Billing Lessons Learned at eBay

by Elizabeth Tse

In my career, I have always held roles where - in one way or another - the complete focus is on the customer.

When I was at eBay, I oversaw worldwide billing, payments and collections operations, and gained an intimate understanding of what it takes to develop, implement and maintain a successful, large-scale billing and payments system. After many years in this industry, I have a deep and unique understanding of the intricacies of billing and payments. Even then, I bet you can all guess the most important element of a successful billing system….customer satisfaction.

Too often, people consider billing a back-office function and I think that’s so wrong. Billing is fundamentally a customer-facing process. In which other process in your entire business do you have an opportunity to touch your customer’s bank account?

As we embark on 2010, I wanted to share some billing advice and insight, relevant to companies of any size and at every point in their lifecycle.

Bring billing to the front office.
It’s your most important and your most regular direct customer touchpoint. Think of billing as an ongoing relationship with your customers, not just a transaction.

Pricing and packaging experimentation leads to competitive advantage
A good billing system is not a cost management issue, it helps a company focus on revenue growth and provides the flexibility to change, test and optimize pricing. Companies that experiment with pricing and packaging have a competitive advantage in that they quickly learn what their customers want and how much they are willing to pay. Testing various billing options makes it possible for companies to leverage their service to capture as much market share as possible. Get the most out of your services – bill strategically and learn from it.

Billing is hard.
Sure it starts out easy for some with a simple monthly package but then quickly a business grows and wants to package and promote different offerings. As you expand domestically and/or internationally, you need to address the complexities that accompany different taxation rates and laws, multi-currency conversions, and more. Billing is not just about an invoice, but also pricing, payments, collections and ultimately impacts financial reporting. It has multiple downstream implications.

Anything less than 100% accuracy is not acceptable to customers.
No customer ever shares a good billing story with you since 100% accuracy is the minimal acceptable performance level. However, they sure as heck will let you know if it's wrong. At eBay, during peak hours, customers were listing literally thousands of items per second. Simply being 99.95% accurate for an hour would have left me with thousands of unhappy customers, hence my keen focus on getting it right all the time.

Billing is fundamental to your business process, but it’s not a core competency (unless you’re Zuora).
Billing is mission critical and has to be done right, but you also need to have the confidence and freedom to focus on product development and customer satisfaction in other areas. Spend valuable time building what you sell and buying what you don’t. We’ve addressed this before on the Z-Blog.

I do have a few more billing tips and tricks up my sleeve and will continue to share my thoughts. In 2010, we will maintain our fierce focus on customer success and will showcase the real results and benefits realized by Zuora’s customers. You can already read about many of our customer success stories on Zuora’s customer page. We will expand this series to include regular blog posts as well, so you’ll be hearing from me a bit more this year.

Happy New Year!

Zuora Launches First Online Commerce Platform for Publishers at DEMO09

by K. V. Rao

Today, we’re in San Diego at DEMO09, where established vendors and start-ups alike come to launch their wares to a panel of journalists, VCs, technologists, and thought leaders. We’re here to launch our latest offering, Z-Commerce for Media. Why Media, why now, you ask?

The publishing industry has struggled with the transition to the online world. While technology vendors successfully made the transition to SaaS and subscriptions, publishers opted for ad-supported and classified revenue models, giving away their content for free. As print circulation numbers continue to fall, and advertising and classified revenues drop, the media industry is struggling to stay afloat. We’ve recently seen household names like Readers’ Digest file for bankruptcy and the San Jose Mercury News print a ‘frank talk’ with readers about their financial woes, which begs the question, could the San Francisco Chronicle or the Boston Globe be next?

We at Zuora can’t imagine a world without a thriving free press. We believe that professional journalism is the cornerstone of democracy, so it’s time to do something to save this critical industry.

In order to survive, publishers must find new and better ways to monetize their online content. Rupert Murdoch and Barry Diller have already challenged their organizations to move away from free content. But what is the right business model? Is it monthly all-or-nothing access like the Wall Street Journal or a metered approach like the Financial Times? Is it pre-paid accounts and micropayments? Or something more nuanced like targeted premium packages for specific interests? The truth is, no one knows what pricing model will work best, so publishers need to start experimenting with bundles and packages quickly.

But media companies are going to need a flexible platform to create the right bundles for the right subscribers. As other subscription businesses have learned, a one-size-fits-all approach won’t maximize revenue, and over time they’ll need to package content to attract different market segments. But where is the platform to enable them to launch and test new products, manage invoicing, and collect recurring revenue? A lot of vendors, including Google, are talking about plans to offer products to help the media industry, but it will take time for them to actually build something. In an interesting side note, just last week Google’s CEO criticized News Corp’s plan to charge for content on all of their sites, saying that “there are enough free sources” of general news.

That’s where Z-Commerce for Media comes in. Zuora built the de-facto subscription platform for the SaaS and cloud computing industry that’s already being used by over 100 companies; and we think that this same technology can be applied to media. Z-Commerce for MediaTM is the first online commerce platform for publishers to (a) price, package, and publish content bundles online, (b) to register and manage new and repeat subscribers and their entitlements, (c) and to streamline the entire billing and payment operations processes.

