Opportunities

Ecommerce is gaining momentum as more and more people discover the comfort of shopping
online and gain trust in the payment methods done through the internet. One of the biggest opportunities
is that because more and more people start buying online, Avangate is able to make more transactions for
its customers and thus increase its revenues.
Secondly, the IT industry is growing and evolving at a very fast pace. Many software, SaaS and
Online Services companies are born over the night and all are interested in finding a partner to help them
with their digital commerce infrastructure. Taking that into consideration, Avangate will never be short of
clients.
Moreover, Avangate can enter new markets that have been quite inaccessible until now such as
countries from Latin America and Asia where lately there has been a technological boom.
Threats
The main reasons of concern are generated mainly by its competitors: Zuora, Digital River,
Cleverbridge, Stripe, Shopify, Braintree which lately are fierce than ever. Competition is increasing day
by day big companies have already entered in this field. Some offer niche services, only for mobile or
only for SaaS providers, thus limiting Avangates access to them.
Other threats are constituted by more fraudulent attempts. Many hackers try to trick the system
and cause serious problems, including damage to the platform, inability to perform as usual or directly
threat our customers. Persons using unfair means to operate can damage the confidence and faith of
common people. All this frauds can be seen in the sales: shoppers are afraid of losing their savings by
doing payments online and are reluctant to buy from an online store.

5) Threat of Substitute Products or Services

The development of the technology has made it quite easy to sell products and services via the
Internet, so, indeed there are threats of substitute products in the eCommerce industry. In our specific
case, the seller of software could decide to build an in-house eCommerce platform through which to sell
his own software instead of outsourcing it from Avangate. Other substitutes are different online platforms
that have similar functionalities but are not mainly for selling products. For example, people and
companies can sell products via Wordpress, an online blog editor.
P.E.S.T.E.L.
Political factors
The taxation system for the eCommerce market is still under development and will continue to
become even more complex. Many online sellers are selling goods and services with Tax inclusive, but
many transactions are still processed without any contribution to the taxation system. Other problems are
related to the fact that internet sales only have tax applied to the purchase if the buyer and seller reside in
the same state. Considering the growth and amount of tax revenue lost to eCommerce, the federal

government and individual states could write legislation to impose tax on all online sales. At this point,
Avangate is trying to solve the VAT regulation differences by applying standardized rules according to the
laws of the countries where the transaction occurs.
Economic Factors
The market opportunity for Avangate is outstanding. The total market for digital commerce
applications in 2013 was $2.2 billion worldwide, growth of 25.5% over the previous year. IDC is
forecasting that this market will grow at a compound annual growth rate (CAGR) of 17.6% for the
forecast period through 2018 to reach a total of $5.0 billion. In Worldwide Digital Commerce
Applications 2014-2018 Forecast and 2013 Vendor Shares (IDC #251185, July 2014), IDC estimated
Avangate's revenue for 2013 at $43 million, representing a growth rate of 58.1% over the previous year.
IDC also estimated that
Avangate was the second fastest-growing company (as per the document) and came in at number
9 on a list of 15 companies in terms of revenue. IDC believes that Avangate is well positioned to take
advantage of this growing opportunity in digital commerce.
Social Factors
Security and privacy issues are major hurdles for the growth of any company in the eCommerce
industry. Many customers are still hesitant to transact with companies and to disclose confidential data,
such as their home address, social security number, and credit card number, over the Internet, even though
they are ensured of their compliance with international standards and regulations.
Technological Factors
Security problems are a technical challenge that is associated to eCommerce providers. New
applications and the entire Internet can never be ignored. Whenever an organization uses the Internet to
engage in digital commerce, it exposes itself to security risks. Although many security protection
technologies, such as data encryption, firewalls, and virus checking can be found in the commercial
market, no one can claim that security is no longer a problem. It is most difficult especially when using
cards as methods of payments. For the payment processing at Avangate they are licensed PCI compliant.
Ecological Factors
In the case of Avangate, or the eCommerce market respectively there are no ecological factors are
influencing the business.
Legal Factors
The eCommerce industry has legal protections in the traditional market. For example, various
laws (e.g. the Sales Act) and regulations (related to the quality assurance, public liability, and warranty
issues) have been passed. However, when conducting business in the eCommerce market, particularly in
areas of security and privacy, relevant legal protection is essential.

