work with eight of the top 10 automobile manufacturers. One of them first teamed with Zuora for our expertise to optimize the telematics business in Europe. Based on that success, they are now leaning on our knowledge of agile enterprise architectures to help them build a modern platform that can launch new offerings into the market faster than ever before.

My take

A solid start to the new fiscal year from Zuora, comfortably beating analyst expectations, although Wall Street was relatively flat in its reaction to the numbers. The focus on those three key vertical markets cited by Tzuo remains a targeted strategy with lots of potential, while the savvy building out of platform capabilities through tech ‘tuck-ins’, as announced yesterday, is a savvy move.