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Subscription Vendors - Building Innovative Subscription-based Businesses: Lecture 5

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Subscription Vendors - Building Innovative Subscription-based Businesses: Lecture 5

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Subscription Vendors - Building Innovative Subscription-based Businesses: Lecture 5

  1. 1. Building InnovativeSubscription-basedBusinessesBUS-185Lecture 5: Subscription VendorsMartin WestheadReferences: Forrester Report: Subscription and Recurring Billing
  2. 2. MerchantaccountRecurringPaymentsPlatform TypesSubscription PlatformsRecurringPaymentsBank/CCproviderYourProduct/ServiceSubscriptionManagementYourProduct/ServiceECommercePlatformECommerce PlatformsMerchantaccountComplexityFlexibilityControlLower CostComplete solutionReduced controlHigher cost(but more value)
  3. 3. Platform CapabilitiesSubscriptionPlatformEcommercePlatformDeployment SaaS SaaSMerchant of Record ✗ ✔✔Payment gateway ✗ ✔✔Fraud screening ✔ ✔✔Store front ✔ ✔✔Revenue Recognition ✔ ✔Business modelmanagement✔✔ ✔✔Marketing tools ✔ ✔✔
  4. 4. Alternatives Game Monetization Platforms Vendors such as Playspan (Visa) and Live Gamer Expensive but very complete Ecommerce offerings Virtual currencies and micropayments Many payment method, including international and proprietary Payout support Build in-house Netflix Survey Monkey Wordpress Operations/Business Support Systems (OSS/BSS) High end Telecoms Enterprise Resource Planning (ERP) Vendors such as NetSuite, Oracle, and SAP offer enterprise ERP solutions thatincorporate billing capabilities. Enterprise Ecommerce Platform Vendors such as Elastic Path Software, Hybris, IBM (WebSphere Commerce), andOracle (ATG) offer solutions in this space.
  5. 5. Subscription PlatformsPros Primary solution for mostsubscription needs Feature-rich Relatively low costCons Incomplete solution Payments International payments Tax Analytics Support Constrained by VendorcapabilitiesCost: around 1-3% of revenue
  6. 6. Ecommerce PlatformsPros Complete solution Payments Support Etc. Immediate internationalpresence (Great way to break into newIntl markets)Cons Higher cost Highly constrained by vendorcapabilitiesCost: around 7-10% of revenue
  7. 7. Gaming PlatformsPros Complete solution Extensive monetizationcapabilities Subtenacy Customer payouts Virtual currencies Micro transactions Extensive payment options Localized cash Playspan cards in Walmart Very InternationalCons Very expensive Highly constrained by vendorcapabilitiesCost: around 11-15% of revenue
  8. 8. Build in-housePros Control Can do exactly what youneedCons Expensive Hard to do Need a team with experience Often not core competencyCost: 12-36 staff-months development1-2 staff ongoing maintenance and support
  9. 9. OthersPros I already have (or need) oneof these so its easy to bolt onCons Constrained by limitedfunctionality
  10. 10. Things toconsiderwhenchoosing avendor
  11. 11. Supported business models Core issue Even small extensions to business logic can provechallenging What you need Today What you need Tomorrow Vendor Roadmap Level of influence on Vendor Roadmap Building custom features on top is hard Ning burned by this approach
  12. 12. Front-end experience Ecommerce frontend Seen by your customers Administration front end Internal for product configuration Sales force (e.g. telesales) Support Reporting and Finance Finance team Business Analytics
  13. 13. Developer Experience API Capabilities Create, Update Read (CRUD) Events and Notifications Documentation Ease of use SDK Client libraries Tooling Developer support Community Testing environment Availability Refresh Ability to populate with (scrubbed) production data
  14. 14. Globalization capabilities Multiple currency support Charge in multiple currencies Presentation of currencies Currency rounding rules Language support Multiple timezone support