Financial indicators and their interpretation

Avangate is one of the portfolio of technology companies owned by San
Francisco-based Francisco Partners. Francisco Partners acquired Avangate in
October 2013. The financial terms of the deal were not disclosed at the time;
however, it has been noted that Francisco Partners typically invests between$50
million and $2 billion in its deals. The firm seeks to invest in software, internet,
healthcare technology, communications, and hardware and technology services. It
prefers to invest in companies with enterprise values ranging from $25 million to $2
billion. The firm makes equity investments ranging from less than $25 million to
over $500 million. It typically acquires a majority or controlling stake in its portfolio
companies, but will be a minority investor with board of director representation.
The capital infusion from Francisco Partners enabled Avangate to invest more
heavily in product development and support Avangate's expansion into Brazil and
Japan. Use of the investment can be seen in the growth in the number of employees
(from 110 in 2012 to over 200 in 2014) and the depth of functionality included in
the quarterly releases, particularly in 2014.
In Worldwide Digital Commerce Applications 2014-2018 Forecast and 2013
Vendor Shares (IDC #251185, July 2014), IDC estimated Avangate's revenue for
2013 at $43 million, representing a growth rate of 58.1% over the previous year.
This growth is attributed to the rapid acquisition of new customers over 600 were
added in 2013 and over 800 more in 2014. Growth was also attributed to the
flexible revenue share pricing model that Avangate uses Avangate's revenue
grows as Avangate's customers grow their online businesses. In addition, in 2014,
Avangate began to add large enterprise customers, notably HP Software, Brocade,
and Software AG, to its traditional mix of start-ups to midsize enterprises. The
success these large enterprises are having with Avangate will attract additional
large enterprises and support Avangate's continued strong revenue growth.
Different types of industries have different benchmarks for rates of growth.
For instance, companies that are on the cutting edge of technology would be more
likely to have higher annual rates of growth compared to a mature industry, like
retail sales.
The use of historical growth rates is one of the simplest methods of
estimating future growth. However, historically high growth rates don't always mean
a high rate of growth looking into the future, because industrial and economic
conditions change constantly. E-commerce has become a $220 billion industry,
growing at almost 20 percent per year. Currently, online sales are a $220 billion
industry, and could grow to $370 billion by 2017. In Western Europe, where the ecommerce market is slightly more mature than the U.S., theres a growth rate of 11
percent, compared to nine percent for the same five-year period for the U.S.

Internal analysis
Strengths

Continuous development
The company is always striving for success. Its main focus is on developing a
good performing product that would enable its customers run better business. From
this point of view, the company is on the right track. New enhancements and addons are added to the core product on a quarterly base and are called seasonal
releases. These releases are examples of agile development, a concept that is very
efficient for the development of any type of business.
Market influencer
Because of the skilled and insightful people that work at Avangate, the
company has the upper hand when it comes to positioning itself on the market as a
trend setter. The company has also an educational aspect: it promotes resources
and articles related to IT, software, the ecommerce and business to business
market. I firmly believe that customers see this quality as a strength and effort of
the company to attract, retain and help customers achieve their goals through
knowledge and experience sharing.
Weaknesses
The primary challenge for Avangate is market awareness. Overall, the
company is still a young one, and its largest base of customers remains in the EMEA
region, although that is starting to change as the focus on marketing in North
America is gaining traction. Avangate is working hard to increase its market
awareness through the success of its customers, by building thought leadership
programs and sponsoring events, and through its "Rethink Commerce" blog,
newsletters, and other activities. Given the growth in customers and revenue, these
market efforts appear to be paying off.
The other challenge is the ability to scale and support a growing base of large
enterprise companies.

Avangate will need to continue to grow its employee base to support these
customers but may also want to consider adding qualified partners.
High customers expectation that are not met
Avangate is a company of repute and this is a major issue for customers,
producers and sellters of software, SaaS and online services when choosing to
partner with it. The bigger the customer, the higher the expectations it has for
better and personalized treatment. Unfortunately, this cant be met for all
customers. The company is under the pressure of satisfying all customers and
sometimes might not be able to meet all demands in due time.
Fraud
Avangate is often accused of fraud. Outraged customers complain about
Avangate as a thief which make unauthorized payments from the bank accounts.
The company in fact cannot make any payments without a present or a former
agreement from the customer. A better communication between the actual sellers
and Avangate would help mediate the conflicts and disband the claims that the
company is stealing money.