Zuora gets PayPal president on board

Zuora, the SaaS billing startup that was pitching itself as 'the PayPal of online business services' when it launched, has snagged PayPal's president as a board member. Here's an exclusive interview.
Written by Phil Wainewright, Contributor

Zuora, the SaaS billing startup that was pitching itself as "the PayPal of online business services" when it launched in March, has snagged PayPal's president and former CTO, Scott Thompson, as a board member, it announced yesterday. The addition is a feather in the cap for the young vendor, which only went live with the first version of its product in May, yet already says it has signed 17 customers. (Fellow ZDNet blogger and EI Dennis Howlett wrote up the product here in July).

I had a quick call with Thompson (pictured) yesterday to find out what had drawn him to get so closely involved with Zuora. He cited two motivations.

One thing that came out very strongly was that Thompson loves the pay-as-you-go model of on-demand services like PayPal and SaaS, based on his experiences on the enterprise buyside in senior technology roles at Visa and Barclays Global Investors. "There was a recurring theme," he explained. "You were always buying everything ahead of what you needed for where you were, in order to allow the business to scale.

"All these enterprise software vendors sell you a chunk of stuff, most of which you don't want," he said — and it becomes a burden, he added. "Your business is slowed down because you're dragging along this big anchor."

Thompson is delighted to see the pay-as-you-use model being extended into aspects of SaaS infrastructure like billing. The other strong aspect of the on-demand model that he sees Zuora exemplifying is the ability to 'mash up' best-of-breed services with each other (a development I discussed here on this blog last month in relation to Xactly's mashup with PayPal, Amazon and Salesforce).

Paypal doesn't do billing, he explained, but it does have a 'request money' function. "It's a very primitive way to send an invoice," he said. "It gets great use." Businesses generate a bill, call the function, and their client settles the invoice via PayPal. The provider is happy to leave that function in its current state, he said. "We don't do the invoicing and billing thing because we want to focus on being a payment service."

Where Zuora comes in is adding best-practice automation of the business processes that interact with PayPal's 'request money' function. "[Zuora CEO] Tien [Tzuo] and his team are going to be world class in doing that one thing," he said, partnering with others for other functions. "A best-in-class billing service side by side with a best-in-class payment service like PayPal."

He forecast that online payments and automated transactions will continue to supplant paper-based payment processes over the next ten years. PayPal and other providers operating payment services will sit on top of the existing banking networks, and they'll partner with other providers to 'mash up' automated processes that interact with the payment services.

Traditional banks will still have their relationships with customers, he said, but the moving of money between businesses will increasingly depend on automated processes that call on new payment options that are more cost-effective and efficient than wire transfers and checks.

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