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Zuora: transforming the European ERP market

17th Nov 2011
Head of Editorial Sift Media
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In an exclusive chat with BusinessCloud9.com editor Stuart Lauchlan, Tien Tzuo, the CEO of Zuora, reveals the company’s mission to surpass the traditional European ERP market and create a new system of record for 21st century business models.

Tien Tzuo has long focused on the need for an on demand subscription management service, but with enterprise customers that include the likes of Dell, Box.net, Reed Business Information and News International, the company is broadening its ambitions.

Tzuo explains: "We are still about billing at the core, but our vision for the future is to transition into billing, commerce and finance. From a positioning standpoint, this is about a much broader footprint to take on Oracle and SAP.

"So we want to become the 21st century system of record for customers. We will build onto the existing system. We’re putting in a lot more resources. We’re investing heavily in R&D and expanding the product line. For the next 18 months, product billing and finance will consume us."
This isn’t just about being Cloud ERP, he adds. There are specific issues in the market that traditional ERP concepts just can’t handle anymore. "We are partners with Workday and NetSuite, ERP firms that are focused on Global 2000 companies. Those firms are just taking accounting and ERP and putting them in the Cloud and there’s nothing wrong with that. From a CRM perspective, that worked well at Salesforce.com. But we think that the concepts are outdated," he says. 
"If you look at what we do, it’s a very different product. We don’t have a catalogue with a price, we have plans – monthly, weekly and so on. We have a different customer master: how many customers did you acquire, did you lose, what’s your customer churn rate, what’s the monthly recurring revenue and so on. That’s completely different to an order management system or an ERP system that knows how to order 230 pencils."
He adds: "When I came over to Europe on this trip, I went to Verizon and I said I wanted to add an international option on my phone. They asked when I wanted to add this, for how long did I want it, how many minutes I might need.
"Traditional ERP can’t handle that. SAP, Oracle, NetSuite – they’re all fantastic for General Ledger or for manufacturing or for inventory, but they don’t do the heavy lifting for running new subscription-based business models. We want to go to the big companies in the world and say to them ‘don’t do that Oracle R12 upgrade – put us in and use NetSuite for your General Ledger’."
But isn’t there now increased competition coming from both SAP and Oracle, both of whom have recently gotten Cloud religion and are preaching the gospel to their installed base? Doesn’t that pose a new commercial challenge for Cloud pureplays? Tzuo insists that what Zuora represents is a more radical shift: "If you were a NetSuite you might be a bit worried, but you have to fundamentally rethink your ERP system to do what we do.
"If you look at what Oracle and SAP and what’s going on there, there’s no innovation in the core systems. There’s no Version 5 of R3 coming along. There some outlying stuff happening, some social media enhacements, but for Oracle innovation is about trying to make stuff they’ve bought work together on the Fusion platform. CIOs are saying ‘ I don’t want to do this R12 upgrade, there’s nothing new I’m going to get from this’."
The other big focus for 2012 is Europe. Zuora was, admits Tzuo, almost dragged into Europe earlier than expected thanks to inbound business coming from outside the US. With that traction there, the firm now intends to capitalise on it. "Europe is a big focus for us," he says.  
"We have massive expansion plans for Europe. We’ve got ten people here already and we will expand that to 20. If you look just at the customers we have signed this year, we have more than 2 billion euros in the system. Europe is ready and embracing the shift to a subscription model."
Europe means London in a big way to start with. Unlike other US Cloud firms, Zuora has chosen to resist the lure of the Irish Government’s Cloud investment drive and is based in London. More startlingly 2012 will also see a data centre set up in the UK (location to be confirmed) to service European customers.
Tzuo recalls: "We drank the KoolAid at Saleseforce.com and built the Irish hub, but since then mobile computing and social networking have made us all much more comfortable with the idea of a scattered workforce."
The big issue with having to have national data centres is the on-going concern about data transfer across national borders, a barrier which a number of US tech leaders have become increasingly vocal about removing in the name of global Cloud market competition. Tzuo agrees: "It is still a big mess. But something has to happen. It just doesn’t make sense as it is.
"At Salesforce.com the place we got the biggest push back from was Asia because the Hong Kong banks would be housing information from Middle East clients and they weren’t going to use us if their data was going to be housed in the US. But we are in multi-jurisdictional areas.
"Swiss banks turn around and say that they have to have the data housed in Switzerland. But then there’s someone in their London branch who accesses it via a terminal, so the data is being consumed outside of the Swiss borders. Who’s to stop someone putting a sniffer on that London terminal and downloading the data that is supposed to be safe in Switzerland?"
The data transfer row will rumble on, but for now Zurora is set to beat its ‘alma mater’ Salesforce.com to the mark and get a UK data centre up and running. Certainly the funding seems to be there to bankroll such expansionist moves.
This week the firm announced $36 million in funding from Index Ventures, Greylock Partners, Benchmark Capital, Redpoint Ventures, Shasta Ventures and Tenaya Capital as well as fresh personal investments from Benioff and Workday founder and CEO Dave Duffield.
Four years on from its inception, Zuora can safely be said to be have exceeded expectations to date. Now with Europe firmly in its sights, the profile of the firm is only set to rise. The ‘21st century system of record’ is a message that subscription-based businesses across the continent can expect to hear a lot more about during 2012. 
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Replies (6)

