Subscribed 2019 kicked off with a bang as we welcomed 2000+ Zuora customers and companies from around the world, from Bloomberg and SiriusXM in New York to Siemens in Germany, from Bitdefender in Romania to Amaysim in Australia, Next Digital in Hong Kong to PHC from Tokyo.
As Zuora CEO Tien Tzuo noted, Subscribed is the time of year (his favorite time of year!) when the Subscribed community comes together to share and celebrate our mutual accomplishments and jump together into the future. Day 1 of Subscribed 2019 was all about this shared future.
And just what does the future hold?
We see the end of ownership and the rise of usership (read more about the keynote and check out highlights from our usership panel). We see smart services taking the place of dumb products. We see more and more businesses — across all industries — transitioning to subscription business models. We see that revenue is tied to consumption and customer engagement — but with engagement comes complexity. And we see that the future of business isn’t just about service monetization, but about service orchestration.
In addition to exploring the future and sharing some exciting announcements about the Zuora platform and new product developments, the keynote culminated in some important announcements….
Tzuo talked about the democratizing force underpinning the shift to subscriptions and users. There’s an opportunity for subscription services to democratize access to services, where and when people may not have access to the things. You may not have access to own a car, but you can access a ride.
And at Zuora, we see what’s going on in the world. And we recognize that we have a responsibility to make the right choices in designing services that continue to provide access to all.
So, in the spirit of democracy and philanthropy and fairness, we announced the launch of zuora.org: our commitment to use our people, our product, and our capital to ensure that the Subscription Economy works for everyone. https://www.zuora.com/2019/06/03/zuora-announces-launch-zuora-org/
We’ve taken the 1% pledge: time, equity, profits – to give back to the world. And we created the Zuora Impact Fund to fund mission-aligned grants and investments in inclusive technologies.
To celebrate this launch — and put our money where our mouths (and hearts!) are — we gamified our event mobile app so that every action attendees take will generate points to be converted into dollars that we will donate at the end of the event to Juma Ventures and Bhumi Org (stay tuned for the total amount donated!).
Read on for highlights from today’s keynote, usership panel with Pandora, Fender, eMoney Advisor, and Unity Technologies; and breakout session content from companies like Vonage, Neustar, Stansberry Research, Optimizely, PwC, Zoom, NextWorld Capital, NCR, New Relic, Zillow, Motor Trend Group, TheStreet, Solium Capital, WorthPoint, and more!
Disruption, Digital Transformation, and the Rise of Subscriptions
“Companies need new ways to engage directly with their customers to grow and take advantage of this disruption.” – Kevin Westcott, Vice Chairman and U.S. Telecom and Media and Entertainment Leader at Deloitte @kwestcott91 @Deloitte
“We are seeing more and more of the world’s top 100 brands transform their products into subscription services to meet customer demand and new growth.” Charles Trevail, Global CEO Interbrand & CEO C Space @CharlesTrevail @Interbrand
“Digital transformation isn’t just about digital. There is a tech component but people are realizing there’s huge advantage in business model transformation, in redesigning what the entire customer relationship looks like. Being able to hit those customer needs is a huge competitive advantage, enough to disrupt competitors and take market share.” – Craig Hanson, NextWorld Capital, @craigalanhanson @NextWorldCap
“Transformation projects all start the same way: we want to simplify, think out of the box, etc. However, you must have a forcing function to carry out these transformations. It’s easy to say, but you absolutely have to live it.” – Matt Rochester, Sr. Director of Product Architecture at Zuora
“Once you’re live with subscriptions, you’re going to want to do things that you didn’t previously think about.” – Tiago Nodari, Lead Product Architect for Zuora
“Digital transformation is using technology to create amazing experiences for your workforce and your client base.” – Curt Cornum, Insight Enterprises @InsightEnt
“You can put the right systems and processes in place, but if you don’t have a behavioral change as well you won’t get the results you want. It’s a big deal to have people think differently about how they’re interacting with their customers and what their offerings are.” – Jeff Yancey, EY Partner, Business Improvement Consulting @eynews
“If you shift to more of a subscription based model, a key change is that you’re reacting to events and these events are dynamic. This starts to drive changes in all the up and down stream processes.” – Jeff Yancey, EY Partner, Business Improvement Consulting @eynews
“Digital transformation is using technology to create amazing experiences for your workforce and your client base.” – Curt Cornum, Insight Enterprises @InsightEnt
Migration: Making the Shift
“The hardest part of any migration is cleaning your own data. When you finish the design phase, then start the migration phase, but again, make sure you set enough time to cleanse the data.” – Tiago Nodari, Lead Product Architect for Zuora
The Shortcomings of Legacy Systems
“We all know under 606 that billings and revenue are completely separated – you are allowed to take revenue as soon as you satisfy your obligations – ERPs cannot make this distinction. ERPs are not designed to take data from other sources and stitch it together as a revenue contract.” – Jagan Reddy, Zuora, SVP RevPro
