Zuora: Telcos have no choice but to look at cloud-based billing

As the overall economy becomes more uncertain, subscription-based billing is one area where certainty and predictability are taking hold – the question is whether it will be entirely welcome.

One evangelist for the new subscription-based economy is Tien Tzuo, founder and CEO of billing company Zuora. With his roots in industries not focused on telecom, Connected Planet was keen to hear his views on recent trends.

Connected Planet: There are some fundamental changes going on in many industries, some of which you have been commenting on.

Tien Tzuo: We have seen the world move from a manufacturing-based economy to a services-based economy – that is the reflected by the migration of jobs and opportunities. There are now many more opportunities making money out of customer relationships than there are making money out of cars, for example. People are beginning to think about how people work, not how cars work, for example. The biggest growth area in the car market is car sharing, not car manufacturing.

Connected Planet: How is this affecting how we do business?

Tien Tzuo: It is causing chaos, in the short term. The way that entertainment works and is delivered is changing, the cloud is changing the way hardware is sold, video is now everywhere online – all of these things are creating uncertainty. In the telco space, it is now a battle between telcos and Netflix, telcos and software companies, telcos and entertainment companies.

Connected Planet: I see you recently commented on Apple’s move to have all app subscriptions go through iTunes – for a cool 30% - that was the original thinking of telcos when content first became an online possibility.

Tien Tzuo: It didn’t work for them and there is a revolution against the Apple initiative. It is only working for some companies. Others are pulling away and building their own billing capabilities – for instance, citing the fact that they will lose control over their customers’ experience.

Connected Planet: This must be an opportunity for you?

Tien Tzuo: Sure, but it is not a long term strategy, it is a market disruption.

Connected Planet: Looking at telecom, in the longer term, how does the subscription model fit with the scale and complexity of their business?

Tien Tzuo: One immediate answer is speed. If telcos are having to adapt to new players, new competitors and new products as quickly as they are, a subscription-based system gets them to market quicker than anything that has been available before. I was an early employee at salesforce.com and learned the power of that. Sign up in the morning, ready to go in the afternoon is really achievable in some circumstances. Telcos will have to deal with that speed of response.

Connected Planet: So with the death of flat rate, subscriptions are the next billing model?

Tien Tzuo: The world is becoming a subscription economy – it is predictable, it is simple and that is what the customer wants. But ‘flat rate’ is not entirely dead. Once the subscriptions themselves get too complex, then someone will come along and say: ‘hey, all you can eat.’ It will be a simple differentiator at some point.

Connected Planet: Are telcos too big and complex to take on subscription billing?

Tien Tzuo: No, absolutely not. It is true that from the experience we have from many different industries, telcos are the most creative in many respects…..you are laughing?

Connected Planet: I am sorry, I am not used to people saying that telcos are creative.

Tien Tzuo: But it is true – the packaging and pricing, the friends and family concept, cross-product discounting – all of those things were innovative models. It will only get better too. It is interesting even now to watch the moves towards telcos branding themselves better, France Telecom is known as Orange, Deutsche Telekom is known as ‘T’.

Connected Planet: But looking at telcos – is subscription-based billing sophisticated enough for their needs?

Tien Tzuo: Absolutely. For the customer, it provides clarity and simplicity, while underneath there can be as much complexity in terms of analysis and tiers and thresholds as you want. The telco can support this because of the flexibility, free upgrades and ‘on tap’ functionality that the cloud provides. I believe that telcos have no choice but to look closely at subscription billing.