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By david_terrar
18th Nov 2011 13:25

Sorry, but I don't get it!

 

This is a great headline, but I really can't see the innovative approach in what Tien Tzuo actually says in the interview.  You can say you are more innovative and you've got a broader footprint than an Oracle or an SAP as much as you like, but where is the evidence?  He says:

 

"We have a different customer master: how many customers did you acquire, did you lose, what’s your customer churn rate, what’s the monthly recurring revenue and so on. That’s completely different to an order management system or an ERP system that knows how to order 230 pencils"

 

Yep!  Managing customers is definitely different to ordering pencils…. Thanks for explaining that Mr. Tzuo.  Are you seriously expecting me to believe that I can't get customer acquisition, customer churn or monthly recurring revenue from my Salesforce CRM or my Business ByDesign system.   I welcome another Cloud ERP entrant in the marketplace, but sorry, I don't get how Zuora is going to be any different from this article.  I just don't get it. 

 

David Terrar

D2C and Cloud Advocates

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Replying to Tim Vane:
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By benkepes
21st Nov 2011 17:08

Sorry but...

David - I disagree, the concept that I believe Tien is trying to get across is that Zuora (and it's competitors Aria, Vindicia etc) are focused on forward looking customer management and retention - let's call it forward looking revenue lifecycle management.

ERP on the other hand is primarily backwards looking, yes it can give me lots of reporting stuff but it's primarily about looking backwards and reporting on that. I'd suggest you spend some time sitting down with Tien to talk through this,the differences become clearer once you do

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By JC
19th Nov 2011 08:29

Agree totally ...

@David Terrar - agreed

The subscription economy

The first time I read this - couldn't really work out what innovative points Tien Tzuo was trying to put across. After second reading designated the article to the bin as nothing new just regurgitating old ideas

What is this chap talking about - All hype and little new substance

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By david_terrar
20th Nov 2011 10:06

Glad it's not just me

@JC

I'm glad it's not just me.  I have huge respect for Dave Duffield, so if he is a personal investor in Zuora there must be something to it.  However, it doesn't come across in this article.  They can say they want to be the system of record for the 21st century as much as they like, but without explaining how they are different, as you say, it's just hype.

David Terrar

D2C and Cloud Advocates

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By david_terrar
21st Nov 2011 19:09

The've connected, so we'll see

@Ben

Maybe it's me, but I didn't get that message from Stuart's article or Tien's quotes.... particularly the one about ordering pencils.  However, their VP of Marketing has spotted these comments, contacted me and we are arranging a 1:1 briefing.  I look forward to hearing more, and I'll report back here when I do.

...and pardon my asking Ben - is Zuora a client of yours?

David Terrar

D2C and CloudAdvocates

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By david_terrar
29th Feb 2012 12:37

No response from Ben

Just checked back and it's notable Ben never replied.

 

David Terrar

D2C and CloudAdvocates

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