Zuora: the future business model?

I recently caught up with Tien Tzuo, CEO of Zuora, the billing management company that offers Z-Billing, an on-demand service. In his opinion, the business model of the future will be subscription based and this brings challenges of its own. "Pricing is a much more complex issue. You need to provide a la carte options that allow for different plans for different types of customer," says Tzuo, whose company took initial funding from Marc Benioff, CEOP of Salesforce.com, his alma mater.

Explaining the difficulties that subscription based companies face, Tzuo gave the example of change orders, where a customer might wish to onboard hundreds of new users in a month, or where price plans change mid-month. "Updating these is often a really difficult task. It creates havoc for accounting staff. When I was at Salesforce.com, there really wasn't anything out there other than expensive systems built for telcos and utilities."

Z-Billing, the company's flagship solution requires that companies load up pricing matrices, catalogs, order and customers and from there on in, the system takes care of the billing operations. Critically, the system includes billings and collections workflow along with integration to QuickBooks, AccPac, NetSuite and Intacct.

"The original plan was to leverage Salesforce AppExchange but we're getting calls from lawyers and real-estate people - anyone with a an ongoing subscription style of business. It was architected to be easily moved over to multi-currency and translated to other languages," said Tzuo.

One area where the company does seem a tad hazy is around data aggregation. It seems to me this type of application, serving as a bridge to financial systems is the perfect place to capture patterns of activity that would have value for benchmarking purposes. So far, that doesn't seem to be in the plan but would make a valuable addition to the existing standard customer reports.

I like this idea. Apart from the obvious administrative benefits, Z-Billing allows subscription based businesses to develop more fine grained and personalized services without worrying about the behind the scenes complexities. This should help them build more profitable businesses. At a starting rate of 2% of billings, with discounts for volume, the service compares favorably with collection services.