Today we’ve very excited to announce that Zuora has officially acquired Leeyo. We’ll be sharing more news at Subscribed next week, but here are some recent press highlights:
When Zuora, a Silicon Valley-based provider of subscription commerce, billing and finance systems, decided to buy Leeyo Software, it did so partially to tap into a huge market that has cropped up as a result of new revenue recognition accounting rules, Zuora’s founder and chief executive officer, Tien Tzuo, told Bloomberg BNA.
“Because ASC 606 is happening now, it’s not like we have two years to build this product,” said Tzuo. “For the last six months we said ‘we have all these customers, they need ASC 606, they need it now’,” he said.
Leeyo is not just any revenue recognition company, though, because it has already made the transition to the new ASC 606 accounting rules set to go into effect next year, a factor that particularly excited Zuora CEO Tien Tzuo. That’s probably because it not only gives his company a more complete subscription accounting solution, it puts him ahead of the pack when it comes to this new approach.
As Tzuo pointed out, the accounting rules have been the same for about 500 years, but now, recognizing the new way that companies buy and sell things in a subscription economy, regulators in the US and Europe are shifting the rules to allow companies to recognize recurring revenue in a fairer way. These rules are known as ASC 606 in the US and IFRS 15 in Europe. Needless to say, a deep systemic change like this one is going to be challenging for customers and vendors alike.
By bringing in Leeyo, his company now has a complete order to cash recognition system.
As an increasing number of companies turn to subscription-based models, with their predictable revenue, Tzuo coined the term “the subscription economy.” From a consumer perspective, buying by subscription is simple – or should be. But on the back end, it can be incredibly complicated. What’s true for billing is certainly true for accounting. “This challenge is as big as the first one, but it is less well-known,” Tzuo explains. “We’ve been saying for a long time that accounting standards don’t support how these products are being sold….The good news is they are about to change. The bad news is they are about to change.”