  15. 15. Fraud detection and protection tools Use of stolen credit cards Leads to charge-backs Monetization of stolen cards Stolen Credit Card validation Costly Hard to block Confuses analytics
  16. 16. Retention management and Chargebacks Credit card payment failure can be high 30% is not uncommon Tools Retry Messaging Business logic (Aria systems 40 paths)
  17. 17. Pricing Model Flexibility (Marketing and campaign management) Promotions Discounts Coupons Customer segmentation Free trial Price change
  18. 18. Financial reporting Revenue recognition Aging/Waterfall reports (unpaid invoices)
  19. 19. Account and subscription levels Account management Sub accounts Payment management Roll up subscriptions to the right organizational level Subscription levels Base subscription plus add-ons Multiple subscriptions per account Notification management
  20. 20. Entitlement management Source of truth for user access tocontent/features Has this user paid for this capability in this context? Important integration point Gap in some solutions
  21. 21. Subscription life cycle management Creation Trial / Discount phase? Change Upgrades, Downgrades Add-ons Pause (Holiday Period) Cancelation
  22. 22. Security and scalability Multitenant implementations, no isolation Performance issues Security breaches Have experts review vendor capabilities
  23. 23. Maturity Will vendor be around in a year? Company performance Financials Investment rounds Customer references Etc.
  24. 24. Lock-in It is hard to switch vendors later Seamlessly moving customer subscriptions Hard and Error prone Difficult to test Particularly hard on a 24/7 uptime system Expect to take months for large customer base Running multiple systems during transition Costly and awkward
  25. 25. Major players
  26. 26. Major PlayersSubscription Platforms Aria Systems eVapt (MagnaQuest) Metanga (MetraTech) Vindicia ZuoraEcommerce Platforms Avangate CleverBridge Digital RiverGaming Platforms PlanSpan Live Gamer
  27. 27.  Founded: 2003 Funding to date: $43M Employees: 100 Clients: 90+ AAA, HootSuite, Pitney Bowes, Red Hat, VMware Pricing: Annual platform fee + transaction fees (~2%) Target: enterprise and midmarket Deployments: SaaS Story: one of the first vendors to get into cloud-based recurringbilling. Integrations: salesforce.com,NetSuite, SaaS tax solutions andpayment processorsAria Systems (Subscription)
  28. 28.  Founded: 2006 (1997) Employees: 300+ Clients: 35+ (150+) Industry leading US cloud computing service provider, Fortune500 utility for new subscription business unit, AvFinity Pricing: SaaS (1-2%) on- premise (1 time license fee +annual maintenance) Deployments: SaaSand On-Premise Target: multiple: cloud, pay TV, broadband, Internettelephony, and mobile virtual network operators (MVNOs);also supports PaaS and SaaS clients Story: eVapt was acquired by MagnaQuest in 2010 a CRMvendoreVapt/MagnaQuest (Subscription)
  29. 29.  Founded: 1998 Employees: 160 Clients: 10 (50+) Concur, CubeSmart, Scribe, Telmore, Temenos Pricing: Annual platform fee + transaction fees (1% - 2%) Deployments: SaaSand On-Premise or Managed Service Target: vertical agnostic but provide targeted functionality fortelco, financial services, cloud, and conferencing andcollaboration verticals. Story:The solution is directed at eBusiness customers whowant to get up and running quickly with an API-enabled, cloud-based service. The company’s otherproduct, MetraNet, is a BSS.Metanga/MetraTech(Subscription)
  30. 30.  Founded: 2003 Funding to date: $30M Employees: 100 Clients: 110 Blizzard,Intuit, Nascar.com, Plaxo, Vimeo Pricing: Transaction fees (2% - 2.5%) on successful transactions Deployments: SaaS Target: multiple: cloud, pay TV, broadband, Internet telephony, and mobilevirtual network operators (MVNOs); also supports PaaS and SaaS clients Story: Vindicia has pursued a strategy of developing its own paymentgateway, sales tax engine, chargeback process, and eCommercestorefront for customers looking for a unified solution. Integrations: salesforce.comVindicia (Subscription)
