Zuora Subscribed London - confessions of a Subscription Economy virgin

Martin Banks Profile picture for user mbanks October 14, 2019
Summary:
We’ve covered Zuora and the rise of the Subscription Economy model for many years at diginomica. But when the firm’s Subscribed conference touched down in London recently, contributing editor Martin Banks had his first encounter with the firm. Skepticism gave way to conversion…

subscribed

I felt that I could argue with Zuora  founder and CEO Tien Tzuo when he talked during the opening keynote of his company’s recent Subscribed  user conference in London of a shift towards the end of ownership and the beginning of what he called 'usership’.

My instant thought was,’This guy is not a guitarist’.

Playing a guitar is as much about the relationship between you and the guitar as it is about the instrument’s set up and intonation, or its ability to stay in tune. You have to get to know each other. It is almost as if they enjoy being owned by someone and seem pleased to see you, ready to respond, when you take them out of the case. They are not something to rent’, or subscribe to the use thereof.

Tzuo then talked about shoes and Marie Kondo, a rising Netflix star with a series of programmes about tidying up to her credit. Her mantra is, it seems, if in doubt, throw it away, and he was considering just such a possibility with shoes – rather than own lots of pairs, subscribe to a shoe provider. Sadly all I could imagine was the huge pile of detritus over the left shoulder of Ms Kondo as she ploughed her way through the homes of middle America.

But then I found myself nodding in agreement with the idea of not owning a car, but using the services of Uber - and can already see an argument for not owning a car in, say, London or San Francisco, Madrid, Paris etc etc. The same with AirBnB, and these two have already demonstrated that the principles of usership - access what you want without owning it – works increasingly well across a surprisingly wide range of businesses. Tzuo argued persuasively:

Car sales are down, newspaper sales are down, yet miles driven are going up, and news consumption is going up. AirBnB outsells the Hilton Hotel chain in the USA, and the uberisation trend is growing fast. Interbrand says the top 100 brands are increasingly subscription based.

Life is no longer about having things but it is about usership, turning them into services that meet the needs of new customers.

This did lead to one last niggle on my part, namely - what happens to the used things? What about those things which can’t be recycled through a service-based economy? But then again, in the same way that charity shops have built a good business model out of reselling pre-loved second-hand clothes, I realise it probably won’t be long before Oxfam or one of the others is taking subscriptions based on utilising a given number of items per month. [Editor’s note: Clothing-as-a-Service is now a thing!].

Digitalisation and usership make good bedfellows

The interesting factor here is that an increasing number of the ‘things’’we want to`have’ are now essentially ephemeral, for they are digitised. Music, videos, art of many kinds, words, games and other entertainments, are all available as digital entities, magik’d up copies of a digital master, fired off at us over the ether, as and when we want to consume them. Even the physical devices we use for the consumption process are entities of subscription, and all of that business is tailor-made for the subscription model.

That is, of course, why it is already big in the B2C market sectors where subscriptions can now magik up anything from fish’n’chips to self-drive cars used to get you wherever and on to stretch limos full of dancing girls and boys (other varieties of content are available depending upon your predilections). But in practice B2B is catching up, especially where digitalisation of the `product’ can have a direct influence. Tzuo posited:

With B2B, the trick is to target existing customers who are getting concerned because of the cost of acquisition of a product.

Two obvious examples of this are the growth of Cloud computing and Software-as-a-Service (SaaS) as sources of compute resources, business applications and process functionality. Both of these have subscription-based service delivery at their core. You don’t `buy’ a cloud service, you sign up for it. And when even the biggest and most established names in business applications software are now majoring on the delivery of their key products in that same way, times have changed.

According to Tzuo, the Zuora system offers significant flexibility in billing, with customers using over 175,000 different active billing models in the last 6 months, while processing $39 billion’s worth of  transactions a quarter.  He said it was also flexible enough to cope with 62 million subscriptions being changed by subscribers in some way, in the last year.

Key to this is the introduction of the Zuora Central Developer Platform earlier this year. This allows companies to integrate, extend and orchestrate all aspects of a subscription business from a single platform. It is build around the existing suite of applications, and now also includes this year’s crop of new announcements, such as modules for payment collection, and revenue recognition.

A million ways to monetise

Use cases of the diversity of businesses now able to exploit the subscription business model are Octo Telematics and Yara. Octo Telematics mixes the model established with the famed `Boris Bike’ in London and the development of the well-established short term subscription model, car rental. The objective is to monetise the idle time of cars and it is already running at a rate of 15,000 transactions a day in 115 different cities around the world. The company is now branching out to start running car sharing services for specific communities, of both interest, and of location. (A deeper examination of Octo Telematics will follow shortly.)

Yara is the archetypal ‘something completely different’, a 100+ year-old Norwegian manufacturer of fertilizers, which it predominantly sells to large farms in large amounts. This does not sound like a likely candidate for using the subscription business model. Yet there are an estimated 500 million farmers around the world, most of whom can called subsistence farmers. They are a market that can’t be reached.

So Yara is re-inventing the business model to both reach them and help them. The company now has a wealth of knowledge about farming – it is now a knowledge business about farming. Realising that, the next target was to find a way to productise that knowledge and get it to the smaller farmers. And these days, even subsistence farmers usually have just the right tool – it may be old and second hand, but they have a smartphone.

So the idea emerged to turn those smartphones into farm sensors. For example, produce an app where they can take one leaf of a crop plant, put it next to the camera and get a quality readout.  In one simple step they get access to world class knowledge by subscribing to the service.

One of the reasons a growing number of business types are moving to subscription service provision is the growing number of options it opens up for developing creative ways of charging, many of which have a bigger element of performance related payment. For example, with modern sensor technology, it becomes possible for excavators to be charged out on the weight of earth or material moved, while households can pay for washing machines on the number of wash cycles run.

My take

Older, wiser heads (OK, I’m trying to make myself feel good) will probably have had enough trouble getting their heads round SaaS and how it operates, and maybe wonder what is so wrong with buying a nice licence for an application? But the cohort which grew up with the mobile phone is now coming amongst us, not as new recruits but as middle managers. For them, signing up for a subscription is as natural as sending a text. It is quite likely, therefore, that the next few years will see this model become an important – and widely accepted – way of doing business. Let us not forget that it was only five years ago that the cloud may have been accepted as the `coming thing’, but the present it was not. Now it is. The same is highly likely to be true for usership.

Loading
A grey colored placeholder image