September 19, 2013
While in San Francisco recently I took the opportunity to chat with Zuora and Avangate – two companies with different views on the topic of helping their customers get money from their clients. Zuora is a subscription and billing company that I’ve covered many times before, while Avangate enables online commerce for SaaS and software vendors. Both companies have an interesting take on the general area of customer revenue, and it’s interesting to contrast and compare the two. Zuora is a company that has always been heavy on the aspirational vision. That’s no surprise when one considers that its CEO, Tien Tzuo was formerly the head of marketing at Salesforce and spent much time with Salesforce CEO Marc Benioff, someone who is very well known for drawing a picture of the future and taking his audience along with it.
Tzuo has long told anyone that will listen his view on how the world of commerce is changing – he often talks about the subscription economy and is quick to use examples like Zipcar for the way the world will be in the future. This vision seems to have paid off handsomely for Zuora, it recently raised $50M of venture funding to bring the total of it’s funding to date to $132.5M. It’s growth would appear to be stellar, in the past 24 months it has signed over 20 contracts more than $1 million to-date across multiple verticals – including one of the world’s largest media companies and industry leaders in education, travel services, consumer packaged goods, cloud services, and telecommunications.
At its recent Subscribed conference, Zuora rolled out a new focus that seems to put it fairly in competition with the ERP vendors, in particular once partner, and now rival for subscription customers, NetSuite. Zuora is talking a message of “omni channel commerce” the idea that an organization will be selling products via many different channels (both direct and indirect) and that they want a solution that can cover the entirety of the customer relationship. The latest release of their -Business product pushes the notion that “shopping carts are obsolete” – and seeks to put relationships at the center of the commerce experience.
Zuora raises some valid points – consumers DO want more options and flexibility in how they purchase and consume products and services. At the same time vendors across all sector groups are looking for solutions to enable them to deliver agile pricing and packaging, and better meet the myriad needs of their customers. In justifying the death of the shopping cart, Zuora points to some key failings of the traditional cart experience:
- The opportunity to monetize services ends at checkout
- They are unable to handle pricing complexity associated with monetizing time, consumption, or access levels
- They are designed for completing an initial sale, but they are unable to manage constantly evolving subscriber relationships
In terms of product changes – much of what we see in the latest release is an extension of existing functionality – but there are some interesting tidbits in there – in particular a native integration with Salesforce to enable Zuora to power commerce across all salesforce applications and the ability to create customer price lists to display within customer facing applications.
The proof of the proverbial pudding is, as always, in the eating and the key measure here is Zuora’s ability to get customers up and running on the platform quickly and at reasonable cost. The commercial world is rapidly turning its back on solutions with massive deployment times and price tags – the challenge is for Zuora and its competitors to offer sufficient functional breadth to meet customer needs, while at the same time making it relatively painless to use the applications.
Which takes us to an interesting conversation I had with Avangate CEO Carl Theobald. Founded in 2006, Avangate is focused on helping software and SaaS companies bring their products and services to the market. There approach is much more commerce focused (in that their primary viewpoint is from the point of transaction moving backwards, as opposed to vendors like Zuora who focus on both the buy and sell side of the equation). They’re also not as broadly focused across sectors as is Zuora. That said they’ve found a good niche to work in – they have over 2800 customers worldwide in the software space. they’ve grown 70% year on year for the past couple of years – so despite focusing on a narrow space, there seems to be good growth potential.
Theobald and I discussed one of their customers, a Fortune 50 technology company that wanted to innovate in terms of product and service packages. They deployed another billing tool, connected it to a payment processor and built a fully custom e-commerce customer frontend. The results were interesting to say the least, according to Theobald:
The problem is that they had 20 other product lines they wanted to get live, each with different business models and pricing models, and they wanted to launch them globally. The project manager had no idea when or how they were going to get that done because what they had done was not a scalable solution. They could not move quickly enough. [Avangate] came in and offered to get their next product live in 100 countries in less than 60 days. They told us if we could do that we would be their heroes. We came in and delivered and they signed us as their global strategic partner for all of their new SaaS offerings globally and replaced their custom implementation of the billing tool.
Outside of the vendor chest-thumping, there is obvious value to be drive from a solution that spans the entire commerce continuum – the customer experience (shopping cart or otherwise) is an important part of this and Avangate raises a valid point about standalone subscription and billing offerings that don’t provide UI functionality. That said, Avangate can be similarly criticized for not covering the breadth of sectors and focusing solely on software.
The bottom line is that commerce is changing forever – both Zuora and Avangate raise some valid points in their criticism of the industry in general. Customers are looking for solutions that span the totality of their needs, are flexible and still simple enough to deploy without sweating blood. This space is seeing a lot of change and if these two vendors are anything to go by, it’ll continue to see a great deal of innovation going forwards.