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Zuora and Salesforce.com: A Good Deal

Zuora and Salesforce.com: A Good Deal

I think of service as the irreducible part of the vendor-customer relationship, where you have to interact on some level. You can only go to the vendor when you have a billing dispute or other issue related to the core of the relationship -- a peer relationship won't do much good. The announcement of a new relationship between Salesforce and Zuora makes that clear, and the combination of billing, payments and customer service is spot on.

By Denis Pombriant CRM Buyer ECT News Network
04/06/11 5:00 AM PT

Zuora and Salesforce.com have announced a new offering that highlights the strengths of each company and delivers new functionality to the telecommunications industry. Zuora for the Communications Industry is a solution based on the Force.com platform that handles billing, payments and customer care for telco and related industries' customers.

This makes a lot of sense and, as often happens with Zuora, I am scratching my head wondering why I didn't think of this. Here are what I consider the highlights.

First, there's billing and payment for subscriptions with emphasis on the special customer relationship that is defined by a subscription. Subscribers are free to change almost at will. True, we're usually locked into two-year contracts for wireless services, but that's a relatively short time, and there's no telling when this model will be vacated in favor of something more fluid.

So vendors have to be ready and able to modify the relationship as a customer's need changes. Often billing systems don't enable enough of this because they're mired in a paradigm -- and a system -- that assumes customers are on board for life, or at least decades. This presents a disruption opportunity for subscription billing providers.

Equally important, this relationship also does a lot to redefine an important aspect of CRM. Over the last few years -- in concert with the social revolutions -- the contact center function has been deconstructed into two constituent parts that had always been thought of together: service and support.

Support vs. Service

I think of support as helping a customer with a technical issue related to product use. How something works. Trouble shooting. Fixing problems, and the like. Social channels have become increasingly popular for peer-to-peer support -- customers helping customers. Increasingly, support is now done through Twitter, Facebook, email and other community-oriented solutions like the Salesforce Service Cloud and Lithium in a peer-to-peer setting today.

Enterprising customers even make video of service issue fixes and post them on YouTube. In fact, YouTube is so popular that it's now the No. 2 search engine. Of course, YouTube is not a search engine; people just use it that way, and that's the point. Support is being taken out of the vendors' hands because customers can do it better, cheaper and faster. Vendors aren't complaining.

Service is another matter. I think of service as the irreducible part of the vendor-customer relationship, where you have to interact on some level. You can only go to the vendor when you have a billing dispute or other issue related to the core of the relationship -- a peer relationship won't do much good. The announcement of a new relationship between Salesforce and Zuora makes that clear, and the combination of billing, payments and customer service is spot on.

In the Catbird Seat

The idea has legs, and telcos around the world are already jumping on board. The initial customer base includes communications vendors from several countries and continents including Canada, (Barrett Xplore) The U.S. (Open Range) and Australia (Macquarie).

This is a significant announcement for Zuora, which recently opened up its European offices, because it defines a new market and positions Zuora very nicely in the catbird seat. It's important for Salesforce too.

Historically, a company like Salesforce has grown by acquisition and by extending product lines. This announcement is more of a product line extension, but it's done through developing partnerships for its existing products. Like last week's announcement of a partnership with Intuit, Salesforce is developing new channels for its existing product, as well as new ways to access them for minimal investment.

Stars Aligned

I expect to see more of this. In fact, and this is only my hypothesis, last week's activities might offer an additional insight or market signal. Salesforce bought Radian6 for US$326 million, showing -- as it has before -- that it will buy a company for strategic advantage. Radian6 is the category leader in social media monitoring and related things, and Salesforce scooped it up to bolster its position.

The same could happen with Zuora if billing and telco service becomes strategic enough, and there are some interesting reasons to consider this idea. First, we're in the beginning or middle of a replacement cycle. Client-server call center systems have exceeded their useful lives and can be replaced by a new generation of SaaS-based, socialized solutions that are significantly less expensive to own and operate. Also, 10-plus years ago, the wireless industry was very different and VoIP was a dream. These and other factors are potential drivers for the Zuora-Salesforce coalition.

Finally, and this has to be said, Zuora's CEO and cofounder was one of the earliest members of the Benioff team. Tien Tzuo is a smart guy and a strategic thinker, and he's proven his chops at Salesforce and now Zuora. Zuora's platform is Force.com too.

Lastly, Benioff has a personal investment in Zuora, having provided some early cash. All those stars are aligned, but I'm getting ahead of myself. It is enough to say that the Zuora-Salesforce alliance makes sense for present reasons. We need to see how the market reacts.


Denis Pombriant is the managing principal of the Beagle Research Group, a CRM market research firm and consultancy. Pombriant's research concentrates on evolving product ideas and emerging companies in the sales, marketing and call center disciplines. His research is freely distributed through a blog and Web site. He is the author of Hello, Ladies! Dispatches from the Social CRM Frontier and can be reached at denis.pombriant@beagleresearch.com.


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