  31. 31.  Founded: 2007 Funding to date: $80M Employees: 250 Clients: 400+ Box, Dell, Docusign, HP, Newscorp Pricing: Annual platform fee + transaction fees (1% - 2%) Deployments: SaaS Target: broad vertical focus, with particular strength in the high-tech, telecom, and media markets Story: Zuora targets invests a lot of effort helping clients understand thebusiness challenges around accounting and metrics for recurring revenue-based business models. Integrations: salesforce.com, Accenture and Capgemini enterpriseaccounting and other CRM solutionsZuora (Subscription)
  32. 32.  Founded: 2006 Employees: 110 Clients: 200+ Bitdefender, Kaspersky, myFICO, SerenaSoftware, Total Defense Pricing: Revenue share (8% or 4.9% + $2.50 transactionfee) Deployments: SaaS Target: software and SaaS markets Story: The company primarily supports clients in a full-service model, acting as the merchant oftransactions, although the company also supports clientswho wish to use their own payment gateway and merchantaccount.Avangate (Ecommerce)
  33. 33.  Founded: 2005 Employees: 230 Clients: 50 Avira, BitTorrent, FastBill, Malwarebytes • Parallels Pricing: Revenue share (average 8-10%) Deployments: SaaS Target: global, full-service provider of subscriptionbilling and eCommerce services focused on B2B andB2C software and SaaS companies Story: Clients typically rely on cleverbridge as themerchant of record, although eBusinesses can chooseto serve as the merchant of record themselves.Cleverbridge (Ecommerce)
  34. 34.  Founded: 1994 Employees: 1300 Clients: 200+ BitDefender, Logitech, Microsoft, TrendMicro, VM Ware Pricing: Revenue share (% depending on services) Deployments: SaaS Target: Software/SaaS, Gaming, Cloud services Story: The firm offers end-to-end outsourced serviceson an à la carte basis includingcommerce, marketing, site optimization, globalpayments, taxation, and digital fulfillment.Digital River (Ecommerce)
  35. 35.  Founded: 2006 Funding: $46.3M Clients:1000 online games Pricing:Revenue share (11-15%) Deployments: SaaS Target: Online games, digital entertainment, and socialnetworks Story: global payment solutions through its UltimatePayproduct which enables in-app purchases using over 85global payment methods in 180 countries. ULTIMATEGAME CARD, is a pre-paid card you can buy atWalmart.PlaySpan (Gaming)
  36. 36.  Founded: 2007 Funding: $35.3M Clients: Acclaim, CCR, Funcom, Hangout Industries, Quepasa andSony Online Entertainment Pricing: Revenue share (11-15%) Deployments: SaaS Target: Online games, digital entertainment, and socialnetworks Story: Live Gamer provides an advanced offering thatgoes beyond billing to drive core business metrics andoptimize new transaction-based revenue streams.Live Gamer (Gaming)
  37. 37. Others Emerging (<3 years) BrainTree Chargify Cheddar Getter Monexa OneBill Recurly Saasy Spreedly Tranverse
  38. 38. Kill Bill Open Source platform Software is free Apache license Ning’s Billing System Billing 100K customers today Flexible Sophisticated catalog – highly configurable Plugin architecture – add what’s missing Great solution if you have developers and need controlhttp://kill-bill.org
  39. 39. Recommendations Decide if subscription management is a corecompetency? Anticipate future needs and build them into yourrequirements now Identify your integration points Consider if an ECommerce Platform makes sense Review scenarios, not just static requirements Remember, its hard to migrate…
  40. 40. Guest LecturersChristian SpringubCo-Founder of Jimdo“Pagesto the People”
  41. 41. Next weekPayments how they work and what to do whenthey don’tDoug CavinessHead of SaaS solutions,Cleverbridge

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