One of the multitude of announcements at SuiteWorld last week was the release of a new combined solution for NetSuite customers that integrated Zuora’s subscription and billing offering with NetSuite’s ERP. While the news is a week old already – I keep a watching brief on the subscription and billing area and hence wanted to cover the news.
First to what this integration does. With the combined product customers can get end to end integration of back and front office functions. Looking at the lifecycle of a subscription transaction, what this enables includes;
- Pricing configuration – pricing, packaging, bundling. One time, recurring, usage and metering. Volume tiers etc
- Account mirroring – synchronization of billing, address and other details
- Order to subscription workflow automation – from entrance to front office all the way through to completion and renewals
- Bi-directional payment operations – work either in Zuora or NetSuite and have details updated in the other system automatically
- Revenue recognition integration – to keep the auditors happy
- Subscription metrics within Zuora, financial metrics within NetSuite
The integration, beyond its utility as a co-marketing play, is a real acceptance of the fact that in a subscription economy the transaction isn’t simply one of sell and pay. Rather it is a highly complex situation where the initiation of the relationship is the simple thing – thereafter comes an oftentimes hornet’s nest of complexity with customers adding capacity, changing bundles, modifying configuration and generally slicing and dicing what they purchase. Under traditional disconnected system this creates a nightmare where manual processes and the scourge of billing departments, excel quagmires are the norm.
As fellow commentator, and genuine nice-guy Denis Pombriant says;
….where a conventional vendor might sell a product and bill in full, the subscription vendor sells a potentially different product every time the customer decides to change the configuration. One of the powerful aspects of selling subscription services is that by reconfiguring them you can deliver a potentially different branded product — if your billing system can keep up.
There are subscription costs that we’re all familiar with like the number of seats deployed but that can change at any time. There are also any number of one time fees and costs that may not fall in the same billing cadence as the subscription. It goes on and on and it gets funky.
There is also the little issue of renewal. The product vendor thinks in terms of cross sell and up sell but the subscription vendor thinks in terms of all that plus keeping the customer — every day. I have seen data that says that customers base their loyalty decisions in part on how easy their vendor is to deal with and billing is one of the key points of contact post sale in the subscription world. There are different metrics that need to be tracked too — monthly recurring revenue, total customer value and the just alluded to churn.
Vendors of all stripes have discovered how hard this nut is and early subscription vendors wrote their own billing systems because there was no other game in town. But as much as Zuora is a good fit for subscriptions, it still needs support from CRM for effective sales and marketing and back end financials for managing the customer payables and then some.
Denis makes the excellent point that whereas ERPs traditionally do a fantastic job of tracking monies earned in the past, they do very poorly to give any visibility to monies expected going forwards – by tightly integrating, indeed converging, subscription and billing along with core financials, companies gain a deep insight into past, but more importantly future cashflows. Zuora is already tightly integrated with salesforce.com – thus giving great visibility of the prospect to cash process, now with this integration there is an offering for NetSuite customers that gives visibility over two dimensions – time and salescycle – customers can see cashflows past along with expected future flows but also get visibility into the sales lifecycle of the customer.
Zuora founder Tien Tzuo is a master story teller, waxing lyrical about the paradigm shift to the subscription economy. If even a fraction of what he envisages happening in the economy occurs, solutions like Z-NetSuite will prove invaluable to any organization that sells products in this brave new world.
Disclosure – NetSuite comp’d my airfares and expenses to attend SuiteWorld and Zuora (along with a number of other subscription and billing vendors, has been a client