Precise Software Solutions

Creating Value

Naveen Nirmal Kumar

EPGP-10-119
 Precise Software Solutions

1. Should Alon plan on introducing Insight at Openworld 2000? Why or Why

not?

Alon was willing to consider the 14 months to Openworld 2000. However, to

have fully functional version of Insight would need approx. two years.

The odds of going to Openworld 2000 with a premature product had detrimental
ramifications such as:

a) The reputation of the organization and its brand could be damaged due to
an suboptimal product and might lose attractiveness with prospective
customers who value the products proposition.
b) It may indirectly promote competition to come up with better alternative
solutions and snatch the chances from Precise to be leader and first-mover
in the industry.
c) The product would only have the function to monitor while the analyse
function will have to be dropped which could be seen as a serious gap issue
in product development.
d) Precise still had to chart the marketing and pricing strategy with the
comprehensiveness of product and may not be able to have fair pricing by
Openworld.
e) The product needed at least a couple of iterations for testing purposes
before taking to the product. If there are fixes required after the launches
then the product will be considered suboptimal.

Hence, it is recommended that considers the advice of his counsel and withhelds
the launch of the product until Openworld 2000 by which a fully functional
product will be available with planned marketing and pricing strategy.
2. What should Precise strategy be for insight? Should they launch a separate
sale force for the new product or sell it through their existing sales force? How
good is their current salesforce?

Precise sold its products, other than Presto, through a dual-channel distribution
system. However, Precise needs to set-up a new direct sales team for the sale of
Insight as the product is very unlike of its product portfolio and the existing sales
were most aligned to interact with DBAs and network engineers. While, Insight
with its features will involve sales process in which senior managers, CIO and
CTOs involved which will need a greater sales leverage and multiple pursuit with
follow-up.

The average representative had sales of $800,000 annually and thus earned
$120,000. The highest paid representative made about $300,000. Both of these
numbers were below average for commercial software sales forces.

Ben, the CFO, was not convinced that Precise had the right people for a product
such as Insight as the team was already pressed for directions and it wouldn’t be
clear for them. Hence, either training the current salesforce for the intended
product or establishing a new team with greater sales skills will be the need of
the hour.

The product also needed a new team for international positioning as the VARs
and systems integrators were best suited for established products which had
greater clarity.

Thus, the recommendation would be to establish a new direct sales team for
domestic and international markets independent of the current list of products that
Precise had a larger stake on.

3. How should Insight be priced? Develop an ROI model for Precise/SQL

product?
The recommendation would be adopt value-based pricing approach which means
a price for a customer should be proportional to the perceived value derived by
the customer based on the solution provided.

DBA savings

Assuming the DBAs worked Total work hours = 45

for 9 hrs/day, 5 days/week
Hours saved per DBA/week 9.4 hrs
Average DBA salary $60,000
Hours worked/year 52*45 2340 hrs
Hours saved per DBA/year 52*9.4 488.8 hrs
Cost/ hr for DBA 60000/2340 ~ $ 25.64
Cost saved per DBA/year 488.8*25.64 $ 12,532 (20% of salary)
Total number of DBAs 10
Total savings for all DBAs 12,532*12 ~ $ 125,320

Hardware Savings
Average Annual Hardware Budget 1,430,000
Hardware Saving if postponed purchase by 1 year 30%
Probability of postponing by 3 months 60%
Savings 64,350

User Savings
End User Salary 30,000
Average Employee Burden Rate 33%
End User Time Improvement 25%
Savings Per User 2475
Number of Users 215
Savings for all users 2475 * 215 532125

Total Savings
= 125,333.33 + 64,530 + 532,125
= 721,808.33

Cost of 10 DBA installations with 25% discount

= 10 * (25000 * .75)
= 187,500

ROI = 285%
=========================================================