NetSuite’s Subscription Billing and Beyond
Well, this is interesting. Today NetSuite announced a Renewal Management offering for its Software Company Edition. The module is aimed at supporting recurring revenue management, a heretofore ignored need for the growing legion of software as a service companies.
The product appears to be NetSuite’s answer to solutions from players like Zuora and Aria who specialize in billing and related processes. When billing was a relatively rare thing — the annual maintenance bill or the one-time license fee, conventional billing software was fine. Billing for software was just like billing for a piece of hardware.
But then software turned to on-demand and suddenly customers had the ability to change the constellation of products and services they consume between billing cycles. When that happened billing complexity increased twelve-fold. The general-purpose vendors like Zuora handle all that nuance and more. Anything that can be subscribed to for a fee is fair game for a subscription billing system. So my bet is that NetSuite is dipping a toe into the water and will have other subscription goals in the future.
On a related note, maybe I am seeing things but this is another piece in a puzzle that looks like a new emphasis on revenue. Typically, when revenue’s importance rises vendors try to handle it through sales tools. This is different, it’s more about collecting than net new business and what I am seeing relates to billing, as here, but also revenue performance management (RPM).
This is just my guess because there’s no centralized group calling signals but it looks like the industry is renewing its emphasis on cash, perhaps in a response to the recent recession. The precipitating event of the recession, or one of them, was the lack of credit to enable mundane transactions to go on. Having or developing systems and processes that let an organization be more in control of its finances says to me that conventional bankers might find it less easy to do business with their best corporate customers in the future.
In fact, a niche that’s gone dormant that I have written about before —vendor financing — could be coming back to life. It makes sense too. Before there were general-purpose credit cards and other bank related forms of unsecure credit, there was vendor financing. It took many forms like a revolving account that you were invoiced on monthly or perhaps a less sophisticated layaway plan. Regardless, the vendor did the financing and collected the interest and the banker didn’t get much of that business.
Eventually, the convenience of bank financing won the day but then the bankers proved unreliable in a big way. They opted to gamble their assets in Wall Street rather than participate in conventional lending. It worked for awhile — not even a long time, really — and now the practices have been exposed. A market opportunity exists in vendor financing. It will not be satisfied by subscriptions or by individual vendor solutions overnight. But a gradual accretion of such solutions could spell a surprise down the road for bankers. Of course, I am not a finance guy, so what do I know. I just watch the marketplace.
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While I think you’re correct that there is an increased focus on revenue, my suspicion is that NetSuite’s new subscription solution is much more about advancing their relatively horizontal product into vertical markets. Subscription companies are growing in parallel to the cloud – and as you point out they have complex business process requirements that cannot be accommodated with traditional CRM, ERP or accounting software systems – processes such as flexible contract management, multiple billing types and frequent subscription changes. If NetSuite can satisfy these requirements, it carries its all-in-one enterprise-wide solution advantage into a market made up of loosely integrated point solutions. While that’s a big technology advantage for many buyers, it remains to be seen whether NetSuite can apply the focus and passion to this industry that is impressively demonstrated by best of breed providers such as Aria, Monexa and Zuora. We’ll see.