- Analyse the company and the environment in which it operates. You might do this by focusing on the following issues:
- What does Hosted SP do?
According to the case study, Hosted SP was a market leader in providing messaging and collaborative services to their end users. The company was in the services of providing private cloud, managed hosting and multitenant services to their service users and their strategic based outsourcers. Hosted SP was one of the pioneers who implicated Software as a Service (SaaS) solution for the companies. Apart from that they were also offering cloud facility merely to enjoy the benefits of flexible solutions and to have rigorous check and balance over the sensitive information. By giving a specific focus over the SaaS, SP has managed to lowered the operational cost by supporting these systems so that the outsourcing of private cloud factor becomes highly economical and feasible for the companies.
- Why would customers choose cloud offerings over their own hardware or software?
Customers are the end users of an organisation. They are the most important individuals for the sake of a company. Efficient and timely management of the customers is legal and highly attentive for the sake of a company. The same was applicable with Hosted SP as well. The customers choose cloud offering over the hardware and software because of their expertise and speciality in the same outcome. It means that Hosted SP is more likely to provide determination and assistance in the cloud offering as compared to hardware and software. But, it doesn’t mean that the company didn’t focuses on the software. They have different programs and software such as Customer Built Solutions, Credentials and other factors which is allowing them to attract more and customers towards them.
- Why would customers choose Hosted SP over one of its competitors? How does Hosted SP differentiate itself?
Competition is the beauty of industrialisation. It means that the organisations which are able to manage the level of industrialisation are more efficient and accurate as compared to the organisations which are unable to have the same mechanism. From the case study, it is found that their were many competitors associated with Hosted SP and among them Microsoft was one of them. Customers choose Hosted SP over Microsoft because of two reasons. Obviously, the price of the software presented by Microsoft were extremely high, and it was not possible for Hosted SP to compete with Microsoft in terms of pricing, but they have added additional features in the underlying product that allowed them to attract more and more customers than Microsoft. This is the main thing why the customers are likely to prefer Hosted SP over its main competitors. In short, it can be said that quality and pricing are two major factors that allows the customers to prefer the products/services of Hosted SP over its major competitor such as Microsoft.
- What does a private cloud customer want compared to an MT customer?
The case study of Hosted SP has identified about two different types of customers. The requirements of the customers are totally different from each other. Hosted SP has a great mechanism and tendency to attract more and more customers within their portfolio. The customers for the company has been divided into private cloud customers and multi-tenant customers. Private Cloud Customers are the one that requires the SaaS and the cloud resources merely for the personal outcome and purposes. In other words, there is only one customer, whose requirements are clear, and the company is likely to provide the customers all the abilities through which they can easily use the private criteria of computing the clouds.
On the other hand, MT customer is about managing the cloud computing mechanism for more and one employees. It means that MT Customers are more likely to maintain their outcome professionally and effectively. Hence, the basic different between private cloud customer and MT customer is relating to the size and number of customers.
- How does the economy affect the industry?
There is a heading covering with the content of Industry Trend is showing some positive aspects and responses pertaining to the market of Cloud Computing. Forrester, which is an independent technology and market research company estimated that the global cloud computing market is likely to grow by 492% over the next seven years, and expected to reach on a level of US$ 241 Billion. 80% of the same amount is associating with the SaaS and Cloud Computing. The rapid transformation towards SaaS and Cloud Computing has increased the values and efficiency of the organisations to increase their potential in the market. The economy of the United States is expected to grow in the next few years, which certainly have a direct connection with efficient financial positioning and effectiveness in the given marketplace.
- The industry has experienced tremendous growth recently. What might this growth mean to Hosted SP?
As mentioned earlier that Cloud Computing and IT industry are some of the most astounding and highly efficient industries of the world. Hosted SP is one of those companies that have exceptional reactions and growth due to the increase in the industry and its growth. The case clearly identified that the industry has experienced exceptional and tremendous growth recently, which is indeed quite an efficient aspect for them. In the current growth of the company, the chances are bright for them to further attain growth in the market and maximise the financial potential of the company in a professional and special manner. Hosted SP has the chance to maximise their potential in the market, and has a great chance to increase their customer base as well.
- What is your evaluation of the current pricing strategy? You can focus your answer on the following aspects:
- How does Hosted SP price its services for each of its private and MT customers?
Pricing strategy is one of the most important and valuable strategies from the viewpoint of an organisation. The organisations which are able to manage their pricing strategy are more efficient and valuable than the companies are which are unable to initiate the same. Likewise other companies, the factor deems equally efficient for Hosted SP as well. The company has to use different pricing strategy in both of the same outcome. For the private customers, the company should pursue a Penetration Pricing strategy in which lowest amount should have been charged with providing complete competitive aspects accordingly. On the other hand, the company has to use a competitive pricing strategy mechanism for their MT Customers. It means that the company can charge similar pricing which their competitors are charging but with the providence of high amount of features and characteristics.
- What kind of margins does Hosted SP earn?
There are numerous types of margins that can be earned by Hosted SP which are as follows
- Firstly, it is the customer margin which is expected to increase with the passage of time
- The company is looking forward to earn a net margins between 25% to 35% for the MT customers
- The company is looking forward to earn a net margins between 35% to 45% for the MT customers
- Where has the company focused its marketing and sales efforts? Why?
The company has managed to focus on its marketing and sales efforts because they are aware with the fact that focusing on the sales and marketing function will help the company to put more focus on their productivity and core efficiency. It is the only thing through which they can get added advantage from their operations in high competition in the market.
- Analyze the profitability of Hosted SP’s eight key customers (Exhibit 4) using the activity-based costing method, and make recommendations to Hosted SP’s management.
From the aforementioned analysis, it is clearly found that the most efficient product of the company is Boo.com which is able to generate revenue of $ 55,232, followed by GovWorks and Webvan with a tendency to generate net revenue of $ 54,018 and $53,407 respectively, which is again a positive sign for the company. Think Tools is the lowest revenue earner for the company with an estimated revenue of $ 11,828$. It is recommended to the company to focus on Boo.com and Govworks products because of their high revenue earning capacity.
Activity Based Costing means the implications of costing on the products wherein the difference between cost and revenue would be the lowest. The last product with the name of Think Tools is the most efficient one which has the lowest level of difference between the revenue and the generated revenue. Hence, it is recommended to the company to invest in the same product. It is essential to apply certain rankings to the product in accordance with their Activity Based Costing. The list is as follows
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