Case Analysis & Presentation

Presented by
Tracy Nguyen
Content

Company
Findings
1 Company background & products & problem s
4 The problems with the existing cost system

Challenges
Recommendations
2 Review the company activities related to
products
5 How to better manage business

Analysis
3 Current profit margins for each product under
existing cost system
 • Leased hardware
• Service: operating system, servers,
1. Background Managed data storage
Hosting

Tidal is a cloud server company,

offering 3 main hardware and • Leased virtual servers
software products with services: Public running on server
Cloud hardware of Tidal
Managed Hosting, Public Cloud
and Marea Cloud.

• Private cloud running on

dedicated hardware.
Marea
Cloud
2. Challenges
Challenges:

1. AWS’s (competitor) announced another price drop for its public cloud (4%)
2. Public Cloud offering is growing well in revenue but perform below the profit margin

What should we do to compete with competitors for new customers for public cloud products and maintain our
existing customers?
3. Analysis
Current profit margins under the existing cost system

According to the current cost system, the Public Cloud service was generating good revenue,
but its profit margin was in the negative. Conversely, the Marea Private Cloud accounted for
30% of the overall company revenue and shown exceptional performance in terms of profit
margin.
3. Analysis
Current profit margins under the existing cost system

What was the method used to distribute the indirect expenses among the different
products?
3. Analysis
Different products comprise different service activities

6 Core activities:
• Provide computing Resources
• Process Payments
• Onboard New Customers
• Support Existing Customers
• Build and improve products
• Advertise and Promote

These core activities are allocated different budgets for

each product
4. Findings
Product Profitability based on ABC Costing

• Utilizing ABC Costing leads to a good

profit margin for Public Cloud.
• The profitability of Marea Cloud should
be acknowledged as it is indicating a
negative contribution instead of an
excellent result as computed using the
old system.
• Despite generating the lowest income,
Product Profitability based on the existing system
the Managed Hosting option exhibits the
highest level of profitability.
• The outcome is expected to be a more
precise estimation of the cost of the
product.
4. Findings
Indirect cost allocation based on ABC

Question 1:
In contrast to Managed Hosting and Marea Cloud, Tidal
engineers handled customer onboarding and server setup, but the
day-to-day management of the operating system was in charged
by customers. Why is the largest allocation of this budget for
supporting existing customers going toward the Public
Cloud?

Question 2:
The organization gave development of Marea Cloud top priority
to enhance and set this product apart from more basic public cloud
and managed hosting options. Why was the development budget
for the public cloud so large, almost equal to the budget for the
Marea Cloud product?
5. Recommendations

Limit the amount of help tickets that are used by an automated system to assist current clients. For
example, use AI assistants to respond to routine client questions or create a FAQ that is accessible to all
Public Cloud product users.

Redirecting the development team's focus to the Marea Private Cloud rather than the Public Cloud. By
creating more distinctive characteristics, we may draw in a broader customer range and at the same time
decrease the total development investment for the Public Cloud and the entire organization.

Consider reducing the Marketing budget allocated to the Public Cloud. It represents 11.8% of the product's
revenue and 15.8% of the overall indirect cost of the Public Cloud.
Thank You!