Subscription Billing, Renewed

Yesterday Zuora, the billing and payment solution company for subscription businesses, did a smart thing, at least I think so. At NetSuite‘s user meeting, SuiteWorld, Zuora chief Tien Tzuo announced that his trademark product is now pre-integrated with NetSuite’s financials. But that wasn’t what’s smart, only the thing that enabled the thing that is smart.

You see, Zuora comprehends a business problem that is bigger than the solution it can provide on its own. Subscription billing is a different animal from conventional billing for products. It’s as different as a horse and a zebra. They might look the same through a picket fence, but you wouldn’t want to saddle a zebra.

Subscription billing is like that. Each type of vendor has to attend to all of the details of the customer relationship that impact billing. But 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.

What Makes Loyalty?

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.

On the Sales Side

So Zuora’s bit of brilliance on display at SuiteWorld has been its admission that it needs other solutions to deliver to the customer an end-to-end solution, and then delivering its part.

This is very interesting to me. Several years ago I thought the same kind of convergence needed to happen in sales (still do). SFA was and is the workhorse solution for sales, but it is increasingly ill-suited to the demands of this marketplace. Solutions from a great variety of sales enablement vendors offer help to consolidate an end-to-end process. But people on both sides of the divide seemed cold to the thought of declaring a process and one’s alliance to it.

Now, to be fair, just about every sales enablement vendor has integrated with Salesforce, and at least some of the other SFA products and in those parts of the world something like an integrated end-to-end solution exists. But the end-to-end sales process is still elusive in many cases, I think.

Mending the Schism

A few weeks ago I gave a short talk as part of a webinar for Sage. The subject was CRM and why small companies need it, as they surely do. In it I said that we treat our money very well in business by way of ERP systems. We know what’s been sold, to whom, for what, when it was delivered and when the money is due. In contrast, many companies still track future money — aka u201cthe sales processu201d — on random scraps of paper and in idiosyncratic documents.

The Zuora-NetSuite announcement is important because it goes after that discrepancy. Zuora, with its new connector as well as its Z-Force connector to Salesforce, offers the promise of uniting front-office processes in a choice of Salesforce or NetSuite CRM and NetSuite financials on the back end, thus delivering the end-to-end process that I crave. I suspect I am not alone.

So good on them — all of them — as my Aussie friends might put it.

NetSuite has been putting on a rather good show at its user, press and analyst meeting, and I will have more on that in a separate post.