Cloud Computing is the phenomenon in which computing, networking, storage and application services are provided as services with seemingly infinite capacity of the Internet
Cloud Computing works in a way similar to how our water and electricity services work- we use the service, how much we use is monitored and we pay for only what we use, giving everyone the same accessibility. There are 3 different services that cover the foundation for cloud computing. IAAS- the housing, running, and maintaining of the operations equipment. PAAS- the ability to develop and test new applications. SAAS- easy and immediate access to software through the internet. Essentially the cloud is an outside and in some cases a 3rd party provider. The 3 services are all located off site and accessible via the internet, giving the users immediate access. How many of you have email? How many of you use a provider like Microsoft outlook? This is the start of email services, where the only way to access your emails was while being on the necessary computer/server/network. How many of you use a provider like Gmail or Hotmail? These providers use “the cloud” to get you your emails no matter where you are.
Cloud Computing can have different benefits depending on the user, but one overall benefit to the Cloud is the decrease in cost to those using the service. I think we all might agree, that being able to get our emails anywhere we are can be both a burden and an aid. The cloud not only provides this increased accessibility to you and me, but to business owners as well. What business owners are generally more concerned about is money, which is another reason the cloud is so appealing. If a company is growing they are likely storing more and more data as well. Often what can happen is they will out grow their current system and updating something like that can be expensive. IAAS allows businesses to pay for use of infrastructure at a significantly lower cost. In addition, for smaller just getting started businesses, the cost of acquiring, loading, and maintaining necessary software can get pricy, through SAAS these businesses can acquire everything they need with an internet connection and pay per use model. The cloud also offers the opportunity for users to immediately upgrade the software they are paying for, without needing to go through the drawn out approval and installation process that is standard in most businesses. Also cloud providers are dedicated to constant and efficient service which for many means efficient work with less outage issues
With all good things there are usually kinks and challenges that go along. Since the cloud uses the great power of the internet to provide services, that can come with latency and occasional performance issues. And changing over to cloud computing for any business is a process that can take a bit of time, and we all know time is money. Finally, and for many the most concerning, is how secure cloud computing is. Using anything outside of what is company maintained can be risky, so trusting the storage of data to an outside source is not usually a businesses first choice.
Now we will move on to Zuora, a big player in cloud computing Marc Benioff the founder of salesforce.com and two key men from WebEx were meeting in 2006 on an unrelated issue, but found that they kept coming back to the major role that a billing system played in growing their businesses and so started the development of Zuora Both businesses had worked hard on developing their billing system for the SAAS companies they had, and with the staying power of SAAS and emergence of other platforms, they began to see the need for an efficient billing system. In particular they saw a growing need for subscription based billing for companies like Netflix Beginning with just 5 of their major customers they developed their billing product, Z-Billing and launched it in mid- 2008. After receiving feedback from these users, they then went to work on a payment product as well and by the end of 2008 had sold their Z-Billing products to over 70 customers. By the beginning of 2009 Zuora had launched Z-Commerce, online billing geared towards cloud developers. This allowed the movement from paying up front for licensing to paying just as long as the service was continued- or pay- as-you-go. Why buy a DVD when you can subscribe to Netflix and access a whole library? Why install CRM software when you can subscribe to the world-class version online from salesforce.com ? Why buy a car when you can subscribe to Zipcar and get the whole fleet? ﾊ H owever, companies that deliver these new services need a way to run their subscription business AND support their unique needs. For example, they need pricing flexibility to address different customer groups, operational scalability for growth, and key metrics like churn and monthly recurring revenue (MRR) to assess the health of the business. ﾊ T hat's where Zuora comes in. Just as Amazon makes it easy to become an online retailer, Google makes it easy for anyone to advertise online, and PayPal makes it easy to accept online payments, Zuora makes it easy for any company to build, manage, and grow a subscription business.