What’s more – we’re already working with online publisher GigaOM and Reed Business Information, Europe’s biggest online and offline publisher – to manage their subscription billing and payment operations.

I’m excited that Zuora has chosen the media industry for our first industry solution, and look forward to helping publishers successfully make the transition to the subscription economy.

Want more information? Read the full Z-Commerce for Media press release and watch Zuora’s live presentation at DEMO09 at 11:30am PT tomorrow.

We’ll be blogging and tweeting from the show floor, so stay tuned!

Top Ten Ways to Improve Cash Flow

by Tricia Reilly

It seems like we’re starting sentences with "In these economic times..." quite frequently these days. But as every CFO knows, cash is king in any economy. It enables growth, investment and expansion; without it, you’re basically dead in the water. So how can you improve your company’s cash position?

We tackled this very issue in our second installment of the Secrets to Successful Subscription Businesses Webinar series. Featuring our CFO, Gary Hagmueller, the live event covered innovative ways to condense the length of time from when a prospect requests or is given a quote to when the money is actually received in your bank account.

Here’s a quick rundown of what was covered:

• Cash flow in a subscription business is different – While a subscription business offers a great recurring revenue stream, more transactions and billing complexity mean more opportunities to impress or confuse your customers.
• There are three distinct processes in the subscription quote to cash cycle, delays to any of which can mean a lag in cash flow:
  • Quote to close – How fast can your reps put together a quote, get it to the prospect, and get it back with the appropriate signatures and approvals?
  • Close to invoice – Can your organization generate an invoice the same day that the order is signed? Reducing delays in this phase increases the likelihood that the customer will pay.
  • Invoice to remittance – How easy do you make it for your customers to pay? Do you have multiple payment options – check, ACH, credit card, PayPal? Are you taking advantage of automated payment options?
• The Top Ten List – Gary provides his list of the best ways to Streamline, Automate and Scale your subscription business to improve your cash flow.
• Jeff Yoshimura jumps into a demo of the Zuora Subscription Management suite to show how we enable you to execute on many of the top ten recommendations.

Want to learn more? Watch a recording of the Webinar at your convenience.

Who needs a subscription management and billing solution?

by Amy Pruitt, Zuora Account Executive

Why do I need a subscription billing system when I already have an accounting package?

On the front lines here at Zuora, this is a question that comes up from time to time when speaking with prospective client CFOs and COOs. Maybe you’re asking yourself the same thing. Put simply, accounting and billing systems manage two different worlds in the business; so an effective accounting system doesn’t guarantee an effective billing system. Just how are billing and accounting systems different?

• Accounting systems record revenues and expenses after they happen. A subscription billing system is where your product catalog, customer subscriptions, and all change orders and amendments are housed. This is where you group features into various packages and rates plans, allowing you to offer customers the level of service they want at a price they can handle, based upon their individual needs.
  
  
• The accounting world revolves around debits and credits and requires business events to work around it. Billing, on the other hand, is built around the business events that drive the flow into accounting: customer acquisition, provisioning, pricing, usage tracking, calculations, invoice generation, collections, etc.
  
  
• An accounting system stores the charge after it has been billed; whereas a billing system looks at the customer’s subscriptions, including all change orders and amendments, and calculates what the bill should be, e.g. prorations, upgrades, downgrades, etc.
  
  
• Accounting will generate a balance sheet, but falls short when it comes to generating key subscription metrics like MRR, churn, renewals, etc.

So, let me pose the question:

How important are money and growth to you, right now?

The answer you give to that question indicates whether or not you should invest in a subscription management platform on top of the accounting package you already have.

If you said, “It’s about cash. Darn it! It’s about fueling the growth of my company by enabling my product, marketing, and sales teams to position and capture as much market share as humanly possible – right now, today! And, I want a system I can leverage in the day to day operational complexities of my business.”

Then, I would respond, “You need a subscription billing system.” Actually, I would say, “You need Zuora.”

Here’s why:

A subscription billing system, correction – a subscription billing system that is flexible, scalable and integrated, handles the tough stuff – change orders, proration, billing in advance and arrears, usage-based billing. The hard part of subscriptions is where the value is. Go for that if you want to make money!

You might not see it yet – actually you might not feel it yet, but it’s there. The pain you’ll experience when your customers want to upgrade, downgrade, pay with a briefcase full of cash (not a credit card), or pay you monthly not annually. Or your sales team wants to discount, and you want to empower them, but without fostering rampant pricing inconsistencies. Or your marketing team wants to offer all kinds of pricing and packaging scenarios to see what the market will respond to… without involving your IT department.

The way that subscription businesses grow is by understanding how the different segments of the market want to buy from you and then selling to them in those ways. It’s NOT about a lot of products but it IS about a lot of pricing and packaging options.

Totally not a surprise when I’ve hung up the phone or left a client meeting in which my client tells me that his customer said one of two things: “You’re charging how much??” or “Your price isn’t high enough for a company like ours.” Both of them have money, so sell to them in the ways they want to buy. This is what a powerful subscription billing system (read: Zuora) can do for you.