>> Hey, welcome back, everybody. Jefe Rick here with the Cube Were its roar subscribed in San Francisco. David, Jeez. Here. Last we saw you, David, I think was January when this was all building up. Now you said you have 1,500 of people passionate about subscriptions right here in downtown San Francisco. Congratulations. >> Thank you. It's great to be here, and it's great to be on Graham and on site. Like, last time we talked, we were at your office. Is you're getting ready to move? >> That's right. You have to come see the new spaces, like, way bigger >> we're looking forward to it would be great. >> So great selection of customer stories up here today. We love the customer stories and, you know, you think of classic subscriptions like Adobe Creative Cloud or you think of spotify and these things were used to You don't think about caterpillar. You don't necessarily think about Ford. So to see those guys up on stage with you and team this morning was pretty impressive. >> Yeah, So we're very excited about how the description economy is really expanded into the mainstream and large infrastructure companies who are changing the way people interact has really taken hold. I mean, a couple of examples. You mentioned So caterpillar here today, and they're showcasing today. They have all of this machinery out in the field, spin out terabytes and petabytes off telemetry data, and they're able to monetize those. They have autonomous vehicles, virtual reality drones over job sites. All of that is available now as a subscription. We have Ford here today who are talking about the next generation off the company, moving from a car and all my bill company to a transportation company. A meeting that customers where they need to be meeting met where, whether it's Van Services here in San Francisco, like chariot on bicycles and knowing their customer from the moment they pick up their vehicle from they call it from bed to bed from waking up in the morning till the lasting negative at night and having the whole transportation structure around them, enabling them to do some things like that. It's over exciting. >> I thought it was funny. Todd Buckler, who was up on stage from caterpillars, explicitly said, We're not going to be a software company. We like making big iron things, but man, oh man, listen to the description of the services that they're delivering to their customers that benefit the customers, get the benefits they get. As you said, with all the telemetry data, it's very different than just building a unit, shipping it to the dealer. The dealer sense. Tow the farmer, the construction worker. And maybe you get some data back when it comes in for maintenance down, then totally changing >> it totally changes. And what it does, is it. It helps predict downtime that helps predict offline activity, which could be in the hundreds of thousands or millions of dollars. In the case of aircraft engines with G We who we had, I stayed well today when those things go down in an unpredictable fashion that causes enormous impact from a revenue, profitability and forecasting standpoint, so that telemetry data can understand their stresses and strains based on environmental factors in Miami does it? I'm gonna call whether acclimate I'm a jet engine, doing short hops versus long harps that provides enormous insight and sophistication for a customer to enable them to plan. And it's all based on this data, which in turn is delivered this part of the subscription >> right and then take it to the next level. Right? This whole theme around democratization of data, democratization of the tools to the data. Yeah, obviously a plane operating in Alaska is going to have different characteristics and one operating in the desert. But what about pilot characteristics? You know, you could just you can You can leverage the power of all the people in your company to start developing hypothesis, testing those hypothesis and driving innovation around a much broader kind of front, if you will. >> Absolutely. And what we're seeing is that the senses air going into everything. So we think about senses and engines. But the aircraft frames themselves of now increasingly having sex, right? How many stresses and strains, we know how many takeoffs and landings. But are they short hop of a long? Are they going over the pole of the growing of the Atlanta They're going over the United States as an example? All of those have different implications for the service and the support, longevity and also the economics. And that data telemetry has intrinsic value that is now being monetized in ways that we've never seen before. >> So the other interesting thing to me that I don't think it's enough talk. David is, is thinking of your customers is either in a club or as a member with this recurring membership, as opposed to transactional customer we had in speech in sporadic on You know, they have a club we had, sir. Fair on. You know you're a member. It's a very different way to think about the people that are your customers. And because you have this ongoing repeat revenue process with them, you know you have to keep delivering value. You have to keep them subscribed, if you will, because it's a very different way to build a relationship on engagement. >> Yes, so we see that is this evolution of from ownership to being a subscriber. Whether it is a second vacation home is a great example. In the case of in Speranza Oh, they've gone from 0 0 to 15,000 members in just a few short years, and they're offering this highly curated, personalized luxury vacation experience that is very individual, very individual and curated. That's a whole new market place, and it's disrupting high end hotels. It's disrupting whether you want a second vacation home, but you always have to go back to write, but also on the show floor. Here we have companies like 11 James. So if you're a watch fanatic and you have a fancy watch, guess what? When you have one fancy watch you pretty one another one right instead of owning them and putting those assets in the safe or in the drawing for months at a time, once you have a new one sent you every single month or every quarter and just change them out for variety. So we see that time and time again as we move from ownership to subscription, you see it in cause you said an asset. Music is part of the case that most people are familiar with. You've gone from your case full of CDs, your case full of DVDs to your streaming services and you're seeing with entertainment. >> Right? Is interesting. Teen in the Kino talked about being free of the shackles of time ownership obsolescence. So when you do