:

Business to Business Case

Submission

Precise developed ‘Performance Management and Availability’

software helping clients to monitor, evaluate & manage their IT systems.

Served firms with complex network of hardware and software

components.

Introduction

3 - Tier IT Infrastructure

Tier 1 – Provided users with access to centralized repository of IT

resources.

Tier 2 – Specific functionality that the user sought.

Tier 3 – The database, provided access to the required information.

Typical IT System

The leading seller of DBMS was Oracle followed by BMC and Quest.

The leading storage device vendor was EMC.

In an organization, separate group of people managed each of the tiers in

the system.

Buyers & Buying Decision Influencers The business unit for which the application would perform (End users). IT Department or IT Experts.

Growth Rate: The market is experiencing a very high growth rate.

Expected to double in 2003.

Market Dynamics

Precise is coming up with the new product called ‘Insight’.

Challenge was to devise a strategy to answer two main questions, ‘When’

& ‘How’.

These challenges can be solved with designing following strategies

Product Launch Date

Go to Market Strategy

Sales Force Strategy

Channel Strategy

The Challenge

The market is fragmented and the products were differentiated in two ways:1. Based on the underlying resources and platforms with which they were associated.2. Based on the functionality they offered.

Four Prominent Groups

1. Monitoring Real Time Functioning. Historical record for benchmarking purposes.

2. Detection Compare performance to historical metrics.

3. Improvement System suggests a remedy for the problem.

4. Analysis Program analyzes effects of prospective change before implementation.

Product Types

Channel Strategy: Direct Sales. Indirect Sales (Value-added resellers, System integrators and Original

equipment manufacturing agreements).

Sales Cycle Time: 6 to 2 months long cycle time.

Pricing Strategy:Pricing structure: one-time license fee + recurring revenue from annual maintenance and service contracts and additional revenues from product upgrades.

Competitors: Oracle, BMS and Quest.

Precise’s Strategy

Precise/SQL Software product managing the performance of applications utilizing Oracle database. Targeted at users of proprietary applications.

Inter point Software product monitoring the database efficiency of large Enterprise Resource

Planning applications.

Precise/Pulse Software product continuously monitoring the underlying database.

Precise/Presto For monitoring the performance of EMC storage products. Sold on an OEM basis by EMC.

Product Portfolio

Dual-channel distribution system

In North America the sales force was comprised of 17 account

executives.

The reps were well trained in all products and good in solving database

problems.

Internationally the company sold through distributors.

The target was the DBA, because the product benefits accrued to the

DBA’s and impartial evaluation of DBA performance.

Sales & Channel Strategy

Value Proposition : End-to-end performance management product.

USP: Important indicator of systems effectiveness: end-to-end response time.

Position Strategy: Position as a provider of enterprise performance solutions, not just products.  Position as an end-to-end infrastructure company not a database company.

Market Dynamics: Large Market. No Current Direct Competitor . Substantial Value Proposition.

Available Go To Market Option: Introduce the GA version of Insight at Oracle’s annual Open World Conference in Sept

2000.

‘Insight’ Introduction Factors To Be Considered

Q1)When should Alon plan to launch ‘insight’?

Options available – Openworld 2000 or Openworld 2001

The arguments in favor of launching INSIGHT are:

First mover advantage. Setting expectations in the market: defining ‘end-to-end’

space. Being identified as the player in the emerging segment. Tying up important lead customers. Figuring out potential problems in space before others.

The arguments against launching INSIGHT are:

Reputation: If Precise creates an expectation and show up with partial solution, it might have negative impact on company’s reputation.

Impact on process: Precise might rush through the alpha and beta phases, missing important insights.

Pricing: If Precise launches a lightweight version of INSIGHT at a reduced price, it may be difficult to raise that price later when the product is at full functionality.

Options available – Openworld 2000 or Openworld 2001

Q2) Should Precise launch separate sales force for the new product or sell it

through their existing sales force?

Arguments for single sales force:

They have been successful in selling multiple products (Interpoint as well as Pulse) in the past.

They are experienced and successful. They know the space and their expertise has not been debated till now.

They have developed strong relationship with the DBAs and have been viewed as important problem solvers.

There is a fixed cost associated with starting and running a sales force.

Arguments against multiple sales force:

The buying process is quite different. DBAs bought SQL because it helped her to win ‘blamestorming’ session. But the sales of INSIGHT is based on an understanding of CIO’s pain points.

There can be problem of ‘cross-product’ effect. Sales team might not be able to allocate the right amount of effort to sell INSIGHT and SQL simultaneously.

Q3) How should ‘Insight’ be priced? Develop an ROI model for Precise/SQL

product.

ROI model for Precise/SQL

DBA Saving:Assuming they work for 40 hours per weekNo. of hours saved/DBA/Year = 9.4*52 = 489 hoursSalary of DBA = $60000/52 weeks/ 40 hours per

week= $28.85/hour

Annual saving per DBA per year = 489*26.64 = $13027/DBA

Annual saving per firm = 13027*10 = $130270

ROI model for Precise/SQL

Hardware saving:

Assuming annual interest rate = 10%Cost of capital saving = 143000*.10*3*.6/12 = $21450

Saving due to price drop = 1430000*.3*.6*3/12 = $64350

Total hardware saving per firm = 21450 + 64350 = $85800

ROI model for Precise/SQL

User saving:No. of daily transaction per user = 194000/215 = 903 trans/userDaily end-user response time per user = 903*15 =13545

sec/user= 3.76 hours/user/day

Improvement in end user response time = .25*3.76 = 0.94 hours% of response time saved per user = .94/8 = 11.75% of timeSaving per user = 30000*.1175*0.33 = 1164/user/yearTotal user saving = 1164*215 = $250098/year

ROI model for Precise/SQL

Total saving = 130270 + 85800 + 250098 = $466169/year

Average price that firm is charging = (15000+25000) /2 = $200000

ROI = 466169/200000 = 233.3%

THANK YOU