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Summary:

A couple of startups are trying to become the PayPals of the business world, offering their enterprise clients a way to measure and invoice without resorting to expensive custom-built billings software that they have to host themselves. The latest of these, Zuora of Redwood City, Calif., […]

A couple of startups are trying to become the PayPals of the business world, offering their enterprise clients a way to measure and invoice without resorting to expensive custom-built billings software that they have to host themselves. The latest of these, Zuora of Redwood City, Calif., has secured $6.5 million in Series A money from Benchmark and counts Coremetrics as one of its first customers. Tien Tzuo, CEO of Zuora, says the money will go toward building out the product and hiring a sales team.

In the age of the cloud, you can outsource everything. To me, outsourcing a billing system for a software-as-a-service provider seems like a hardware vendor outsourcing its inventory management, but I suppose just-in-time manufacturing has worked out for the hardware guys. So I’m trying to push aside my doubts about these new companies offering outsourced billing for anyone providing subscription services.

In addition to Zuora there is Austin, Texas-based eVapt, which doesn’t provide help in setting pricing the way Zuora does, but also recently closed a small $250,000 seed round. Ranjit Nayak, founder and vice president of marketing at eVapt, says The Economist Group is using eVapt’s service to track and invoice subscriptions and articles purchased on its sites. Another player in the space, Ireland’s LeCayla, was purchased in February by SaaS applications host OpsSource.

Right now, these guys are targeting SaaS vendors because they clearly understand the model, but both Tzuo and Nayak point to other subscription service providers — from online gaming to NetJets — as examples of companies that could use their services to get rid of another layer of complexity in their business.

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By Stacey Higginbotham

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  3. It is important to clarify that setting pricing for SaaS and subscription offerings is a function of the business service provider. eVapt has already built the necessary software infrastructure to create subscription based contracts once the price is set by the business. There are companies like Austin based Mimiran which provide consulting help in setting the right price for business services.

  4. Stacey Higginbotham Thursday, March 13, 2008

    @Ranjit, eVapt doesn’t help with setting price, but Zuora does.

  5. Dave DiDonato Tuesday, April 8, 2008

    You left out Aria Systems billing solution, ariasystems.com, from your discussion. In our research they had the most complete overall solution and exceptional support.

  6. Stacey Higginbotham Tuesday, April 8, 2008

    Dave, you’re right. I’m chatting with them later this week, tho.

  7. Have you looked at SubscriptionDNA.com? Definitely an up and coming solution that looks like they have a real interesting offer.

  8. Whose challenge is this ? Marketing team is coming up with innovative price plans, Sales is aggressive in acquiring customers, Technical team is provisioning services, Customer is availing every option of service extensively but end of the month, usage metering , calculation and invoicing !…..How do we do this? Is this a concern for every cloud computing provider ?

    To have competitive edge and sustain in the cloud market place, cloud service providers are flexible in terms of their services, price plans or pricing structure which introduced the concept of Pay Per Use (PPU). But, one must not ignore the pains of a cloud service provider in tracking, collating and calculating the usage of each and every customer, applying respective rate plan, and generating a bill.

    In addition to the usage based pricing parameters such as storage space, bandwidth consumption, computing cycles, number of users, modules, services, instances, downloads, alerts, hours etc, every cloud service provider has its own vertical specific usage based pricing charges e.g. in SaaS HRM vertical , they charge based on number of employees, or per month per user, Now the challenge here is cloud service provider has to have a continuous watch on the usage consumption of its customer(s) which may prevent from significant revenue loss. Alerting and allowing a customer on the usage limit (threshold) is again one such crucial business process. Cloud service provider follow a manual process or they have a tool in house developed to track such things. This exercise involves additional human resource or efforts to their operations .

    Manual usage tracking is not much of a painful process for start-ups with less customers. However usage tracking process would become a challenging and painful process for the service providers with Large customer base. Hence cloud service provider should automate its usage tracking process and keep a weather eye on the individual customer’s usage consumption. This will reduce the revenue loss occurred in manual process.

    eVapt has proven experience in collecting the usage records for cloud subscription service providers across the globe. eVapt has deployed its solution along with it’s Metering module which integrates with cloud service providers database servers / control panel /virtualization platform to collect the usage detailed records (UDRs). This will collect data that is in logfiles, databases or can run scripts written in Java to collect data. The Metering component in eVapt allows collections of multiple usage type and accurate processing of the same. This will plug the loss of revenues through accurate usage collection and processing

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