“What I see is a lot of companies moving to subscription, or usage based models – the short answer is that current technology cannot keep up with this.” – Pete Schrader, PwC
“Most companies have some form of ERP system to handle their traditional business lines – these aren’t architected to manage the shift to subscriptions.” – Jeff Yancey, EY Partner, Business Improvement Consulting @eynews
The Complete Order-to-Cash Process
“Order to cash and rev rec are inextricably linked. Both have their own requirements, but the more we work with customers the more we learn how linked these are under ASC606.” – Jagan Reddy, Zuora, SVP RevPro
“Drive hard to invest in changes in your order to cash process as necessary – it definitely will need a change.” – Steve Judge, VP of Finance Transformation for CDKGlobal
“Okay I’ve adopted ASC606, what’s next? Knowing what we know, how should finance leaders think about rev rec? Compliance is in the past, but we all know that automation is in the future. 606 is over – but we’re just getting started, The next level of rev rec automation is empowering finance leaders to lead the business.” Jagan Reddy, Zuora, SVP RevPro
“Leading companies see revenue recognition not as a ‘nice to have’ but a ‘must have’ to scale and grow their business.” – Pete Schrader, Partner – Technology, Data Management at PricewaterhouseCoopers @PwC
“For every subscription change there are 15 things that have to happen – one of these things being rev rec. But really, this is much more than one thing.” – Kathy Pearson, Director of Technical Accounting for Zuora RevPro
“Compliance is the past – automation is the future. The biggest pain point I see with my clients now is the lack of automation.” – Pete Schrader, Partner – Technology, Data Management at PricewaterhouseCoopers @PwC
“Revenue automation was absolutely not an option for us, but a requirement for us.” – Steve Judge, VP of Finance Transformation for CDKGlobal
“What we’re seeing is that finance leaders are coming back and saying that automation is a business imperative.” – Pete Schrader, Partner – Technology, Data Management at PricewaterhouseCoopers @PwC
“Using spreadsheets, using a manual process – this puts your company at risk. How many human hands touch these manual processes?” – Pete Schrader, Partner – Technology, Data Management at PricewaterhouseCoopers @PwC
Benefits to Recurring Revenue Businesses
“Subscription sales grow on average 5X faster than sales of the S&P 500 companies and US retail. But there’s a huge diversity in outcomes. Just putting on a subscription moniker doesn’t guarantee success.” – Carl Gold, Chief Data Scientist for Zuora @24kcarl
“Accelerating the transition to a recurring revenue model is becoming an imperative for many companies. Recurring revenue models bring more predictable cash flows. If you model it the right way, you can predict accurately the outcome of the businesses. This has led to an explosion in valuation for companies who shifted part of their business to subscription: shifting just 5% of your biz to subscription yields .5 – 1 turn of EV/sales multiple.” Jeremy Schneider, Sr Partner at McKinsey @McKinsey
“40% of Fortune 500 companies will no longer exist in 10 years time to digital disruption. We are in the midst of a generational shift to the Subscription Economy. Gone are the days of a company selling a hit product deemed as a winner. We’ve gone beyond products, to a world where consumers have the highest set of expectations for, and demands from, our business. “ – Neej Parikh, VP of Digital Transformation at Zuora @neejPARIKH
“Today everything is subscription or recurring revenue based. It’s almost unheard of to do one-time product sales. It’s rare for a VC to fund that type of model. We push back on businesses without a recurring revenue model. A subscription model envisions the right type of customer-centric mindset, it increases stickiness and customer value. If someone has a more customer centric model and you’re pushing a one-time product sale or heavy customer requirement, you’re going to lose.” – Craig Hanson, NextWorld Capital, @craigalanhanson @NextWorldCap
“Companies like Uber can see what you’re doing and what’s going on. They were natively designed to do that. Hardware companies have no idea. You build a tractor, sell it to a farmer, and hope they come back in 10 years to buy more parts. But NOW, you can see what they’re driving, when they’re using it, what happens when the weather patterns change. It gets really interesting when you can see this product usage. Without consumption information going back and forth, it’s black box.” – Adam Echter, Simon-Kucher & Partners @simonkucher
“It may sound odd, but we need to start with analog. Customers are analog, but they want to interact with us through digital channels. We need to make sure we transform and do things differently then we have over the past 135 years if we want to be around for another 135 years. And the Subscription Economy is going to be what takes us there.” – Joe Koscik, NCR @joekoscik, @NCRCorporation
“If we’re enhancing the customer experience through business processes, products, and services — that is our ultimate measuring stick. We have 50-100 measurements under that, but none matter if we don’t increase customer satisfaction.” – Joe Koscik, NCR @joekoscik, @NCRCorporation
“How do we make the customer experience seamless? That’s an expectation of clients today and we need to be able to deliver on that.” – Curt Cornum, Insight Enterprises @InsightEnt
“Expansion and being connected to the customer really drive growth. This happens through change – renewals, crossells, upsells – Growing the ongoing relationship with a customer.” – Kathy Pearson, Director of Technical Accounting for Zuora RevPro
“Since 2016 the number of changes that happen in a subscription has doubled. If every subscription goes through one change, growth is going to triple and churn is going to reduce by 25%” – Kathy Pearson, Director of Technical Accounting for Zuora RevPro
