Billing Enters the SaaS Era
May 21, 2008 9:09 am New Tech, Tech IndustryOne of the things that I have been working on recently is research for billing systems for SaaS companies. One project I have been working on recently has the eventual need for billing for the SaaS offerings they will be releasing soon. The challenge has been the multi-tiered nature of the billing solution that is needed. Becuase of that, we came up with a naming system to minimize the confusion:
- Patrons are the customers of the SaaS provider.
- Customers are the customers of the Patrons
Not only must the solution handle billing for the SaaS provider's patrons, but also handle billing pass through for the patron to charge their customers. And that pass through billing could be services or product based with each patron having a slightly different product offering.
The initial thought was that this would have to built internally, maybe using a combination of Sugar CRM and osCommerce. The problem was that we realized we would need to do too much meatball surgery on these systems to really get what we wanted. Also, we don't need a full fledged CRM system, just a light customer database (at least initially, boiling the ocean was something we were fighting even though we could see the need for it down the road). Then on top of all this, we still needed to work with a payment system to run the transactions for us. We really didn't want to store credit card numbers on the system as we wanted to avoid all PCI headaches.
What was needed was a service that would take care of all this for us!
Enter two SaaS based billing solutions Zuora and Aria Systems. Both companies generally do the same thing: provide a SaaS based billing solution that can be used by SaaS, subscription based companies.
Aria Systems has been around for a bit longer but been growing more organically and, I think due to their being based out of Philadelphia and not having expanded their sales force until just recently, not as well known. They have a much more mature billing service which can be co-branded or embedded via APIs into an existing SaaS service. The main downside that I see to their current business model is that they are only interested in doing business with companies that have an existing revenue stream. Primarily because of the high cost of configuring a client to use their system. They don't appear to have embraced the SaaS model internally from the fact of allowing a small early grown company to sign up on a small pay as you go model and then enable that company to learn from self help documentation on implementing the system. Thus, I feel they are likely to miss the rising tide of young companies being successfully and riding that success.
Zuora recently came out of stealth mode to announce their offering. I know a number of talented people who have gone over to Zuora and from what I have learned pre-launch and since from their website, it looks like at the core they offer the same thing as Aria Systems. However, the company was founded by poeple who came from the SaaS space, they claim to understand the new and expanding needs that these companies have and will have. It appears that their system is designed to provide flexibility for the SaaS provider to adapt their service offerings as well as run analytics across it. Something that Aria Systems, doesn't talk up very much. Since they are still fresh out of the gate, I don't know if they suffer from the same problem as Aria: not focused on seeding the market with self service, pay as you consume offering that can be used by startups. Their "web 2.0″ feel definitely gives them an advantage from initial impression alone.
I'm anxious to learn more about Zuora's capabilities and hope that it will be the silver bullet for the SaaS project I am working on. As I get more exposure to their offering, I will share my experience.
