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Subscription billing software enabling new business models

Zuora's Tyler Sloat shares his CFO strategies for succeeding in the subscription economy.

In September 2010, Tyler Sloat was named CFO of Silicon Valley-based Zuora Inc.

Zuora's billing software helps companies manage the subscription lifecycle for their customers, including pricing and packaging, acquisition, billing, collection, renewal and analytics on subscriber data.

Shortly after Zuora announced $115 million in new private funding, Sloat spoke with SearchFinancialApplications.

Zuora CFO Tyler Sloat

Tyler Sloat

How does your subscription billing software improve the management of recurring revenue?

Tyler Sloat: A company might be launching a new product or shifting its business model. They look at their legacy systems on the back end and realize they will not be able to execute against that strategic initiative with the systems that they have in place. We enable our customers to actually enter into a subscription business model, or if they are already in it, to be able to make strategic shifts and iterate in a flexible and efficient manner.

On the back end, as an enabler, our systems provide a company with the data the company needs to know whether it is actually doing it correctly and allow the company to iterate on that data.

Does your software replace traditional ERP?

Sloat: We're not a GL system. A company still needs a GL system to be able to roll up and close its books. We would handle most of the revenue side, but we don't handle the expense side.

What does your company use for ERP?

Sloat: We use NetSuite for our GL, Zuora for RBM [relationship business management] and Salesforce for CRM.

How does that perform?

Sloat: It performs well. We utilize our system for the billing, the cash, accounts receivable, deferred revenue, revenue. Then we have a productized connector to NetSuite. We can pass information to NetSuite and do our consolidation in NetSuite.

Can your subscription billing software integrate well with other ERP systems?

Sloat: Absolutely. Our capability to integrate into a GL system is not specific to NetSuite. It's important to be able to allow our customers the flexibility in how much they want in their GL system, whether it's utilizing their Oracle, SAP or NetSuite, which has been a customer of ours for five years now. We understand that we need to allow our customers the capability to utilize us as a subledger for certain items like AR or whether a customer would want to be able to pass detailed invoice data from Zuora into their GL and utilize that system as the subledger.

What are your recommendations for being a good CFO?

Sloat: Own the business model. I'm not talking about a budget. I'm talking about the strategic business model. You need a very clean and clear understanding of what the drivers are for the business and what influences change in the business. You need to help executive staff make the right decisions on what is going to move your business forward. The best CFOs can do this but only after they have already set in place the compliance and governance structure that allows the books to close, that allows for appropriate internal controls and reporting. That needs to be first and foremost clearly. Once that is set, the business should be a machine that runs with a lot of confidence around it. The best CFOs know how to set up that governance machine then turn the corner and act as a true business advisor and strategist. They are the ones helping you to optimize and run the business model for the company.

What is the toughest part of your job?

Sloat: When you are growing so fast, you need to make sure you are doing constant measurement on investments. When you are growing as fast as we are, and the market opportunities are as big as we are facing, the risk is you get too far in front of your skis. In the subscription model, you often invest ahead of revenue. You invest in growth, you invest in acquisitions. The toughest part is making sure that you have a constant feedback loop, a measurements system to understand, OK, do we need to keep going, do we need invest more? Does it make sense or do we need to pull back? That is difficult. You also need to ensure the entire executive staff is aligned on that feedback loop so you have buy-in across the entire organization.

What is some advice for building a great team?

Sloat: It starts with the next level of leadership. First, it's about setting up your governance, your compliance structure first. I always look at my controller. I make sure the controller is 100% rock solid and I know the controller has everything under control. When I know that is in place, then moving forward, you need to understand, "What do I need to fill out the reporting structure as well as the planning infrastructure to allow for a robust business model to function within the company?" That is primarily addressed through a strong FP&A function. In between the two would be a head of operations, typically a mix of sales ops and finance ops, that will help execute the business model.

Next Steps

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