Originally published in Forbes as How Alvina Antar And Zuora Drive The Subscription Economy, by Peter High.
When Alvina Antar joined subscription-based software company, Zuora, four years ago as the first ever CIO, she did so after having been a customer of the company when she was the Director of Mergers & Acquisitions for Dell Information Technology. From the customer’s perspective, she recognized that means of procuring technology was shifting in many cases toward software as a service (SaaS) models where companies paid only for what they used. Zuora has dubbed this model as the subscription economy. As Antar notes, “Modern consumers are shifting from traditional ownership and demanding new consumption models which allow them to subscribe to the outcomes they want when they want them.”
Antar has fostered a community of CIOs from across Zuora’s customer base to foster learning and collaboration in new ways. She is also changing the way in which the IT department does things, as she has developed a Zuora on Zuora program, where IT acts as the company’s first and best customer, offering insights into Zuora’s product offering. She describes her experience and the implications of the Subscription Economy in this interview.
The World Subscribed
Peter High: Please describe Zuora’s business, and your role as CIO.
Alvina Antar: Zuora provides cloud-based software that enables any company in any industry to successfully launch, manage, transform, and thrive as a subscription business. Our vision is simple: we call it “The World Subscribed.” It’s the idea that one day every company will be a part of the Subscription Economy. My belief in our vision and seeing it first-hand as a customer is the reason I joined Zuora four years ago.
Our mission is to enable all companies to be successful in the Subscription Economy and our solution is purpose-built for dynamic, recurring revenue business models. Zuora Central is the system of record for subscription businesses. It functions as an intelligent subscription management hub that automates and orchestrates the entire subscription order-to-cash process, including billing and revenue recognition.
As Zuora’s first CIO, I have built a Business Technology organization from the ground up with a vision to empower both our ZEOs (every single employee is the CEO of their Zuora career) and our customer’s success by providing innovative solutions and trusted partnerships. Ultimately, the goal is to become the Business Technology model for subscription businesses.
The New IT
The new IT is no longer a single, closed-off general and administrative expense (G&A) department but is fully integrated into the business. Digital transformation requires every role to change, especially the role of IT. Modern IT should marry business and technology allowing subscription companies to grow and thrive. As new business models emerge, the IT function is pivotal in enabling new revenue streams by driving change for competitive advantage.
At Zuora, our Business Technology organization values are centered around fostering our unique culture that truly differentiates our team. I am fortunate to be surrounded by an incredibly talented, diverse, and passionate team who embrace our ZEO culture in every way. Given our comprehensive understanding of all functions of the business in concert with our expertise in technology, we create immense value by focusing on business outcomes. As a thriving subscription business, we enable accelerated growth through agility, disruptive technologies and data-driven transformation (what we call subscription intelligence).
The New Breed of Technology Leaders: Selling to CIOs
High: In most cases, your company’s customers are your peers. How do you interact with CIOs, and what advantages do you draw by approaching them as a peer rather than as a sales advocate for Zuora?
Antar: Today’s Subscription CIOs are a new breed of technology leaders who are challenging the status quo and driving innovation with disruptive technologies. These modern CIOs are enabling true transformation and operational excellence to differentiate their business.
While running M&A IT at Dell, I purchased and implemented Zuora for Dell’s Software Group. As a Zuora customer, I created a streamlined platform to integrate acquisitions, cross-sell and upsell across product lines to generate new revenue streams. After joining Zuora, my product expertise was invaluable in that it allowed me to immediately reconstruct our internal structure to run Zuora on Zuora (ZoZ). This also empowers me to showcase the SaaS reference architecture for a thriving subscription business to all of my peers.
I have built meaningful relationships with CIOs in the Subscription Economy as a trusted peer who understands the evolution of the modern order-to-cash architecture. My genuine belief in Zuora’s vision/product as a result of deep first-hand experience as Zuora’s customer zero is compelling. I’m able to provide transparent feedback not only from our own experience but from direct input from Subscription CIOs. I am the voice for both our internal and external customers to deliver comprehensive assessments to product/engineering, sales and customer success. This feedback is critical to ensure laser-focus on customer success as our customers rely on our mission critical solution that drives their business transformation. This goes well beyond any point solution investments made.
My personal relationships with innovative CIOs has organically created a community of technology leaders who are playing pivotal roles in transforming their respective organizations.
