>> 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

(can opening) >> Hey, welcome back everybody. Jeff Frick here with theCUBE. We are live in downtown San Francisco at Zuora Subscribe 2017. 2,000 people talking about the subscription economy and subscription equals freedom, and coming right off the keynote, we're excited to have the founder and CEO, Tien Tzuo, founder of Zuora. >> Great to be here. >> Jeff: Well first of all, great job on the keynote. >> Oh, thanks. Thanks for having me on the show. >> Great energy. You know, we hear a lot of about subscription economy. Obviously, a lot of people have Amazon Prime, a lot of us subscribe at Costco. We've got streaming music services, like Spotify. But I don't think people think of companies like Caterpillar, or Fender Guitar, as companies that have a subscription-based relationship with their customer. So before we get into the specifics, I want to talk to you, how is the subscription relationship different than a regular, one-off transactional relationship in the way that you are connected to your customer? >> Right, well, we all know that the world has changed. And we're even evangelizing at this event. This is the sixth year we're having this event. There's over 7,000 people that actually come to these events around the world. That the world is moving to a subscription economy. Starting two years ago, people said, "You know what, we get it. "This is a subscription economy. "I can feel myself, I don't buy products anymore. "I simply tap into services that I use." And the great thing about these services is the provider of these services really care about you. They want you to come back and use their services. They're constantly updating it. And it really frees us all from the shackles of product ownership when we want to get from point A to point B today. We don't have to worry about cars. We pull out our phone, tap into our service, and we're able to get what we need when we want it. >> Yeah, you have that as a really big theme. Kind of shackles of ownership, shackles of obsolescence. This idea that if you have a subscription to a service, you don't have to worry about the oil change. You don't have to worry about whether it's last year's model. You've pulled up some funny pictures of CDs and the CD wasn't even in the CD case. >> The CD, and that wasn't that long ago that we had these CD cases. >> I have empty CD cases all over my garage. I'm guilty as charged. Let's dive into this specific example. So Caterpillar is a cool example. Already having autonomous vehicles driving these big mining. That's all right, but let's talk about the Fender example, 'cause I think that's a really interesting one. What is Fender doing in terms of a subscription relationship with their customers to change who they are and what they are as a business? >> Well, we talk to companies that are going through this transformation. What they bring it down to is the shift in mindset of selling a product to thinking about customers. And so when Fender did this, an amazing transformation happened, right? They sell a lot of guitars. And when they look at shipping products out, how do I sell more guitars? And they said, "Let's not look at it that way. "Let's look at our customers." And what they found is that over 40% of their customers, guitar purchases, are first-time customers. And then 90% of the customers quit after about three months because it's just too hard. It's just too hard. And so when they look at it that way, they say, "Gosh, we have a 10% retention rate "for our customers after 90 days. "Now, if we can just extend that, "extend that out," and, oh, by the way, the 10% of customers that stay, they stay for life. They buy additional guitars. They buy additional amps. They buy sheet music. They buy picks. And so that's how we have to think. We have to not think about selling more guitars. We have to think about how to hold on to our customers for life. If we could just go from 10% to 15% to 20%, we are going to find so much more revenue and we're going to double or triple the size of our company. >> So how do they execute that with your guys' software. >> So what they need to do is they need to establish a subscriber ID. So when you buy a Fender now, there's a whole set of digital technologies that they draw you into. There's a tuning app that you can use, 'cause it's hard to tune your guitar. There's applications that teach you how to play a guitar. There's applications that you can use to play like The Edge, or play like Flea, or play like your favorite guitarist so they draw you into the process that creates social community, social networks. And what we do is we help them turn a guitar purchase into a subscription service that the customers opt into for life. >> So interesting, right? 'Cause this is not a transaction; it's an experience. And it's an engagement. And what are the other things you said in the keynote that got my attention? That there's all these other transactions now. You can buy, you can upgrade, you can pause, you can turn off, you can turn on, you can change the level. So it's this much more dynamic, engaged process and relationship between person selling the service and, arguably, guitar enjoyment, not a Fender Guitar versus an actual piece of wood and some metal strings and everything else. >> Right, what we try to talk about is this whole world of subscriptions. Ultimately, when you're successful is when you deliver freedom to customers, right? Freedom to customers that didn't have it before, right? The story of Netflix is if you have, or let's say Spotify, so you have $20 to spend, you don't have to buy one song, one album, one CD. You can access the whole library of music ever created. And there's a freedom to that. Now, what that means for businesses to react to that is that puts a lot of constraints on businesses, right? Before, they just simply take orders, give me a guitar; give me a song; give me five units of this Widget. Now they have to react to what customers want. I want this; I want this now; I want it like this; I want to upgrade; I want to downgrade. And so this creates all these constraints on businesses and what we want to talk about today was in this new world, businesses need freedom too, right? Businesses need freedom to price, to experiment, to design customer experiences, to get the information they need and what's holding them back is their IT architectures are the past. These ERP systems, and so what we presented this morning was an alternative view. A post-CR view, P, ERP view, of a new set of systems that we provide that help companies be successful and grow in this new subscription economy. >> That's a linear. Basically, that was your theme, right? Not because it's linear. >> That's right. >> It's those transaction types. >> These linear systems passed, they don't work anymore. >> Well the other thing I think is really compelling that I think needs more attention is now, if I have to pay $20 a month to Spotify, which I do. We're on the family plan. I love the service. But they have to keep delivering new value, because for me to keep paying every month, it's a much deeper relationship because they got to keep keeping me on the hook. They got to keep innovating. They got to keep delivering new things and so that's what I think is really interesting about this is the relationship between the buyer and the seller when you have an ongoing touch point every single month versus that one-time transaction. >> Well the keyword there is relationships, right? In the old model, which I'll call an asset transfer model, let me convince you to buy my product. Now you own it. I've gotten your money and I'm going to go focus on the next customer. This new model really requires me to care about the relationship, to care about the value that I'm creating, to continue to add to it to make sure that there's not an alternative out there that's moving faster and delivering things that I'm not. That relationship becomes really, really important. And that's why this model is better and that's why when you use services like a Salesforce, like an Uber, a Spotify, a Netflix, an Amazon Prime, you get the feeling that the other person, the vendor on the other side, really cares about you because, of course, they do. >> All right, so I know you're super busy. You got a lot to do but before you leave, just give your impression, you've been at this for a while, how this has grown. Has it grown faster than you expected? Is it about the same line? As you've seen the subscription economy grow from your initial vision six, seven years ago, what's your, kind of, takeaway as you sit here amongst 2,000 people that are in, arguably, the center of this universe right now? >> Gosh, when you look at this subscribed event, when you look at the energy here, And then when you look at the companies here, I would say five, six, seven years ago, we had a lot of software as service companies here. Box, they're great customers. They continue to be customers. But did we think that we would have Ford, right? Showcasing their electric bikes here? Or Caterpillar showcasing their autonomous vehicles? And these are gigantic vehicles that are carrying 200 cars in what they talked about on stage. And the world's clearly being transformed. Did I think it was going to happen? You know, we always knew the subscription economy was going to be here. We always knew the size and scope. But once you hear the stories, right, you can really tell how much our world is going to change and how much it's going to become just, simply, a better place. >> All right Tien, well congratulations to you and thanks for taking a few minutes to stop by the table. >> Thanks a lot. Thanks for having me. >> All right, he's Tien, I'm Jeff. You're watching theCUBE from Zuora Subscribe. Thanks for watching. (can opening)