Solution to Precise case

1. :
Business to Business
Case Submission

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.
Precise’s 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
DBA’s 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 Oracle’s 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
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

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 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.

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%

22. THANK YOU