In an MGI 360 Rating published On March 27th 2015, we increased Zuora’s rating from 60 to 61 (out of 100) and reiterated a Positive outlook. In this research note (see attachment below), we take stock of the cloud billing vendor’s recent milestones and review company opportunities and challenges.

Over the last 24 months, Zuora shifted its focus from small, VC-backed startups towards larger, more mature business accounts. The company is generating traction in its product sweet spot and has been growing its channel and partnerships while making solid improvements in its implementation methods and services. The product platform has been broadened to include more finance and commerce capabilities. Zuora has also been expanding its direct sales force, partner relationships, and geographic footprint. Customer feedback indicates a more consistent and predictable product implementation experience.

Zuora raised $115 million in institutional funding which should provide a mid-term cushion. We raised the company’s Finance score to reflect the influx of new capital. We view the current Zuora solution as able to meet 80% of the most mainstream billing requirements of medium volume, speed, and complexity—a huge playing field that covers a massive number of accounts. The company’s aspirations to become an enterprise supplier will be put to the test as the market matures and the pace of customer adoption picks up.

The risk to Zuora is in “focus drift”—trying to aim outside its current sweet spot at highly complex enterprise accounts with long evaluation cycles where the company is likely to face stiff competition and high cost of sales. We see a transition in Zuora’s strategy and messaging from its launch theme of Subscription Economy to what the company terms Relationship Business Management or RBM. While we see potential value in the RBM approach, the company still needs to flesh out its core messages and product vision. Maintaining focus in this process will be essential. We expect 2015 to be a key year for Zuora’s development in which its execution and strategic focus will prove critical in positioning the company for the next major set of development milestones. Organizations with largely mainstream billing requirements of medium complexity and volume that are looking to replace or refresh their monetization capability should be evaluating the Zuora solution as a strong option.