Precise Software Solutions

[Case Analysis]

BY Group 1 Aakriti Singh Archit Jain Chahana Jhakar Mridul Behl Prashasti Mishra Sonali Rout

Case Background Precise Software Solutions developed software that helped its clients to monitor, evaluate and manage the performance of their Information Technology (IT) systems. A major portion of its revenues came from products managing the performance of Oracle database applications. It faced tough competition from Oracle, BMC Software, and Quest Software. Shimon Almon, President and CEO of this company, wanted to establish it as a market leader by introducing an innovative product, Insight into the market. Also he had this ambition of turning his company into a $100 million venture. But 2 critical questions came his way- when to introduce Insight, considering the tradeoff between time to market and functionality, giving no opportunity to his competitors to produce a better product and take over the market, and how to introduce the same, answering queries about the selling strategy to be embraced, the sales force to be appointed, requisite incentive plans etc. The market for an End-to-End Performance Management Solution was highly lucrative, considering the fact that a majority of the customers would be from firms using enterprise-wide applications. Analyzing the huge investment that goes into buying, installing and running enterprise applications, any glitch in their performance would be a source of major trouble and worry for their users. Apart from that, the applications were highly data intensive, and the distribution of users very skewed, which matched brilliantly with the Insight value proposition.

Recommendation regarding introduction of Insight at OpenWorld 2000 Alon believed that Precise should be looked upon by the customers as a solution provider rather than just another IT firm dealing in various products. An end to end product like Insight held great promise and was seen by Alon as the product which will realize his long held dream of making Precise a $100 million company. The demand for Insight was expected from firms using enterprise-wide applications like ERP, online retailers. The advantage of releasing Insight at OpenWorld is simply that there will be serious motivated and interested prospective customers attending the conference. A successful demo there would leave very little work later. In fact the sales team would be handed contacts of potential clients on a platter, they would just have to follow up on the first impression left by Insight at the OpenWorld. Since Insight is an end to end product and will be existing in a multi-tier environment, thus there are a lot of developmental issues that it is facing. Insight will require a totally different kind of expertise which will have to be picked up from the market. Then putting on the table a fully functional product would take a considerable amount of time too (2 years).

First impression is the last one, keeping this in mind and to really shock and awe the prospects at OpenWorld Precise should wait for the OpenWorld 2001 to release the product, because a fully functional product would be able to command more attention, interest and price. This would also wrong foot the competition, they wouldnt know what hit them. Whereas releasing a generally available product with reduced functionality in 2000 would just give away the strategy to the competition and by the time Precise comes out with a proper version of Insight the competition will have had time to develop a similar product and thus give some completion to Precise, basically the first mover advantage will be mitigated to a certain extent. Hence it should be kept under wraps and only the final fully functional foolproof product should be introduced in the market, notwithstanding the amount of time that may take. Sales Strategy Precise has a highly efficient existing sales force, which has been trained to sell all of the companys products, other than Presto. Since Presto dealt with monitoring the performance of EMC storage products, training for the same is not very relevant as far as Precise, an end-to-end performance management solution is concerned. Hence the existing sales force is competent enough to understand the needs of the customers and offer the right solution to them. Also, they have been considered as valuable partners in solving important database problems. Hence considering the vast amount of knowledge that they possess, the existing sales force can certainly be used for Precise, after providing them adequate training on Storage devices, since Precise is going to be an end-to-end performance management solution. Also the sales force requires being highly motivated and persuasive to influence the CIO or CTOs approval of the purchase, since its price is going to be much beyond $25,000 and the DBA would not have the autonomy to make the purchase alone. Also this software would require the sales force to learn new skills required for networking environment, which is a deviation from the earlier database environment. Reactions of the sales force Precise/ SQL were designed to manage the performance of applications utilizing Oracle databases. Precise had an image of high quality product which delivered what it promised. The main benefits from this product were the savings associated with DBA productivity, savings due to deferral and hardware upgrades and savings in end user productivity. Precise sold its product through a dual channel distribution system. Each salesperson was trained to sell the companys entire product. This ensured that sales rep will understand the customer needs and hence will be able to offer a right solution. Due to introduction of Insight the main decision required was to have a new sales force for this product or to continue with the existing sales force. This new product required the sales rep to have skill set different from the existing representatives. SQL sales force was expert in database management but Insight required experience in networking environment also. There is a possibility that the existing sales force may not be interested in

