ERP Is Not Enough, According to New MGI Report

By Erika Malzberg February 20, 2019

Zuora Outpaces ERP to Become #1 Rated Vendor for Monetization

Zuora was rated the top vendor, among 16 vendors—including traditional ERP vendors Oracle, SAP and Amdocs—in the latest MGI Research Agile Billing Solutions Buyer’s Guide.

According to the report, “Agile Billing is an economic bridge between an organization and its customers,” and key to successful monetization. With this recognition as the top agile billing vendor, Zuora is validated as the essential hub that connects businesses with their customers.

Momentum in the Agile Billing Market

As noted in the report, “Billing was once considered to be a back-office function but, in its modern agile billing form, emerged as a link between the customer-facing front-end sales systems and back-office fulfillment, payment, collections, and financial reporting and management functions.” It’s also become key to the “strategic objectives of a company such as entry into new markets, gains in market share, and improved compliance.”

Whereas old business models were product-centric, focused on just getting more products to market and selling as many products as possible, new business models are customer-centric, focused on selling directly to customers, maintaining relationships with customers, providing ongoing value to customers, and monetizing customer relationships over time. These new business models require agile billing solutions.

As more and more businesses across all industries make the shift to new customer-centric business models, agile billing solutions are predicted to continue to disrupt the current billing market.

According to the MGI report, “By 2022, we expect Agile Billing to displace over 15% of incumbent billing solutions.” As a result, a forecast by MGI research estimates the total addressable market for software that manages recurring revenues to exceed $172 billion over five years.

ERP Is Not Enough: The Need for Agile Billing

Whereas traditional business models are anchored on a two-system platform that runs from a CRM to an ERP, new business models demand a flexible iterative system.

Specifically, “Agile Billing becomes an agenda item when organizations realize that they can no longer match their competition in terms of time-to-revenue, when they are unable to offer flexible new pricing plans and when their ability to accurately invoice, collect, report, disclose and forecast revenue is in question,” reads the report.

“This creates a need for a modern platform that can connect an organization’s front facing CRM system with their backend ERP finance system to automate all order-to-revenue processes in the Subscription Economy,” said Andrew Dailey, Managing Director, MGI Research.

According to MGI, “The reason that traditional ERP systems are not able to fill the capability void in billing stems from their fixed, often brittle, and coarsely granular approach to anything outside general ledger.” In other words, while ERPs are sufficient to manage your supply chain and function as your general ledger if you’re selling products, they are insufficient to support the agile billing that is necessary to sell products and services on a recurring basis.

As the report notes, “Ultimately, a billing system should not limit an organization’s business model, pricing approaches, Time-to-Revenue, or customer satisfaction. In practice though, many finance, technology, and business departments feel like they are held hostage to an expensive and brittle billing technology being used beyond its ‘SELL BY’ date.”

Agile vs Legacy Billing for Monetization

Much of the report focuses on the idea of agile monetization. MGI Research sees Agile Billing as key to overall agile monetization capability. As they note “Monetization is how efficiently and effectively market demand is created and translated into revenue, profits, and competitive differentiation….In the monetization context, agility refers to ability to create and evolve new offers by iterating rapidly, thus accelerating velocity with which a business can convert opportunities to cash.”

According to data from an MGI Research State of Monetization study, organizations that continue to rely on ERP systems for monetization experience serious challenges.

These challenges, according to MGI Research, are “tightly interconnected and stem from a lack of a single source of truth when it comes to accurate product catalog and pricing data and inability to flexibly model and deploy a variety of pricing methodologies.”

In the report, MGI cites what they call the “13 deadly sins of monetization” from heavy use of Excel to a lengthy financial close to SKU sprawl. “Notably, monetization challenges such as billing friction, revenue leakage, and others continue to grow in importance despite years of investment into ERP and custom billing solutions.”

The lesson is clear: Organizations that face monetization challenges need a new agile billing solution.

Zuora as the Leading Agile Billing Platform

MGI’s report validates Zuora as the leader in the agile billing space, having literally created the category. As the report notes, “Currently some suppliers orient their marketing messages and positioning towards subscription billing, in large part due to the awareness for recurring revenue management broadly created by Zuora.”

We are very proud to say that, according to this MGI report, “Zuora brand visibility, funding, pure-cloud architecture, deployment methodology, and size of channel separate Zuora from the rest of the next-generation, SaaS-only suppliers.”

About MGI 360 Ratings

MGI Research is an independent industry research and advisory firm focused on disruptive trends in the technology industry. MGI 360 Ratings is a comprehensive system for evaluating technology companies. IT organizations use MGI 360 to track suppliers, assess purchasing risks and identify promising new vendors. Vendors utilize MGI 360 to track their markets and evaluate partners. Institutional Investors use MGI 360 for independent assessment of tech companies. MGI 360 ratings help lower costs, save time, reduce risks, and identify new opportunities.

Read the press release.

Access the full updated MGI 360 Report.