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Precise case b2b

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Abhijeet Kumar
Abhijeet Kumar

This document discusses Precise, a company that develops performance management software. It introduces Precise's new product called "Insight" and the challenges of determining when and how to launch it. It provides background on the IT infrastructure market dynamics, typical systems and buyers. Product types are segmented into monitoring, detection, improvement and analysis. Precise's existing strategy, product portfolio and sales approach are outlined. The document then considers options for launching Insight, whether to use the existing sales force, and how to price Insight by developing an ROI model for Precise/SQL.

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: 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. Precises 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 DBAs 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 Oracles 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 companys 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 CIOs 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 week No. of hours saved/DBA/Year = 9.4*52 = 489 hours Salary 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/user Daily 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 time Saving per user = 30000*.1175*0.33 = 1164/user/year Total 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

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Precise case b2b

  • 2. 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. 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
  • 4. 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
  • 5. 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
  • 6. 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
  • 7. 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. Precises Strategy
  • 8. 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
  • 9. 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 DBAs and impartial evaluation of DBA performance. Sales & Channel Strategy
  • 10. 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 Oracles annual Open World Conference in Sept 2000. Insight Introduction Factors To Be Considered
  • 11. Q1)When should Alon plan to launch insight?
  • 12. 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.
  • 13. The arguments against launching INSIGHT are: Reputation: If Precise creates an expectation and show up with partial solution, it might have negative impact on companys 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
  • 14. Q2) Should Precise launch separate sales force for the new product or sell it through their existing sales force?
  • 15. 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.
  • 16. 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 CIOs 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.
  • 17. Q3) How should Insight be priced? Develop an ROI model for Precise/SQL product.
  • 18. ROI model for Precise/SQL DBA Saving: Assuming they work for 40 hours per week No. of hours saved/DBA/Year = 9.4*52 = 489 hours Salary 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
  • 19. 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
  • 20. ROI model for Precise/SQL User saving: No. of daily transaction per user = 194000/215 = 903 trans/user Daily 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 time Saving per user = 30000*.1175*0.33 = 1164/user/year Total user saving = 1164*215 = $250098/year
  • 21. 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%