Forrester Research has just published a new Wave looking at the subscription and billing space, and the company that essentially invented the term “subscription economy” has cleaned up – Zuora was found to be the leader in the report alongside some stiff competition.
This year is actually an interesting one for the report. Previously it has been more limited in its breadth – it was actually titled the “Subscription Billing Platforms Wave.” Perhaps Forrester has taken a good swig of Zuora CEO Tien Tzuo’s kool aide, Tzuo has since Zuora was founded, been banging on about the so-called “subscription economy”. In Tzuo’s eyes, every company is going to have to become a subscription one, and the flexibility that is going to be required of core enterprise software to enable that change is huge. Whatever the reason, this year the report has been moved a little, it is now known as the “Recurring Customer and Billing Management Wave.”
Whatever the nomenclature, it is certainly interesting looking at the report – Forrester applied a 35-criteria evaluation onto the providers and identified nine that are, in its view, the most significant. The vendors that made the cut are Aria Systems, BillingPlatform, Digital River, goTransverse, Oracle, SAP Hybris, Vindicia, and Zuora. Before I get to my critique of the report itself, it’s worth looking at the key takeaways that Forrester found:
- Zuora, goTransverse, And Aria Systems Lead The Pack: Forrester’s research uncovered a market in which Zuora, goTransverse, and Aria Systems lead; BillingPlatform, Apttus, SAP Hybris, and Digital River follow close behind; and Oracle and Vindicia offer competitive solutions for specific needs.
- Leaders Want Flexible Software To Manage Recurring Billing And Customer Needs: This market is growing because more digital business professionals see this software as a way to manage innovative business models and solve acute billing pain points with increasingly empowered customers.
- Agility, Automation, And Analytics Are Key Differentiators: As legacy technology becomes outdated and less effective, leading vendors will prove that they understand the customer experience impact of billing technology. How? These solutions will improve business agility for their buyers to react to changing market conditions; automate consequences to customer life-cycle changes; and provide actionable, recurring customer- and revenue-focused insights.
It’s not just about subscriptions
Firstly, kudos to Forrester for not remaining focused on just subscription functionality but instead realizing that businesses are moving beyond plain subscriptions and fundamentally rethinking their business models. Forrester talks about “recurring customer relationships””,” which is a bit of a mouthful but correctly points to the fact that the actual transactional elements (i.e. selling something via a subscription) is only part of the deeper business relationship between supplier and customer and that these platforms enable a whole bunch of broader lifecycle activity beyond simply billing.
Is stand-alone the right methodology?
In its inclusion criteria, Forrester specifically excludes any product that is a component of a CRM, ERP or payment gateway. As such, Forrester ignored a number of vendors who also have a strong story to tell in the billing lifecycle marketplace – CRM tools such as Salesforce’s SteelBrick acquisition, ERP tools such as FinancialForce or NetSuite, and the myriad payment products who have some subscription functionality. While I understand their rationale for doing so, an attempt to keep things simple, it probably isn’t helpful in the field. A customer, for example, who is already using NetSuite’s ERP should be able to gain an understanding of how the NetSuite-native subscription billing tools compare to third party options from these vendors.
MyPOV
I disagree with Forrester’s approach viz excluding subscription platforms that are part of a platform product. It seems like an artificial distinction that doesn’t have its basis in a real-world context.
Notwithstanding the weird inclusion criteria, this is undoubtedly a win for Zuora. The company literally invented the subscription-billing market and this report is payback for all the years they spent evangelizing new business models and ways of transacting with customers.
Of course, there is the question of Zuora’s future – whether it is an acquisition target for a platform vendor (Salesforce, Oracle or SAP, for example) or for a legacy billing vendor wanting to foot it in the cloudy world (Amdocs being an oft-mentioned potential acquirer.)
Zuora has raised a ton of cash and has tried hard to justify its position as a standalone billing vendor. The jury is out, however, as to whether third-party solutions will really be viable longer-term, either way, Zuora just managed to justify an uptick on its potential acquisition price, so that will have its investors pleased.
