Zuora Inc Case Study

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strongly positioned itself in the industry. Now that Zuora is scaling up, it will need to identify which market segment they need to target next. The new scenario should be marketable quickly in order to capture all potential customers.

• Technical feasibility – Zuora needs to come up with a new IT strategy to cater to which scenario they would focus on. If they go with the first one, they will need to develop strategy to encourage partnerships with large and well-known e-businesses such as Amazon or EBay. If they decided to expand in capturing cloud computing or subscription market, it would need a solid cloud or billing platform.

• Company value – Zuora new scenario’s outcome should be an increase to overall company’s value, which will in turn increase the value of the stakeholders. It should also fit in with the policies and objectives of the organization to avoid failures due to conflicts.

ALTERNATIVES AND RECOMMENDATION

There are several possible routes that the company could take to find a balanced strategy. The alternative solutions are given below and an analysis of between their pros and cons.

Scenario 1: Continue to focus on billing for the SaaS industry

Pros:

• Positive cash flow, no need for Series C funding

• Will focus on SaaS industry, and maintain as the industry leaders.

• Possible partnerships with Amazon and Google

• Organizational and technological structure will remain the same

Cons:

• Growth rate will remain the same or may become stagnant in the future as new technology emerge.

• Vulnerability to competitors that can provide the same product but with new innovation

Scenario 2: Expand to capture the broader cloud computing

Pros:

• Sustainable growth

• Can capture small and medium sized market

• Moderate change in organizational structure.

Cons:

• Require Series C funding

• Negative cash flow

Scenario 3 Grow big fast and try to capture the broader subscription opportunity

Pros:

• Expected growth rate of 200%

• Higher profit

Cons:

• Requires Series C funding immediately.

• Market is too big that it may lose its focus.

• Inability to address the needs of large consumer and enterprise markets with s short time of planning.

• Drastic change in organizational structure as more employees are needed.

Recommendation

It is recommended that the most strategic scenario to go is with the second one, which is to expand to capture the broader cloud computing trend. The other two scenarios involves taking too little or too much risk. Venturing to cloud computing trend is less risky than the third option, while being in the SaaS industry pose low growth and potential loses in the future. Capturing broader subscription opportunity without a strong foundation pose a higher risk. Zuora needs longer time in planning to be capable in taking overlarge market and enterprise segments. This may also result in losing focus in its current standing in SaaS industry. The company can consider this cloud computing project as a stepping stone. It will need to start the Series C funding, but not as soon compared to the third scenario. This will allow Zuora continued growth while giving them time to evaluate their opportunity in broader subscription services.

RISK ANALYSIS

Zuora may face risk issues once they launched the cloud computing venture and they should implement a risk management strategy to overcome these issues.

Business Perspective: There is a risk that cloud computing may not be as big as they have envisioned. They cannot be considered as the first-mover in this industry and therefore may not be able to capture the market share and segment they have anticipated. The company should re-evaluate their current strategies, processes, and goals then develop the venture to cloud computing based on it.

Financial Perspective: Zuora have to raise Series C Funding. With the downturn in the economy, the financial cost will be higher and could lead to a negative cash flow in the long run. The company has to be prepared for this and continue to evaluate the cost and benefit analysis and should know when to delay the project to avoid failure. However, because of the company’s track record in its previous two series funding there is a good probability that Zuora will be able to get funds at competitive rates and will be in position to repay the same on time.

IT Perspective: Risk with respect to security and privacy as they transact sensitive information. They have to take strong measures to mitigate this by investing heavily in security and making it an initial initiative within the company. Another challenges of cloud computing is the necessary network upgrades needed that can be costly for Zuora. Before implementing a new project, the company should evaluate their current IT portfolio. They have to ensure that they their strategic demands will be able to meet by their IT department. They should also consider hiring developers that have high level of expertise in cloud-computing.

Zuora Inc has to consider a “Plan B” to cope with risks or when they feel that the new product is leading them to failure. If it was decided to not continue with the product, they should keep the all the work done and continue on when they are financially ready and more prepared to develop it. They should still continue and strengthen its ties with existing cloud vendors so they will still have the contact and relationship with clients when they are ready to launch new products. Another option they can consider is creating a cloud business independent of their SaaS business to avoid any negative impact that the cloud computing business may encounter.