New Report Reveals Subscription Economy Tools Market Reaching $100 Billion Through 2020

April 12, 2016

Report Highlights Zuora as a Leader Driving a Major Share Shift Away From Legacy Systems Vendors

Foster City, Calif. – April,12, 2016 – At this year’s Subscribed™ Conference, Zuora, Inc., the world’s leading provider of subscription billing, commerce and finance solutions, unveiled a report by MGI Research that estimates the global market for Subscription Economy® SaaS tools will be more than $100 billion through 2020, with 20 percent of Fortune 1000 companies adopting these solutions. The report forecasts the total addressable market (TAM) for Zuora’s Subscription Billing platform will be nearly $15 billion by 2020, growing at a 50 percent compound annual growth rate.

“We have claimed that all companies are moving to the Subscription Economy, and this study shows that to be true,” said Zuora® CEO Tien Tzuo. “It’s clear to us that the shift to subscription business models requires Relationship Business Management (RBM)™ tools that will drive deep subscriber relationships and create opportunities to monetize virtually anything. We will continue to lead the industry in supporting our customers’ need for rapid innovation, flexibility, and agility to grow and prosper in the future.”

The MGI report is a comprehensive study of Subscription Economy SaaS services and tools, described as Agile Monetization Platforms (AMPs), which includes nine categories: agile billing, financials, order management, e-commerce, customer support, CPQ (Configure-Price-Quote), contract management, revenue recognition, and mediation. The study includes 34,796 companies in 116 countries across 10 major geographic regions. The report accounts for almost $50 trillion in revenue, or 60 percent of worldwide GDP and more than 70 percent of North American GDP. North America has led the move to these SaaS services and tools, and over the next 24 months, markets beyond North America will accelerate adoption, led by Japan, China, Germany and the UK.

Companies are no longer focused on just shipping products. They are building new services and experiences for their customers — experiences that deliver outcomes, not assets. This requires companies to move from “selling units” to “monetizing relationships.” In order to meet the changing needs and expectations of today’s customers, businesses are realizing they need to offer new services that can be monetized in more flexible ways. The rise of the Internet of Things creates further possibilities to offer whole new classes of services and experiences from established industrial companies — creating an unprecedented opportunity for a mix of recurring and usage-based pricing models.

The report further suggests that because these new SaaS services and tools can support rapid scaling for topline growth and increased customer engagement via data and analytics, spending for these solutions is now being prioritized. Similarly, companies seeking to improve their efficiency by consolidating a number of out-of-date and disparate systems through a new monetization platform will also benefit, fueling additional demand.

“As enterprises attempt to shift to new subscription and on-demand business models, they realize their existing business systems are wholly inadequate,” said MGI Research Analyst Andrew Dailey. “In fact, in some industries, legacy business tools are delaying business model migration, creating an existential threat for some well-known companies. In addition, recurring revenue business models require new approaches to product management, sales, marketing, and even finance.”

Additional Report Highlights

  • At $50.441 billion, North America is the largest geographic component of the overall TAM. On a combined basis, Asia (East Asia, South Asia and Southeast Asia), at $24.847 billion, is the second largest component, and Europe, at $22.757 billion, is the third.
  • More than 80 percent of the overall TAM is represented by companies with over $1 billion in annual revenues.
  • Industrials at $26 billion, Information Technology at $22 billion, and Consumer Discretionary at $14 billion represent the top three opportunities for Subscription Economy services and tools. Energy, Consumer Staples, and Financials also have a five-year TAM of more than $5 billion.
  • IOT adoption will be a significant factor in driving spending, as increasing control capabilities and data collection will stimulate innovation with new pricing models.

Additional Commentary

In the report, Mark Sisco, Director of Operations at NCR, is quoted as saying, “Ability to switch from Capex to Opex has been one of the main drivers from NCR to explore new business models. The subscription model has allowed us to introduce offerings that are very robust, quite affordable and easy to access by small customers who don’t have a lot of technical knowledge or a lot of capital to outlay.”

Matt Anderson, Chief Digital Officer at Arrow Electronics, is quoted as saying, “If you had a pacemaker that had sensors in it you could charge for a subscription for heartbeats! If you had shoes that had sensors in them you could charge for how many kilometers do you want to walk per month! Those kinds of business models never existed before.”

Additional Resources

The Subscription Economy: A Business Transformation” by Tien Tzuo, CEO of Zuora

SlideShare: “Drivers of Success in the Subscription Economy

MGI Research Forecast on Agile Monetization Platforms 2016-2020

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About Zuora, Inc.

Zuora’s Relationship Business Management (RBM) solution helps enable businesses in any industry to launch or shift products to subscription, implement new pay-as-you-go pricing and packaging models, gain new insights into subscriber behavior, open new revenue streams, and disrupt market segments to gain competitive advantage. Headquartered in Silicon Valley, Zuora also operates offices in Atlanta, Boston, San Francisco, London, Paris, Munich, Beijing, Sydney, Tokyo, Amsterdam, Vienna, Copenhagen and Stockholm. Zuora clients come from a wide range of industries, including media, travel services, consumer packaged goods, cloud services, and telecommunications. Clients include Financial Times, Schneider Electric, Box, Honeywell, NCR, RTL, The Guardian,, BlueJeans, Shutterfly, TripAdvisor, and Vivint.

Media Contact:

Jayne Scuncio