“In commerce, the number one metrics that we track is churn…even a 1% drop in churn would be important for our bottom line.” – Ryan Hagey, Group Product Manager, Commerce Infrastructure at Evernote @evernote
“Account Updater allowed us to mitigate a lot of churn we get. It allowed our billing team more freedom. They’ve moved from tactical to strategic. It’s also allowed them to build relationships with customers and collect data points that allow us to identify at risk clients and predict churn.” –Rachel Kaplan, eMoney @emoneyadvisor
“We’re such a small company versus the users that we have, so we do have to rely heavily on automation.” – Ryan Hagey, Group Product Manager, Commerce Infrastructure at Evernote @evernote
“We work collaboratively and automate as much as we can to get the sales teams the leads that they need.” – Jill Marchisotto, Head of Marketing at TheStreet @TheStreet
“Our billing processes before we moved to Zuora were cumbersome and put the responsibility on our clients to be proactive. Automated payment runs has completely removed all steps. Instead of being reactive, our team is being proactive.” – Rachel Kaplan, eMoney @emoneyadvisor
“Most of our retry logic is focused on 5 days. We didn’t change that logic, but the logic behind the soft declines wound up helping us recover a lot more people that would otherwise move to the hard decline pool.” – Jill Marchisotto, Head of Marketing at TheStreet @TheStreet
“Some of the biggest improvements we’ve seen with Collect were an improvement in renewal rate and a reduction in churn.” – Jill Marchisotto, Head of Marketing at TheStreet @TheStreet
“When a payment is due, we try to collect the money that day. If it’s not successful, we don’t take away customers ability to watch videos, but we’ll retry. Since turning to Zuora Collect, we’ve collected close to $60K.” – Gurijinder Pooni, Senior Solutions Architect at Motor Trend Group @MotorTrendGroup
“As we’re growing and as we intend to launch internally, we need to look at all the possible payment methods in various countries.” – Gurijinder Pooni, Senior Solutions Architect at Motor Trend Group @MotorTrendGroup
“Getting the data right is a really important part of any implementation for a subscription model. Moving data and bringing it through is important. Have a good, detailed plan with lots of stages of execution, have a good project manager, and test — do a full dry run through your system, and if you don’t get it right, do it again: the full pass through of the data.” – Neil Smith, Sr. Manager – Enterprise Applications at Zillow Group @zillow
Pricing and Packaging
“Cleaning up your product catalog (once you have buy-in from sales) will help your teammates in finance and this gets them on board. When finance hears a sales team supporting them like that, the are like ‘thank you!!’” – Mario Espinoza, Revenue Operations Manager for Outreach.io @outreach_io
“Our marketing team goes to market frequently at very different price points. This can lead to product catalog proliferation unless you use a generic rate plan. That saves you from a redundancy within your product catalog. Doing so accelerated our launch to market very, very quickly. Now our marketing team can plug and play now within minutes.” – Kristen, Vandendriessche, PCIP , Revenue and Technology Optimization at Stansberry Research @stansberry
“we needed the ability to iterate on pricing and packaging quickly. With New Relic people’s stacks change a lot. Changing prices in a custom application takes toil and takes our engineering team off of core products.” – Case Koon, Director, Business Applications – G&A at New Relic, Inc. @newrelic
“A lot of research we have tells us pricing is an economic problem: what are customer segments, how do you optimize. It tries to reduce everything to a rote math problem. But pricing is actually one of the most exciting opportunities you have to re-architect the strategy of your business.” – Hazjier Pourkhalkhali, Global Director of Strategy & Value at Optimizely @Hazjier @Optimizely
“Static recurring billing could be missing usage value. But pure usage billing can be unpredictable. The trick is finding a blended approach.” – Lucasz Weber, Director of Product, @ZLukasz @Zuora
“What constitutes consumption? Text sent, kWh used, miles driven, CPU cycles spent, dollars processed, gigabytes stored, clicks captured…the options are endless.” – Lucasz Weber, Director of Product, @ZLukasz @Zuora
“All great experiments begin with the customer problem, not the solution. Pricing is a long-term opp to solve a lot of problems that our go-to-market teams face.” – Hazjier Pourkhalkhali, Global Director of Strategy & Value at Optimizely @Hazjier @Optimizely
“Freemium is a catalyst. You can use Freemium to lower the ‘activation energy’ in order to get a customer to convert. Customers who came in through a Freemium product had a CAC that was about 20% less than the CAC of those who came in through a cold start. Because customers can convert on their own terms, we’re seeing a higher retention rate.” –Patrick Campbell, CEO & Founder of Profitwell @patticus @profitwell
“The mentality you have to have is to separate pricing from attribution…Ask yourself, ‘What are the actual things about this product that are driving the price?’” – Matt Rochester, Sr. Director of Product Architecture at Zuora
“If you’re diverse and you’re just getting into the subscription business, chances are you’re selling more than one thing. What happens when you sell these things together?” – Kathy Pearson, Director of Technical Accounting for Zuora RevPro
“Usage is giving your customer what they want, when they want it.” – Kathy Pearson, Director of Technical Accounting for Zuora RevPro
For more about the end of ownership and rise of userhip check out the End of Ownership Report.