Being that online billing, at the time, was still very much an emerging sector, the major competition for Zuora was not necessarily major. The market includes a number of billing and payment companies, however none of them were a subscription-based billing solution that would automate the billing process- just what Zuora set out to accomplish
Given that at the start of the cloud computing market, those offering billing and payment services were new and not necessarily providing the ideal service, the potential market for Zuora was amazing. In addition to that, it was estimated that in 2011 the worldwide software industry purchases would be around $744 billion and that 12% of that would take place via the internet leading to the potential of $95 billion for the taking. In addition to the potential market to be had through the overall software purchases annually, the declining economy has also lead to many businesses looking for less expensive alternatives, what Zuora has to offer is just that.
For many the reason they entered into cloud computing was that they saw the ability to provide attractive solutions to the small and medium sized business market. While Amazon and Force.com entered into the cloud computing industry already having billing solutions in place many of the others did not. This is the reason that such potential entrants as IBM and Sun actually did not jump head first into cloud computing- their lack of the appropriate billing systems. And this is where Zuora saw its opportunity and so began to development of Z-Billing.
Zuora thankfully acquired its state in the market before the major downturn in the economy, but the change in the economy brought them to a point where they needed to decide where to head next. They had the opportunity to get funding for a 3rd round of developments to capture early market share and establish a market dominant position or continue at a slow and steady pace and avoid any possible downturn. The way Zuora saw it they had 3 options: Scenario 1 consisted of keeping the company structure the same, remain cash flow positive and see only a 30-50% growth and hopefully forming partnerships with companies like Amazon and Google. Scenario 2 would involve ramping up sales to capture more of the cloud computing market as well as expanding the company structure, both of which would increase their burn rate and lead to them needing increased funding. Scenario 3 would involve a large increase in staff to assure a 200% growth year to year because it would bring in all types of subscription businesses, however they would need almost immediate funding.
Cloud computing and zuora
Zuora Inc.: Venturing IntoCLOUD COMPUTING By Kaitlin Farrell BUS 550
AGENDA• What is Cloud Computing• How does the Cloud work• Why do we need the Cloud• Challenges with Cloud Computing• Background on Zuora• Zuora Competitors• Market Potential• Leading Cloud Companies• What Now• Discussion Questions• MC Question
What is Cloud Computing? “The Cloud”A loosely defined term for any system providing access via the Internet to processing power, storage, software or other computing services, often via a web browser. Typically these services will be rented from an external company that hosts and manages them.
How Does the Cloud Work?• Infrastructure as a Service (IaaS)•• Platform as a Service (PaaS)• Software as a Service (SaaS)• Ex. Gmail vs. Microsoft Outlook
Why Do We Need The Cloud?• Increased accessibility• Decreased operating expenses• Elimination of upfront costs• Immediate upgrades• Lower outages
Challenges with Cloud Computing:• Higher latency and worse performance• Necessary network upgrades can be costly• Security issues Breaking through firewalls Who can touch the data
Zuora Background• Started in 2006 around the idea of “billing”• SaaS to Subscription• Launched initial product in 2008• Z-Commerce
Zuora Competitors• Paymentech• PayPal• National Processing company and Bluepay• VLM International• Custom home-grown billing solutions
Market Potential• Multi-billion dollar market• $744 billion in sales worldwide in the software industry• 12% migration to the internet in 2011 in software purchasing• $95 billion potentially• Declining economy leads to tightening budgets
Leading Cloud Companies• Amazon DevPay FPS: Flexible Payment Systems• Force.com• Microsoft Azure• Google App Engine• Potential entrants IBM, HP, Sun, EMC, and Oracle
What Now?• Scenario 1: Continue to focus on SaaS industry• Scenario 2: Expand to capture the broader cloud computing trend• Scenario 3: Grow big fast and try to capture the broader subscription opportunity
Discussion Question• Which scenario would you choose given the state of the economy and the potential market that Zuora faced?
Multiple Choice Question• Which one of the following is not a service of the foundation of cloud computing? a. Platform as a Service (PaaS) b. Infrastructure as a Service (IaaS) c. Subscriptions as a Service (SaaS) d. None of the above
References:• cloud computing. (n.d.). The Free On-line Dictionary of Computing. Retrieved May 26, 2011, from Dictionary.com website: http://dictionary.reference.com/browse/cloud computing• Zuora Inc.: Venturing Into Coud Computing. Stanford Graduate School of Business. September 16, 2009• http://www.zuora.com/company/index.html