Back in 2012 professional services firm Deloitte released research that analysed the impact of digital disruption on every sector of the Australian economy.
The research was entitled “Harnessing the ‘bang’, stories from the digital frontline” and revealed that a stunning one-third of the Australian economy would be significantly disrupted within the next three years -- a significant statistic that fuelled a national conversation among businesses leaders, politicians and the media.
Yet there was another, unexpected outcome. Deloitte discovered that the professional services industry, the firm's very own area of operation, was one of the industries most likely to be disrupted.
Here’s the video of today’s lunch event, which is a must-see if your business needs to get into subscription revenues and can support such an innovative model.
The video has a fascinating discussion by Tien Tzuo, CEO of Zuora; Ben Shields, the Partner and Head of Strategy for Deloitte Private, and Geoff Wanless, CTO of Swann Security, as well as plenty of insightful questions from all the journalists present - and hey, even me.
But back to Deloitte Private’s media release. Deloitte says that ‘Clients are demanding new experiences’, and that the momentum of cloud-based adoption in the accounting space was redefining the nature of the relationships between SMEs and their accountants.
Business owners had become accustomed to the ability to log on at any time and see their ledger at any time. As well as being able to buy accounting software on a subscription basis. That created a desire from clients to access other services in a different way.
Ben Shields, Partner and Head of Strategy at Deloitte Private said: “When we realised that we were going to be disrupted there were a couple of ways we could have reacted, we could have done what a lot of early adopters have done and we could have digitised what we were already doing and that would have delivered a lot of process savings and efficiencies that we could have handed onto the client.
“But we thought we'd take a slightly different approach so we went out essentially with a clean sheet and said, "Well, how should the accounting process be done?”.
Deloitte Private said it, on the whole, it learnt that clients ‘don't value the accounting process, it was seen as largely a compliance process with the focus on getting data into the system, rather than providing insights and the real-time advice clients wanted.’
‘Furthermore, the traditional time and materials model meant there was always a pause for the client because they knew when they rang their accountant; they were on the clock, that the time was being charged.’
So, Deloitte Private sought to ‘reinvent for the new standard’, and happily boasts it’s vision was and is ‘big’.
The company ‘set out to create a new standard for professional services, embracing emerging technologies, to redefine how professional services are delivered and set a new benchmark for what individuals and family businesses should expect from their accountant: the best cloud technologies and the best of Deloitte Private at a compelling fixed monthly price.’
To achieve this, Deloitte Private explains that it ‘had to redesign every step of the accounting value chain, with the client in mind and online subscription plays a key role in this experience.’
‘At the time, Deloitte Private’s technology was oriented around billable time and materials and could not account for recurring subscription commerce and revenue models. Nor was it equipped to understand the inherent complexities and iterative nature of the subscription model.’
Shields added that: “We needed a set of tools that were client-facing and would equally allow us to innovate our operating model.”
Deloitte Private needed ‘an engine that could’:
- enable it to iterate on dynamic pricing and packaging to drive revenue growth;
- unify its commerce, billing and finance processes, in a way that puts customer relationships at the centre of their business; and
- both integrate with popular professional services and accounting solutions, but also meet new financial requirements unique to subscription businesses.
To do this, Deloitte Private deployed Zuora’s Z-Business, a ‘Relationship Business Management’ or RBM solution, which is ‘a new class of software focused on building, managing and optimising the revenue relationships that are the lifeblood of subscription businesses.’
The explanation given is that ‘the software integrates with the firm's professional services systems such as its work in progress application, as well as the general ledger, capturing subscription and payment data.’
Z-Business enabled Deloitte Private to launch Deloitte Private Connect as a subscription model, test market results and even evolve its pricing as a result. Shields attributes the new flexibility of their business model to Zuora.
Shields explained that: “Zuora has become an integral part of our innovation system. Without something like it, we wouldn't be in the market with Deloitte Private Connect as it is today. Our systems weren't built to cope with the Subscription Economy. In fact, I suspect most traditional systems aren't built to cope with the subscription economy.”
So, where is Deloitte Private Connect today?
The company reports that, after almost nine months of beta trials, ‘Deloitte Private Connect’ was launched back in June 2014, with the service including ‘automated bookkeeping and live financial reports and business analytics’.
It turns out that ’in a first for professional services firms globally, the time-and-materials model has given way to a fixed monthly subscription model.’
Deloitte Private reports that its ‘clients have reacted enthusiastically to their new experience with Deloitte Private’, with the fixed monthly fee helping ‘clients to manage their cash flow, with certainty.’
Shields concludes by stating that: “Zuora has allowed us to transform not only our business model, but our systems too -- equipping us with the flexibility to achieve our business goals. They are leading this charge to the Subscription Economy. They understand it and, more than anything else, have changed the way we look at our customers.”