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Zuora touts pay-as-you-go billing to world's top companies

Phil Wainewright Profile picture for user pwainewright April 13, 2016
As leading businesses seek to embrace pay-as-you-go billing models, Zuora sees a multi-billion opportunity for its cloud-based subscription billing platform

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Subscription management vendor Zuora is going after top-tier global enterprises with the latest release of its cloud-based software, announced today to coincide with its annual conference in San Francisco.

The new product targets multinational businesses that currently use established ERP products such as SAP and Oracle to run their business, and which want to add more flexible pay-as-you-go billing options to monetize additional services and relationships alongside traditional one-time transactions. The subscription model, first popularized by software-as-a-service vendors in the tech industry, is now going mainstream, says Tom Krackeler, VP & GM of products:

We've been serving the SaaS companies, but now we're really seeing traditional companies are innovating and going to market in new ways.

It really is an enterprise-grade product that we've built to go after this new opportunity ...

We feel it's the first solution to really give every team in your company a shared view of your customers, to give you the ability to monetize everything and then really scale operations globally with a set of capabilities to allow companies to manage multiple entities with Zuora.

That combination we believe uniquely allows us to go after this opportunity with those large global clients.

Zuora says the new release has four main elements designed to appeal to and serve large global enterprises:

  • Insights into usage and subscription metrics delivered at scale and combined with financial transactions and demographics, which help product leaders analyze subscriber behavior and test innovative new propositions.
  • Support for more than 40 different charge models that can be introduced and managed without disruption to back-office systems.
  • Business performance dashboards that allow finance leaders to track subscriber-centric metrics such as ARR, churn, and renewal rates alongside more traditional data, providing an overview of multiple revenue models and business lines.
  • Rapid deployment and easy integration both to cloud applications such as CRM as well as traditional back-office systems including SAP and Oracle.

$100 billion market

A report from MGI Research released yesterday by Zuora projects a $100 billion total addressable market (TAM) worldwide for subscription economy SaaS tools through 2020 as large enterprises adopt what the report calls 'agile monetization platforms'. The category includes nine separate types of software: agile billing, financials, order management, e-commerce, customer support, CPQ (Configure-Price-Quote), contract management, revenue recognition, and mediation. The report also identifies the Internet of Things as a significant factor driving spending.

One of the most notable findings is that this is predominantly a large enterprise phenomenon. The report finds that more than 80% of the market is represented by companies with over $1 billion in annual revenues. This is the market Zuora is targeting with its new release, says Krackeler:

We will see large multi-billion companies that are making a commitment to shift over to these new models of delivery. They're going to have to be more agile and responsive in how they package propositions for their buyers.

Those enterprises are finding their traditional ERP systems are too inflexible to accommodate these new models. Zuora provides a flexible, high-volume subscription billing platform that deals with quoting, subscription management, billing, collections and revenue recognition. It processes those transactions as a subledger and sends the resulting journals back to the system of record.

There's a big opportunity to help guide enterprises and track key metrics as they transition to these new models, says Krackeler:

A lot of effort is around helping companies that are not 100% subscription. We want to help them make that journey and shift into the subscription economy.

For the CFO, we're trying to help him or her change from a backward-looking accounting function into a real business value architecture.

My take

When Zuora first launched in 2008, subscription billing was the preserve of the nascent software-as-a-service industry, and even most SaaS vendors didn't have a system in place for it. Today, the landscape has changed dramatically and pay-as-you-go models are spreading into every industry.

That spread has been so extensive that Zuora has plenty of competition, most notably from quote-to-cash vendors such as Apttus and (recently Salesforce-acquired) Steelbrick, but also from cloud financials vendors including NetSuite, FinancialForce and Intacct. In response, Zuora has moved up-market, focusing its attention on businesses that want to offer subscriptions to large volumes of customers with high frequency of billing. If your problem is complex sales then you'll go to a configure-price-quote specialist like Apttus. If your problem is managing high volumes of rapidly changing pay-as-you-go contracts, unless you already have that capability built into your existing cloud financials platform, then Zuora is where you'll turn.

On that basis, MGI estimates Zuora can target a global market worth a total of $15 billion by 2020, and it's one that's growing by 50% each year. That's not a bad market segment to target, and Zuora can fairly claim to be the leader in its field.

[Updated to clarify that Zuora did not commission MGI's independent research study].

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