Published on the 08/06/2017 | Written by Donovan Jackson
Subscription business heralds a new era, if subscription software vendor is to be believed…
While it was essentially throwing the covers off a couple of new products, subscription software company Zuora reckons the implications are much deeper and wider. Indeed, hot on the heels of our feature in which the case is made for ERP software still hanging around for some time in both on prem and cloudy versions, Zuora is touting a ‘vision for the future of enterprise software’ in which little room is left for good old ERP.
And so, while the chief product being announced is Zuora Central (described as a ‘cloud-based software platform that functions as a hub to coordinate all order-to-cash operations) the company said it has ‘defined a completely new architecture for a post-ERP world’.
In a statement, founder and CEO Tien Tzou (who we interviewed some time ago) said: “Ten years ago, we saw a tectonic business model shift – one that we now call the Subscription Economy. Today, we predict that this shift to services will have a massive impact on existing IT infrastructures.”
In this new digital world, continued Tzou, companies require an entirely new order-to-cash architecture to manage massive recurring revenue complexities. Handily, that’s now available: Zuora Central, he said, is “the first platform to orchestrate all critical financial operations, setting a new standard in dynamic enterprise software in a post-ERP world.”
The company’s own research shows that the revenues of subscription-based companies grow eight times faster than those of the S&P 500, while enterprises with over US$100M in revenue are growing the fastest.
But as readers will no doubt note, many companies achieve that revenue growth at the expense of profitability. Companies, for example, like Amazon (for a good long while), Uber, and most certainly a raft of subscription businesses in the SaaS mould, including Xero.
Zuora pointed to a 2016 survey which found that 72 percent of Fortune 500 companies felt the single greatest challenge limiting their growth was their technology. It said a majority of these companies emerged over 30 years ago with applications that served them well, but no longer work in the new ‘Subscription Economy’ (a term that Zuora has TM’d).
With an undertone that somehow all business will be subscription business (it obviously won’t) Zuora pitched the old silo/legacy/integration problem: ‘Stitching together these rigid business applications with custom configurations can be time consuming and expensive, particularly with legacy financial systems like ERP’, it said.
Naturally, not all ERP is legacy, though Zuora did point to Gartner research which shows that ‘Early ERP adopters, particularly large enterprises in energy, manufacturing and distribution industries, are paying the price of decades of excessive customisation’. That struggle, certainly, is real.
In clouting ERP good and hard, the subscription software vendor said that it (being ERP) can’t handle dynamic business models, dynamic subscriber relationships or dynamic markets.
Some or maybe even all of that is undoubtedly true of some ERP systems. But we’re inclined to believe that Zuora’s approach is akin to the man with a hammer, to whom everything looks like a nail.