consume these things as a service, it really changes the week consume because as we all know, once you get stuff and they get a garage full of stuff, stuff all breaks, it gets out of date, so it's a really an interesting way to think of it. Now. It's supports this whole kind of experience based economy. I want to share a funny story waiting with Esperanza. Oh, is that they see your commitment to subscribing. To there Club is really a demonstrated commitment to your family that you now have put on the dotted line. You're going to take quality vacation time with your family, and if you could afford it, you're probably pretty busy person, so really interesting twist on what their value proposition is. A wide support of their members. >> And actually what they said this morning was really interesting. And you think about a vacation club on a you know, a luxury curated experience. Maybe that's a week or two weeks a year. They're also filling in the gaps for the other 50 weeks a year with all kinds of local events as well. I'm building this lifestyle so it's fascinating, you know, physical experience off this description economy, and they're very sophisticated how they look at the data and looking who their subscribers, their customers are on this subscribes and customs. By definition, I suspect very demanding, >> right. So you've been doing the emcee job did a great job this morning. I'm just curious as you're walking around the show now that the keynotes air done and you can kind of walk around the exhibit hall and bumping into people any surprising stories. What are you hearing? What kind of the buzz that you that you're hearing a lot of hard work? A lot of teams. >> So So first, what? We have an amazing group here and we're so proud of of the work that we do bring the subscription economy to a physical life. You know, we had this vision some months ago when you and I talked about having a showcase and having our customers tell their stories. And you can see from the energy that we have on the show floor today there are hundreds. We have 1,500 people here this week who are experiencing lots and lots of different customers and companies. Subscription economy experiences. Tomorrow we'll hear from Andy Mooney, who is the CEO of Fender Guitar. So you think about you walk into a store, you buy a fender guitar, they're fabulous. The shadow casters and you leave. They never hear from you again. They want to turn that into a life long music experience and really change the way from learning how to play an instrument to being part of a community and having a long term relationship first is just walking out the store with a guitar >> I love. I love the fender story because again, you know it's easy to think of spotify and digital assets that you're subscribing to and deliver digitally. But they're really redefine your relationship with your customer and then to get the lifetime value. The benefits of that. Because they claim or they buy more sheet music, they buy another guitar. You know, they hang out at the store and becomes a hobby and part of a community engagement. What a brilliant, brilliant move >> exactly. And I would say if if I leave you with one final closing thought, you know the other bigger heart is that there is a looming financial accounting change that's coming where the way subscription economy cos any company with recurring revenue is going to have to change the way they account for their revenue and their expenses. It's something called 606 If you're in the financial community. You're having sleepless nights right now because it's as important as socks. Sarbanes Oxley White. Okay, right on. That's an accounting standard that's coming down the line. We'll be mandatory in December 17 or December 18. Dependent, whether you're a private or a public company. And we just acquired a company that is the market leader in automated revenue recognition. So educating the market in what is a very compelling value proposition on a compelling event that's going to hit almost everybody, >> right? All right, we'll leave that there. We'll pick it up next time, and we'll have a little bit more accounting talk. >> Sounds great. >> All right, well, thanks for taking a few minutes out of your busy day. And again, congratulations on to prevent >> we appreciate you coming. Thanks for having us. >> Absolutely. Alright. He's David GM Jefe Rick. You're watching the cue from Zor subscribed 2017 in San Francisco. Thanks for watching

>> Hey, welcome back, everybody. Jeff Frick here with theCUBE. We're at Zuora Subscribe in San Francisco. David Gee is here. Last we saw you, David, I think was January when this was all building up. Now you said you've got 1500 people passionate about subscriptions right here in downtown San Francisco. Congratulations. >> Thank you, it's great to be here and it's great to be--

>> Hey welcome back everybody. Jeff Frick here with The Cube. We're in downtown San Francisco, at Zuora Subscribe 2017, about fifteen-hundred people according to David Gee, talking about the subscription economy. And a big part of that when you collect money, you got to collect the taxes. And we're excited to have Simon Geach with us. He's a VP of Sales Billing in Commerce Platforms from Avalara. Did I repeat that right? How do you pronounce it? >> Geach. >> Geach. No, Avalara. Did I get that? >> Avalara. >> Avalara. Alright, so welcome. (laughs) >> Thank you. >> Collecting taxes: everybody's got to do it, everybody's got to pay 'em. >> Not fun though. >> It's not fun, and not simple, right? And usually with sales tax especially, you got the state, you got the county, you got special assessments, you got this, you got that. So that's what you guys do. >> That's right. So, if you think about the subscription economy, one of the most important things in that is making sure that what's on the invoice is accurate for the customer, because of course, the subscription economy is built around that engagement through an invoice, and that can be the important document that a customer gets, as you're building that long-term relationship. So, ensuring what's on that document is accurate, including the taxes, is really important. And for some companies it can be actually fairly simple. But for a lot of companies, particularly as they're growing and expanding their business requirements, it becomes ever more complex, and the costs of dealing with it manually can really sneak up on you and start to increase, and before you know it you're investing a lot of time and resource in trying to manage it, with really no guarantee of accuracy, and then of course, there's the longer term