By David Appel, Sage Intacct
The cloud financials market has flipped. It all comes down to one simple reason: to build a recurring-revenue business, finance teams are rapidly transitioning from processing orders to managing subscriptions.
Based on the many customer interviews we've conducted, it's apparent that a pattern has emerged showing this shift from orders to subscriptions and the underlying differences between the two models.
For early software and SaaS companies, financial systems for order-based were invaluable. These companies sold discrete products-core editions, users licenses, and additional modules. To renew, you simply sold another order. Everything was separate and you managed revenue recognition through vendor-specific objective evidence (VSOE) to satisfy auditors.
The new subscription paradigm changes all of that. In the subscription world, you must understand the lifetime relationship with the customer - all the upsells and renewals and how they all build on one another. You also must understand the revenue, billings, and cash derived from those-again, over the entire lifetime of the customer relationship.