learning new skills required for networking environment. They may be not open to change. The existing sales force may feel insecure because of new sales team for new product. This will not differ if we launch insight in time for OpenWorld or not because this new product requires different expertise, so the reaction from the sales representative will be irrespective of when it is launched. Difference between selling of the two products The difference between selling their core product SQL/Precise and the new product Insight is basically the kind of skill required by the sales representative for selling the product. Insight had a more complex development process as compared to SQL/ Precise. Precise is a software product managing the performance of applications utilizing oracle database. It is targeted at users of proprietary applications. On the other hand insight is an end to end performance management product. It also has end to end response time unlike SQL. It is not a high quality product if launched immediately. It talked about the whole system unlike different components. Pricing of Precise The new venture, Precise/Insight, had planned a tentative launch aimed at the Oracle OpenWorld 2000 conference. The OpenWorld conference allows them to introduce and demo the new product to thousands of prospective clients. The main problem was that as of July 1999 development had not yet begun on the product. This left Precise likely unable to develop, test, and launch a fully functional new product in time for the OpenWorld 2000 conference. In light of this information and the fact that 95% of respondents of survey indicated end-to-end response time as key indicator launch of Insight would be welcomed, many products on the market, Precise/SQL being a key player, could manage cross functionality from resource monitoring, detection of suboptimal wait times, suggesting improvements based on the detected issues, all the way through an analysis of the impact the recommended changes would have on the performance of the server. However, these applications were single-tier oriented. In other words, they could only monitor, detect, improve, and analyze either the Application Server, or the Database Server, or the Storage Server. The first version of the product has limited functionality in the sense that it can look only after the process of monitoring. The pricing and segmentation of the product insight should be done keeping this thing in mind. A one-product company faces a high risk of being displaced by either a large vendor or another company that develops the same solution. At Precise they should go for an enterprise performance solution which just dont want tools, but enable them to become an end-to-end infrastructure company and not a database company. Hence this should be their target segment.

Precise covers very, very well the link between storage, database, ERP applications, business applications, Java applications and so on. The performance market will be the most challenging and fastest growing market as they go forward. Since they should continue to develop high value performance solutions that will cover every major application for every major platform the pricing of Insight should be Value proposition based. ROI Model For Precise/SQL The ROI for the precise can be calculated as follows from the EXHIBIT 4: Calculating Total Savings from DBA

No of hours worked by DBA per week(assuming 8 hr working/day) Hours saved per DBA per week Hours worked per year(=per week * 52) Hours saved per year(=per week saved *52) Average DBA salary Average DBA salary per hour Annual Savings per DBA per year Average # of DBA Annual Savings per firm(Total Savings from DBA)

40 9.4 2080 488.8 60000 28.84615 14100 10 141000

Calculating Savings from end-user

Average end user salary Average employee burden rate(33%) Improvement in end-user response time per transaction(25%) Savings per user(end user salary*burden rate* improvement) No of simultaneous users Annual Savings through users

30000 0.33 0.25 2475 215 532125

Calculating Hardware Cost Savings

Average annual hardware budget affected by precise/sql Hardware cost savings if pospone purchase by one year(30%) Probability of months(60%) posponing hardware purchases by

143000 0.3 three 0.6

Annual Savings in hardware costs

64350

TOTAL SAVINGS Cost of 10 DBA installations ($20,000 avg. & 25% discount)

737475 150000

ROI

491.65

Thus the ROI comes out to be 491.65 percent. The price paid varies between $15,000 and $25000 and so the average we have taken is $20,000. Already the ROI is very high and charging increasingly as 15% increase in list for every additional CPU over a designated number would further increase it. Moreover it also varies with the performance of the machine it is being installed on. So analyzing these figures Precise/SQL has been quite successful and price they charge is as of a premium product. These figures are highly relevant in the launch of the product INSIGHT as that is a product with full functionality and has no direct competition. Already it is tested that products of Precise solutions always have been successful if the returns justify the price, and here it is not just a product but a provider of solutions. We can conclude that a premium price charged would help to recover not only the investment made but also earn the company a lot more due to its substantial value proposition and so INSIGHT can be launched with a high price.