The Subscription CIO Exchange meets regularly and has created meaningful relationships for CIOs by CIOs. At Zuora’s Subscribed conferences globally, we offer an exceptional platform for CIOs to share their business strategies driving transformation and the architecture enabling their growth which generates new revenue streams. We also share our varied approaches to building a culture of innovation and agility necessary for success.
Subscription CIOs span all industries from high tech companies who were built on the subscription model to IoT companies who are pivoting and shifting from traditional to customer-centric business models. These modern CIOs are disrupting their own industries—from media to gaming to car-sharing—and are having to do so through new product launches, new acquisitions, new distribution channels, and new geographies.
New Subscription Business Models Require a New Architecture
High: Zuora is a champion of the Subscription Economy. How does this new era in business change the role of CIOs from your perspective?
Antar: The way we do business has fundamentally changed. We call this shift the Subscription Economy to describe the new era of companies and business models. Modern consumers are shifting from traditional ownership and demanding new consumption models which allow them to subscribe to the outcomes they want when they want them. To satisfy this new era of customers demanding outcomes (not ownership) customization (not generalization) and constant improvement (not planned obsolescence), businesses are compelled to change the way they sell products and services to keep customers consistently engaged in long-term relationships. This new business model requires a new architecture. In the old world, systems were built around selling products. But in this new era, we need new systems that are purpose-built around delivering ongoing value to customers.
Breaking Down Silos to Enable Business Transformation
With these new models, the conventional role of the CIO has evolved. CIOs should not be too busy maintaining their legacy systems and continue to take years to launch new products to market across as many disparate sales and distribution channels as possible. It is a mandate that all channels, including self-service and assisted sales, have a single view of a customer and their usage.
Today’s CIOs must capitalize on the opportunity to provide meaningful impact by breaking down silos across the organization. Let’s face it, Business Technology is the prime function within the enterprise positioned to drive the cross functional alignment required for this dramatic shift.
Business leaders are demanding for IT to enable their transition from a product-based company to a subscription-based revenue model. Marketing & Sales looks to IT to compete in the market and be strategically positioned to launch new products and services, provide new ways to price and package and identify upsell and cross sell opportunities. Finance looks to IT to provide metrics around provide growth metrics and a new financial model for subscription businesses.
Essentially, the way CIOs buy has changed. It’s time for CIOs to mandate ease of deployment, seamless integration, stability, and scale with minimal customizations required. This not only applies to the products their company sells but it should also apply to any product CIOs choose to invest in.
Circular IT Architecture—Not Linear
High: What are some of the challenges of shifting towards a subscription based model, if a company isn’t currently set up this way?
Antar: The shift from perpetual to recurring revenue business models requires a corresponding shift in business processes. Organizations need a deep understanding of their business to accelerate their growth. Businesses need the ability to answer simple questions like how many customers have renewed their subscriptions in the past year or how much revenue is being earned per subscriber.
Traditional legacy ERP provides a system of record for products, orders, and accounts — but it can NOT answer anything related to customer-centric activities. With dynamic subscriptions, there are constant changes — upgrades, downgrades, cancellations, suspend, renew, resume, and more. If you don’t have the right systems in place to track and manage these subscription changes, you’re creating an undue burden on your IT and finance teams and risking revenue leakage.
Legacy IT architecture is linear and unable to support the dynamic nature of new business models. For example, you can’t sell by creating a different SKU for every month of the year just so you can process monthly renewals. This creates SKU explosion that is impossible to manage and ultimately restrictive to growth.
Also, new subscription models require an IT architecture that is circular, not linear. Businesses need the ability to conduct rapid and iterative price testing to determine which new offering sticks. They can’t afford to wait 6+ months to launch a new product or try out new pricing packages spanning one-time to monthly recurring to usage charges. Agility is KING and businesses need to designed to meet time-to-market needs and enable innovation and experimentation.
CIOs as the Voice of the Customer
High: What advice do you have for CIOs about to take on this shift?
Antar: It takes guts and confidence to let go of obsolete investments and homegrown solutions that are holding your business back from growth and transformation. Today’s CIOs need to take calculated risks and make tough decisions to test and prove out innovative solutions.
Don’t invest in building complex solutions that do not accelerate your business. Regardless of how strong and abundant your engineering staff is, allow them to focus on areas that will deliver your competitive advantage as opposed to blindly building out systems that aren’t related to your core business.
