Gartner just released their first-ever Competitive Landscape Report for Cloud Subscription and Recurring Billing Management.
This report is a signal that Gartner is seeing what we’ve been evangelizing for more than 10 years: ERP is dead.
In short, legacy players like Oracle, Netsuite, and SAP cannot solve for subscription and recurring billing.
Sure ERPs continue to serve a limited purpose: if you sell products, they can manage your supply chain and serve as your general ledger. But if you’re selling products and services on a recurring basis, ERPs are definitely not the answer.
Why? As Gartner notes, traditional on-premise billing solutions “are good at billing one-time sales, but more often than not, they are unable to support these new digital business models.”
A new solution is needed: a comprehensive solution that can manage all the complexities associated with these new digital business models.
According to Gartner, “Zuora sits in between CRM and ERP systems and serves as the central hub orchestrating all subscription quote-to-revenue processes in real time.”
“Zuora is an end-to-end subscription management platform that covers customer acquisition, recurring billing management, payments, collections, revenue recognition and subscription metrics.”
Let’s take a closer look.
This new Competitive Landscape report comes at a time when the Subscription Economy is booming. Subscription businesses are growing revenues between 5 and 9 times faster than S&P 500 company revenues, according to the most recent Subscription Economy Index (SEI) report.
And Gartner notes that “new subscription and recurring-revenue-based businesses are being launched every week in nearly every industry.” What’s more, “by 2022, more than 90% of software providers will have migrated to a subscription-based business model.”
But it’s not just limited to the software industry. We’re witnessing the end of ownership and the rise of usership. Consumers want ongoing access to the latest and greatest (tools, content, services, etc.) and they demand value. Meanwhile businesses want the stable and predictable revenue offered by subscription models.
As Gartner notes, “subscription and other recurring revenue streams derived from digital business models…will soon become standard in modern day businesses.”
These digital business models follow a new paradigm.
In the “old world,” businesses were focused on getting products to markets and selling as much of those products as possible. Customers only came into the equation at the very end of the line.
But in the “new world,” the world of subscription models, the customer is at the center. It’s not just about knowing what you’re selling…but knowing who you’re selling to.
This shift from a product-centric to a customer-centric model changes everything about the organization, from how you market to your customers to how you manage the downstream impacts of ongoing customer events.
These new models completely change your business system requirements. Simply put, you can’t expect to run a new subscription model with your legacy IT architecture.
As the Gartner report notes, “A significant aspect of the monetization process associated with digital business will require organizations to address and revamp the customer billing experience and deal with the rising complexity and requirements for flexibility associated with that experience.”
Traditional business models are anchored on two systems: your CRM and your ERP. Everything else, from quoting to ordering to fulfilling, falls between those two anchors. This architecture assumes a linear process, but the reality of subscriptions is much more complicated.
Gartner outlines this shift from linear to circular in their report and demonstrates how a dynamic subscription billing model requires an agile system that can respond to thousands of customer events every single day.
Subscriptions businesses also demand a flexible system that allows for experimentation with new pricing and packaging, go-to-market strategies, and more, especially as “technology disruption will accelerate demand for even more complex pricing/billing models,” as Gartner notes.
As a result, innovative businesses are seeking new solutions that can handle the unique requirements of subscription models and the new order-to-revenue lifecycle.
Per Gartner, “digital business models have accelerated interest in and growth of subscription and recurring billing management (SRBM) because traditional solutions are unable to address the complexity and new requirements imposed by these models.”
From our perspective having worked with a wide variety of subscription businesses from native SaaS startups to transforming Fortune 500 companies, some of the most critical capabilities for an end-to-end subscription billing management solution include:
— Configure price quote. Traditional CPQs were built for manufacturing and thus the product/one-time sale. While this type of system is sufficient to configure product cost, that doesn’t work for subscriptions where you’re dealing with more than just quantity, product, and price. Businesses need the ability to leverage pricing strategies to maximize customer lifetime value.
— Advanced pricing and product flexibility. Businesses need the ability to launch new products and price and package in minutes without having to re-code or re-engineer back office systems.
— Support for usage-based billing models. In addition to subscriptions, businesses are also adopting usage-based monetization models and need the ability to bill subscribers commensurate to what they consume.
— Dunning tools. To facilitate payment collections and reduce churn, businesses need the ability to implement operational measures around dunning and collections.
— Payment gateways. To optimize monetization, businesses need the ability to price in any currency and have the financial operations to let subscribers pay any way they want.
Revenue recognition. Subscription businesses need the ability to handle the complexities of deferred revenue and to automate revenue management to meet compliance and accelerate time to close.
In this first-ever report for subscription and recurring billing management, Zuora was recognized as an end-to-end enterprise-grade solution going head to head against—and outpacing—“large suite providers” like Oracle and SAP.
Gartner noted that Zuora is “a significant player in this market” with offerings that enable companies to manage the entire subscription life cycle.”
With a platform custom-built for subscription models, companies across all industries, from Ford to Symantec, The Financial Times and Fender, are all turning to Zuora to run their subscription businesses. Just ask our 1000+ customers!
As Dylan Smith, CFO of Box, said: “Scaling our subscription business to what it is today simply wouldn’t have been possible without Zuora.”
And Michael R. Sutcliff, Group CEO of Accenture Digital said, “Together with Zuora we enable companies to develop more direct relationships with their subscribers and offer them the personalized services they now demand. The companies that move fastest to deploy an agile, global monetization platform that supports more productive and intuitive business processes are the ones that will deliver the best customer experience and be in the strongest position to be the leaders in this new Subscription Economy era.”
We are proud to be identified by Gartner as the hub that sits between CRM and ERP systems to do what those legacy systems can’t: orchestrate all subscription order-to-revenue processes throughout the entire subscription life cycle.
“We are thrilled to be included in Gartner’s first report on the market we’ve been serving for the past ten years with two flagship products designed specifically for the complex and dynamic requirements of the Subscription Economy®, said Tom Krackeler, Senior Vice President of Product at Zuora. “Both Zuora Billing and Zuora RevPro have leadership in their respective categories with over a decade of product development for industries and geographies around the world. This is not something any single company can build overnight.”
Download the report to read more about Gartner’s view of the trends and competitive analysis of the vendors shaping the Subscription and Recurring Billing Management market.