Subscription model has benefits besides reduced costs: Zuora

SaaS provider sees subscription as a way to reinvent businesses as a whole

Benefits with the “pay for the hour” SaaS model goes beyond cost saving for customers, according to Zuora CEO, Tien Tzuo.

Tzuo, who also founded the SaaS provider, admits that there is a tendency to view financial engineering as the key benefit of the subscription model.

“If that is all it was, it would just be lease vs. buy,” he said.

“But there is also the transformation of the service itself.”

Tzuo uses Zipcar, a car sharing service in the US, as an example of a company that has seen success with the subscription model.

“Their approach is not ‘here is your car and just lease it,’” he said.

“It is more about you having access to 50,000 cars that you can just pick up and drive away, and that it already comes with liability insurance and petrol.”

Better service

For Tzuo, the subscription model demonstrates a chance to reinvent services in terms of what the customer really needs, as well as how you provide that as a service with the technology available today.

“If I am a company selling turbines, I could offer it on a per hour basis and make it an asset that I can replace if it breaks,” he said.

According to Tzuo, that gives the company impetus to ensure that it does not break.

“In the process, you end up getting better service, innovation sits where it belongs,” he said.

“Additionally, it is not an asset transfer where the customers now owns it and you no longer don’t.”

Patrick Budmar covers consumer and enterprise technology breaking news for IDG Communications. Follow Patrick on Twitter at @patrick_budmar.