Jeff Wissink, Jim Martindale, Steve Terry, and Pete Getchell took some time to reflect on their work with clients over the past year. Below, they answer two questions from their different perspectives: what were some of the surprises of 2018, and what advice would they give clients as we head into 2019 and beyond?

Insights, Trends, and Surprises of 2018

Jeff Wissink 200x200 head shotJeff Wissink, Managing Director

The year 2018 felt very much like a time of maturity for the market’s understanding of subscription and recurring revenue-based businesses. This business model has become mainstream. The Zuora IPO helped to legitimize the subscription economy hype and adoption of the model increased across a variety of industries. Countless articles were published on the topic, such as this recent piece, How Subscriptions Are Remaking Corporate America.

The maturation led to an acceptance that recurring revenue businesses operate in a distinctly different way than item-based, transactional business models. However, with acceptance we saw a rush to either buy new software or smash a CRM and ERP system together without really addressing the strategic, process, and operational changes needed to run a successful, recurring revenue business. If the fundamental process design isn’t aligned to the recurring revenue business, technology exacerbates, rather than fixes, the issues.

Jim Martindale 200x200 Head shotJim Martindale, CEO and Managing Director

While the overall awareness about the value of recurring revenue businesses increased in 2018, we still saw a lot of companies really struggle with their business architecture. They have underestimated the internal interactions to holistically support Continuous Customers™ and a recurring revenue model. Therefore, subscription management platforms are implemented in a narrow view, as almost a stand-alone system, without tight integration to their CRM and ERP. This results in more manual work, confusion about master data, and a variety of other symptoms of a broken recurring revenue business.

This year we’ve also seen the lines between CRM and ERP continue to blur, and subscription management vendors extend functionality into what was once traditional CRM or ERP territory. This is because the Continuous Customer™ interaction can’t be siloed—it’s across all business functions. So the vendor landscape continues to be messy and a challenge for companies to navigate.

Steve Terry 200x200 HeadshotSteve Terry, Practice Director

A surprise for us this year has been the upsurge in businesses re-platforming their ERP and core financial environments. Companies are moving to cloud-based ERP systems, performing major upgrades to existing systems, or transitioning to enterprise-grade ERPs. So along with building and scaling their recurring revenue business, they are overhauling their core ERP technology and architecture.

We also saw order management for recurring revenue models become a major pain point for a lot of companies. Managing the lifecycle events of create, renew, upgrade, add-on, terminate (CRUAT™) across a portfolio of products and services with hybrid pricing structures is much more challenging than the billing calculation. While we started to see this in 2018, the pain of order/commitment management will continue for the foreseeable future.

Pete Getchell 200x200 head shotPete Getchell, Managing Director

A big surprise for clients in 2018 was how interconnected the different business services actually are in this continuous economy. The way products are designed have a great bearing on how they are sold, how they are served, how they are monetized, and how they are accounted for. Product teams have become much more inclusive of the other areas of the business, and this made a huge difference in their innovation speeds.

This growing acknowledgement of the breadth of people who need to be involved in market innovation is not just impacting product and services, but how companies operate in general. What’s developing is a recognition of the power of the product catalog and being able to tie the interconnected dependencies together.

Insights, Trends, and Advice for 2019 and Beyond

Jeff Wissink 200x200 head shotJeff Wissink, Managing Director

In 2019, there will be an increased focus on recurring revenue business operations. Where in the past we’ve seen reluctance to alter business processes to support the Continuous Customer™, with acceptance of the operational differences for recurring revenue businesses companies will be open and eager to innovate around them.

The technology supporting recurring revenue businesses will continue to evolve and mature. We’ll see more new entrants, M&A activity, and capability expansion from entrenched players along the lead-to-renewal continuum. This will result in even murkier waters for clients to wade through as they look to adopt new technology into their business operations stack. We will continue to closely monitor the technology landscape and help guide clients to the right choices for their specific needs.

Jim Martindale 200x200 Head shotJim Martindale, CEO and Managing Director

While overall awareness of subscription business models has increased, it’s still a relatively new model in the market. There are many management teams who’ve worked and built businesses centered around an item-based economy that aren’t experienced with the challenges of recurring revenue businesses.

So, one piece of advice I would give for 2019 is an old saying, “Measure twice and cut once.” We’ve seen so many companies buy and try to implement software for narrowly defined use cases, only to face the same or even more challenges. Make sure you spend a little bit of time thinking through the current and future use-cases, and really planning the implementation, so that you don’t have to go back and rework a lot of what you have done. And seek counsel from those who’ve done it before. It can greatly accelerate your transition and save time, money, and frustration.

Steve Terry 200x200 HeadshotSteve Terry, Practice Director

In 2019, the hybridization of different types of products and services offered in the market will gain much more traction. There will be interesting combinations of one-time and recurring revenue products, and blends of legacy products and new services. But companies will face a couple of challenges: scaling and technology. The challenge with scale will not be one of volume, but of the nuances of selling multiple products/services into new markets, and how this fundamentally changes the business processes. The challenge with technology is how to select and integrate a recurring revenue technology stack that holistically enables support of the Continuous Customer™. All vendors want to be the single source of the truth for the customer, but no single system can really own the complete lead-to-renewal pathway, with all the various touchpoints.

For digitally native businesses who are a little further along their Continuous Customer™ journey, the focus will shift from hyper-acquisition to one of business optimization. They will want to drive efficiencies in their internal processes and operations. One result of this internal inspection we see on the horizon is that these companies will start to take licensing and provisioning much more seriously. They will start investing in enterprise-grade systems to manage this piece of their operations, rather than relying on home grown solutions spun out of product expansions or R&D initiatives.

Pete Getchell 200x200 head shotPete Getchell, Managing Director

Growing companies are going to realize that they need to deliver innovation more rapidly with fewer mistakes. At scale, mistakes are incredibly costly. With hundreds of thousands of customers, a mistake in billing is newsworthy; a mistake in financial reporting can mean trouble from the authorities. So in 2019, companies are going to look at process excellence as part of their overall business discipline, enabling innovation at the speed of the market.

For companies embarking on business transformations in 2019, I’d advise them to include more people in the process, across the organization, and have the difficult conversations. It’s important to ask end-to-end questions with end-to-end people. Where you can, bring best practices into the organization from those who have gone down similar paths or have helped companies with their own transformations. These best practices can help companies see around corners and avoid challenges they didn’t know were there.