How To Get Pricing Right

Usage-based pricing, the next phase of SaaS, is just one way CIOs can play an important role in company growth, says Paul Heard, CIO of Zuora.

Technology offers multiple ways to impact pricing for companies today, both internally and externally, and that’s shifting the role of the CIO, says Paul Heard, vice president and CIO of Zuora, a Redwood City, California, company that provides a subscription management platform.

Heard, who lives in Austin, Texas, has been a CIO in both the U.S. and UK, helping organizations on their digital transformation journeys. His experience has most recently focused on technology and enterprise software organizations, and he has also worked in automotive, financial services and consumer brands such as Mercedes-Benz, Chrysler and Mars.

Heard spoke with StrategicCIO360 about changes in Software as a Service, what to keep in mind when hiring IT professionals and the shifting role of the CIO.

How is the SaaS industry evolving?

SaaS has now reached a tipping point to its next phase of evolution. Customer expectations are evolving—they want to consume what they want, when they need it, and only pay for what they use. To address this, companies like AWS, Snowflake and Stripe are turning to usage-based SaaS models and seeing strong growth. Usage-based pricing ensures that no money or services go to waste. 

How can CIOs take advantage of these changes?

IT teams serve as a company’s backbone, enabling customer and employee success. CIOs can leverage usage-based pricing in two ways. The first is to purchase tools using this pricing model, to ensure they pay for exactly what they need, don’t overpay for a service, and can adjust usage seamlessly as needs shift over time.

Secondly, CIOs can enable and champion their own companies selling usage-based pricing. Zuora research has found that companies with a hybrid model tend to be the most profitable—companies with a mix of usage-based and fixed pricing have seen an increase of 28 percent year-over-year growth, compared to 18 percent YOY growth without usage pricing and 24 percent YOY growth for those with pure usage-based pricing. CIOs should ensure the right technology systems are in place that enable pricing experimentation and bring in insights to determine the best value for customers.

One of your main initiatives last year was reducing friction in internal business processes. Can you expand on how you achieved that?

Finance was one area where we were seeing some friction as we scaled. We were actually able to leverage our own products, Zuora Billing and Revenue, to support this growth through automation. We also applied automation to IT, enabling us to handle the growth of the company without growing IT headcount.

What tips do you have for other CIOs looking to help smooth out these processes and scale quickly?

First, make sure you have the right team in place to support scaling the company. If you hire someone just based on their skills, they’ll be helpful for supporting just current needs. Instead, hire employees based on their mindset and strategic abilities. This will help you set your company up to embrace the future and drive true transformation.

Additionally, setting up an IT infrastructure that is flexible and easy to integrate is crucial. Migrating to SaaS solutions and taking advantage of the cloud are key ways to accomplish this. Embracing these solutions enables more real-time flexibility based on evolving business needs and allows for greater compatibility with emerging solutions. To enable this agility, IT teams need to champion adapting business processes that align with the tool and not customizing the application. 

As the impact of Covid continues to be unpredictable, should CIOs be focused on cost reduction or investing in innovation?

Investing in innovation is absolutely critical for CIOs during this time. While many face a pressure to cut costs from uncertainty in the market, CIOs still need to invest in solutions that help companies stay nimble and adapt quickly. Companies that try to wait out the market fluctuations instead of adapting will fall to the wayside as innovation surpasses them.

What other tips do you have for CIOs to stay resilient in this changing world?

CIOs must become a strategic advisor to the business. Whereas in the past many were simply leading technology enablement arms, now they must become ingrained in the entirety of the business to find and develop technology that will lay the foundation for the business’ future. CIOs must think of themselves as business leaders, not technology leaders. A key tip is for CIOs to reflect on their calendar and recognize how much time was actually spent meeting with business leaders.

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