risk that comes if you get something wrong, you miss a rate, there's a change in product taxability that you don't capture, you can get hit and penalized really heavily in an audit. >> Right, and then in the subscription economy there's a lot more transactions, right? So the opportunity to mess it up goes up dramatically. >> Exactly. Tax legislation changes really frequently. So if you're billing customers on an ongoing, constant basis, the need to be up to date with the latest changes is really important, because if you're not, and you miss it, it can cost you a lot of money. >> So where's the "they're" there? So if I, buying something on a subscription, which tax do I pay? Do I pay where my residence is? Do I pay where my phone happened to be when I said "go". Do I pay where my phone happened to be when the end of the month hit? I mean, what are some of the jurisdictional rules? >> Right, so if you think about, Colorado's a really good example of this. Think about Colorado's estate, it not only has state-level assessments, it has then county and city level assessments as well. So it very much depends on where you live. We could be neighbors, and you could pay 4 percent less tax than me, literally being next door to each other. Because tax jurisdictions don't correlate with zip codes at all, and people make the assumption that they do. So it's very easy for that tax rate to change, even across the street. So then you have to factor in origin rules, and destination rules. So some states have origin rules, and some states have destination rules, and some states, like California, have a combination of both. So you really have to have a way of capturing all of that and managing all of that, and as I said, as it gets bigger, and revenue for states is more of an issue, because they're looking to generate more and more revenue to deal with budget deficits, sales tax is a really easy way for them to do that, so the states are paying more and more attention to how accurate you are in doing that. >> And you got to have it right at the invoice, you can't go back and fix it after the fact, right? >> Well, you could, but then >> It's coming out of your, it's coming out of your pocket. >> Right, and if you get it wrong and you get assessed for the difference, it's coming out of your pocket potentially, or you're overcharging the customer, which the state doesn't care about, they just want what you've charged the customer. So being accurate with it not only optimizes the efficiency within your business, it also means your resources can actually be used for other activities, because sales tax compliance is just a cost of doing business. It's not going to help your business grow, it's not going to make your business more profitable. >> So, so, what's the smallest granularity that you look at then, when you're trying to figure out which of the many rules impacts the decision that I'm making? Is it zip code? You're saying it's even smaller than zip code? >> Yes, so we actually determine the tax rate, using a latitude and longitude coordinate, overlaid by a tax jurisdictional boundary of the US. And that's proprietary technology that we maintain. Then we overlay that with product taxability content. So, for example, in Kansas if you buy a Kit-kat, or you buy a Snickers, the Kit-Kat has a lower, or zero tax rate, because it has flour in it, the Snickers doesn't. So (laughs) if I'm in New York, and I sell-- >> More benefits to gluten-free, less tax! >> If I sell you a bagel in New York, and I don't cut it, it's tax free. If I slice it, it's taxable, because I rendered you a service. >> 'Cause one's a grocery item, and now it's like a restaurant item. >> So, the different tax rates apply just based on what you do with the product. >> And how do you capture that in your rules? >> So we have a content team of over 100 people who are managing state compliance legislation, and are working to ensure that our tax engine is always up to date, and we actually guarantee the accuracy of our calculations. >> Is it easier just to put a 20 percent flat rate and then you figure it out on the back end? (laughter) I mean, it's got to be amazingly complex, so you got people by jurisdiction, you've got it by state, you've got it by content type. >> You've got also special taxing jurisdictions, so if they build a new stadium, or a new transit system, the tax may apply for a period, and then go away again, so really having someone who universally can supply you with an engine that's going to take care of all that and update all of that, it not only helps your profitability, it also helps your customer experience, because you don't have customers ringing you, going: "Why have you charged me this?" >> Right, right. >> We automate everything about the returns and remittance process, and the exemption process on the back end as well, so it isn't just the way that we calculate, it's a full end-to-end process of remitting and filing those taxes, responding to tax notices, and then managing exemptions. So universally we can help people outsource this burden. >> So you guys do that for transactions regardless of whether it's subscription or not subscription, correct? >> Right, correct. >> So from your point of view, what's different now with the growth of the subscription economy? How does that impact your business, or does it, or does it just make more transactions, more complexity? >> Well, I think to your point earlier, about the fact that because rules change, and they're not uniform necessarily in the way they change, sure, if a state decides to change a rule, they'll publish a date when they're going to change the rule by, they're not always uniform. There's not always just one time a year when those rules change. And of course if you're a national company or a growing company, trying to stay abreast of that across the 45 states that charge sales tax can be really challenging and time-consuming and costly, long term or short term. So what we're doing, whether it's a subscription customer or not, is making that really easy for them to scale. So you think about a subscription customer, they want a scale, they want to a scale fast, the last thing they want to have to do is worry about how are they going to implement their tax policy. We take that away, so they can concentrate on growing their subscription base. >> Simon, I think you got great job security. (laughter) >> Death and taxes, right? >> Alright, well thanks for taking a few minutes out of your busy day, appreciate it. >> Thank you. >> Alright, he's Simon, I'm Jeff. You're watching The Cube, from Zuora Subscribe. Thanks for watching.