Hi,

I have some exciting news to share. Today we proudly announced that Zuora has signed a definitive agreement to acquire Leeyo Software Inc., the world’s most advanced solution for revenue recognition. You can read the official press release here.

I’ve been banging the drum for years about how revenue recognition standards need to change to keep pace with the global explosion of digital services. Today’s accounting rules were written for the Spice Trade (literally — Luca Pacioli  invented double bookkeeping in the 15th century), and they simply don’t apply to the modern world of recurring digital services.

Well, apparently someone listened — not just to me, but to everyone in the rapidly growing Subscription Economy.  Those accounting changes are coming, and they are happening very soon — compliance deadlines for the new ASC 606 and IFRS 15 rules are just around the corner, starting in FY18 for public companies and FY19 for private ones.

This is arguably one of the biggest changes in accounting in the last quarter of a century — certainly since Sarbanes-Oxley (If you’re new to this, here’s a great white paper we wrote with Leeyo on the topic). Make no mistake — these new standards will result in winners and losers, and lots of finance departments are either panicking to no effect or being dangerously ignorant about them right now.

The new standards are based on one overarching principle: Companies must recognize revenue when goods and services are transferred to the customer. That’s pretty easy to do when you’re selling widgets, but poses problems in the digital economy, where service relationships can change drastically over time.

Don’t dismiss this as just a back-office issue. For subscription-based companies, this has the potential to impact sales, go-to-market strategies, product roadmaps, everything. The freight train is coming.

Enter Leeyo.

We’ve been partners for three years, with many successful deployments between us. What else can I say? They’re the best.

They have the best management team — Jagan and his group saw these new standards coming years ago. They have the best employees, including an incredible development group in Chennai. And in RevPro they have the best product on the market, bar none.

Besides, our joint customers have been bugging us about this for a while. They wanted the complex billing capability of Zuora with the revenue recognition expertise of RevPro.  They wanted unified reporting. They wanted lock-solid security. They wanted compliance taken care of, so they can focus relentlessly on their product. They wanted the whole package.

So after living together for a few years, it was time to tie the knot.

With this merger, we’re expanding Zuora’s leading order-to-cash portfolio to include RevPro, the leading enterprise-grade ASC 606 / IFRS 15 compliant revenue recognition solution. As a combined company, we become a one-stop shop for automating your financial operations, from your quoting all the way through to your revenue recognition. Awesome.

Lots more news is coming, but if you want the real inside scoop, please join us for three information packed days at Subscribed San Francisco (June 5-7, Marriott Marquis). This is our must-attend event for anyone who wants to thrive amidst the most disruptive business-model shift in history, and with today’s news, this year’s event promises to be particularly great.

Sincerely,

Tien Tzuo