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The rise of Subscription Economy: Zuora

Nurdianah Md Nur | May 12, 2014
Businesses need to adopt a subscription-based revenue model in order to stay relevant to their customers in future, advised Zuora’s CEO and founder.

Instead, enterprises need a platform that enables continuous business model innovation centered around the recurring customer relationship. A new breed of systems is needed to augment ERP and remove roadblocks to innovation. These systems should easily integrate into existing IT infrastructures, seamlessly manage the subscription order-to-cash processes, meet security and audit standards demanded by large enterprises, and support rapid innovation without requiring massive investment.

Businesses also have to relook at their financial metrics. In a traditional product business, you look at an income statement, which is a backward looking financial statement that looks at how much revenue you did, and what it cost for you to deliver that business. In the subscription economy it is a forward looking annual recurring revenue based financial statement.

These are the metrics that matter:

  • Retention Rate:How much of your average rate of return (ARR) are you keeping every year?
  • Recurring Profit Margin:It is your annual recurring revenue less churn minus the cost to run a deliver that service, and
  • Growth Efficiency:How much does it cost you to acquire a new dollar business?

 Zuora snagged a US$50 million round of venture capital last year, and has Dell, IBM, Tata and Salesforce among its customers. What's next for Zuora?
Asia is our new frontier and we are expanding our presence in the region with a new office opening in Singapore anytime now. This is part of our international expansion strategy to solidify our global leadership position.

We recently raised a further US$50 million in additional capital to expand our operations to help transform the quickly growing number of companies that are embracing the Subscription Economy.

We want to maintain our momentum and expand into new vertical markets and geographies. We will continue to in core research and development that will broaden and deepen our product line at an unparalleled pace.

 

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