Be the voice of the customer. Drive accountability of building product that works and is easy to deploy, integrate, and maintain. The same standard of excellence should be applied to all technology investments. Remember that you’re in this for the long haul. Take a big picture view: think end-to-end spanning configure, price, quote, order, provision, collect, invoice, and revenue recognition. While you will be required to phase out the program delivery, you should ensure your end-to-end architecture is clearly defined prior to making one-off decisions that have upstream and downstream implications. For example, if you’ve had any experience implementing the new 606 revenue standards, you know the significant implications the order has on revenue treatments.
The Modern Quote-to-Cash Architecture
High: How does Zuora fit into the broader ecosystem of technologies that CIOs are bringing into the enterprise to facilitate digital transformation?
Antar: Zuora is often assessed and implemented as part of a larger digital transformation initiative within an enterprise. Most often than not, enterprises have built homegrown solutions that aren’t built to scale and aren’t positioned to meet the time to market needs of the business. As a strategic partner in driving business transformation, Zuora is integral to success in managing the entire subscriber lifecycle.
Zuora sits at the heart of the modern quote to cash architecture in between your CRM and ERP for order management, subscription billing and revenue recognition. Zuora’s connect platform and REST APIs allow for integration into core systems required.
The idea of a one size fits all platform is a myth. Traditional product businesses lived in a linear, two-cloud world with CRM at one end and ERP at the other. Subscription business models require more dynamic complexity than either cloud can handle. IT leaders are realizing that they need to address their legacy architecture challenges to support the dynamic cycle of subscriber actions including renew, suspend, upgrade, downgrade. Your CRM can’t prorate recurring charges and your ERP requires you to hard code new price plans resulting in SKU explosion and gives you no visibility into bookings metrics.
The Challenges of Monetizing Services
High: IoT is a driving force behind these digital transformations. Give us an overview of the challenges faced by companies in the IoT space and help us understand how Zuora’s solutions address these challenges?
Antar: At the heart of IoT is the idea that companies are shifting from selling devices to building long-term service relationships with millions of consumers and businesses. IoT companies are monetizing things like usage, storage, contextual sharing, and aggregated data from connected machines. This model comes with challenges. How do you price hardware versus services? How do you bundle for different categories of buyers? How do you innovate faster than the IoT market?
With Zuora, IoT businesses can instantly bundle connectivity and data features with hardware offerings. (Note that traditional systems used in the management of the device—production, inventory, shipping—are not the systems that will manage the customer relationship.) Rather than having to wait for IT to hardcode new pricing plans, your business can instantly roll out new pricing and packaging, and create a range of plans and consumption models, from pay-per-use to pay-per-user, etc.
With IoT, it’s essential to establish a single customer record that can be viewed from multiple systems. Zuora provides insight into your subscribers so you can easily understand customer data required to make informed data-driven decisions.
Our analytics suite gives you a comprehensive view of your subscribers real-time data on purchases, preferences, usage, add-ons, and customer moments. As a subscription business, Finance should measure new subscription metrics including Annual Recurring Revenue (ARR), Churn, Growth Expense, Recurring Costs, Recurring Profit Margin, Growth Costs and your Growth Efficiency Index (GEI) – how much and how fast you will grow.
IT Is No Longer the Back-Office Function that Just Says “No!”
High: What are you most excited about as it relates to IT?
Antar: I’m thrilled about IT’s positioning in the industry. IT is no longer the back office function that just says ‘no’ when asked if they are able to meet aggressive time to market needs. IT is no longer worried that the business will take over their jobs through shadow IT. IT is no longer able to coast and ride their legacy systems to death. Even the CIOs who are risk averse and worried about losing their jobs due to a failed implementation are now forced to be fearless and create competitive advantage. Not taking calculated risks will make them obsolete.
CIOs are now required to be visionary leaders providing the strategic vision driving business transformation.
Subscription CIOs are building meaningful relationships and sharing the evolution of the modern CIO and business strategies in disrupting their own industries. Technology leaders are capitalizing on the opportunity to be fully integrated into the business and focused on business outcomes, data-driven decisions, product stability impact, and customer influence—ultimately running a Business Technology unit as an integral part of the business.
Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Forum on World Class IT podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.