January 31, 2011
I’ve written pretty regularly about SaaS billing and subscription services and how, in my view, they’re an indicator for the greater cloud economy. Given that then it’s pretty interesting to see the results just announced by Aria Systems and Vindicia recently (Zuora is still in its current quarter and their results will be out in a couple of weeks). So what are they both reporting, and what does it mean for the billing and subs industry generally?
In terms of financials, Aria reports that Q4 bookings have tripled, and average first-year transaction size more than doubled compared to Q4 2009. Interestingly, Aria is claiming that they’re winning larger customers and more strategic initiatives than previously – although there are no metrics to back this claim up. Aria is working hard on its partner ecosystem, particularly the NetSuite and Salesforce.com integrations, but they’ve also released Aria SubscriptionsPlus for PayPal, a subscription management and recurring billing product which gives PayPal’s global merchant base SaaS-based subscription billing capabilities. Finally, in terms fo partnerships, they’ve collaborated with VMware to introduce the Aria Cloud Revenue Adapter for vCloud Director, automating service activation, usage tracking, billing and collections.
In terms of financials, Vindicia is reporting that December 2010 was their largest month ever, GAAP revenue-wise, and that overall GAAP revenue grew over 80%, year-on-year. Vindicia is claiming that they handled around $2 billion worth of transactions through our system last year and that as a result of their retention logic and chargeback management capabilities, Vindicia clients generated $50 million in incremental revenue in 2010 (automation of these two services is one of the core propositions of billing and subscription vendors). Finally, the number of Vindicia clients that are live (i.e., in production) grew 100%.
What the results mean
SaaS billing and subscription is a consistently growing market area, and one that I’ve been picking as an enabler for the subscription economy for some time. All vendors are still struggling however with the reality that most startups (and, for that matter, many enterprises) still prefer to build their own subscription and billing platforms in-house. There tends to be the attitude the subscriptions are core and should therefore be part of the internal systems, secondarily, people under estimate the degree of complexity that rapidly gets introduced to their subscription services and fail to see the headaches that may cause.
All vendors have announced big funding rounds recently and that’s an indication that there is no one vendor dominating the market – while Zuora, Vindicia and Aria all have slightly different takes on the vertical, and slightly different market focuses – some degree of further separation needs to occur to further define distinct parts of the subscription and billing marketplace (for example, Vindicia has a particular focus on gaming and online dating that the other vendors are less focused on). Either way you slice and dice, he move to a subscription economy needs a bunch of enablers behind it (infrastructure, security, monetization etc) – subscription and billing is a part of this and, while many vendors will continue to use their own, home-baked solutions, there is enough of a marketplace to keep all of these vendors busy for quite some time to come.