Chapter 1 Chapter 1 Subscription Economics: How Recurring Revenue Changes Everything By Tien Tzuo Tien Tzuo is widely recognized as one of the original thought leaders in the software-as-a-service (SaaS) industry for the critical role he played in defining the service and business models that helped Salesforce become the most successful enterprise SaaS company in the world. In 2007, Tien left Salesforce to start Zuora, a company devoted to solving the complexities of running a subscription-based business. As Zuora’s CEO, Tien has not only built one of the fastest-growing SaaS companies around, he’s also evangelized the shift to subscription- based business models across all industries — coining the phrase “subscription economy.” All SaaS founders need to be grounded in the fundamentals of building and running a subscription business. Subscription economics is all about understanding what the new metrics of success are, as well as the business drivers needed to achieve success. Congratulations. If you’re reading this book, you’ve put yourself in the right place at the right time. The business landscape hasn’t seen changes like this since the Industrial Revolution. Huge opportunities lie ahead, it’s just up to you to grab them. What are these changes I’m talking about? We all recognize that over the last 15 years, software as a service (SaaS) has become the dominant model for distributing and consuming software. Who wants to own software, and also deal with the headaches of buying it, installing it, backing it up, upgrading it, and getting calls in the middle of the night when it breaks? Once you try Salesforce, there’s no going back to Siebel.