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Precise software solutions case

Solution to Precise software solution.

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Precise software solutions case

  1. 1. Precise Software Solutions
  2. 2. Case facts • Prescise Software Solutions, located in Westwood, MA, is a small software developer with one successful niche product and an idea for another, bigger value proposition. • Bulk for their sales come from Precise/SQL which provides DBA with important information about how database is working. • The new product PRECISE INSIGHT has potential to impact the entire IT operation • Shimon Alon is planning to launch the product on ‘Open World’ in Sept 2000 but the team does not think that they can complete the product on time • The management needs to decide ‘when to launch the product?’, ‘should they release limited functionality version or wait for one more year to launch full product?’, ‘how will the new product be sold?’, and ‘what will be the price of the product?’
  3. 3. Q1) Should Alon plan on introducing INGISHT at OpenWorld 2000?
  4. 4. Go for launch or not? The arguments in favor of launching INSIGHT are: • Setting expectations in the market: defining ‘end-to-end’ space • Being identified as the player in the emerging segment • Tying up important lead customers • There is always a option to pull out OpenWorld if they think that they will not be able to make it • Figuring out potential problems in space before others
  5. 5. Go for launch or not? • 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
  6. 6. Q2) Should Precise launch separate sales force for the new product or sell it through their existing sales force?
  7. 7. 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.
  8. 8. Arguments for 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.
  9. 9. Q4) How should Insight be priced? Develop an ROI model for Precise/SQL product • We would recommend value based pricing approach. That means a price for a customer should be proportional to the perceived value derived by the customer from the solution
  10. 10. 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
  11. 11. 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
  12. 12. 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*1.33 = 4688/user/year Total user saving = 4688*215 = $1007920/year
  13. 13. ROI model for Precise/SQL • Total saving = 130270 + 85800 + 1007920 = $1223990/year Average price that firm is charging = (15000+25000) /2 = $20000 ROI = 1223990/20000 = 6112%
  14. 14. Thank you