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 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 this 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 these kinds of changes since the Industrial Revolution, and huge opportunities lie ahead. Now it’s up to you to grab them. What are these changes I’m talking about? We all recognize that over the last 16 years, software as a service (SaaS) has become the dominant model for distributing and consuming software. Who wants to own soft - ware and deal with the headaches of buying the hardware, installing the software, backing it up, bothering with upgrades, and getting calls in the middle of the night when it breaks? Once you try Salesforce, there’s no going back to Siebel. 99