MANAGING BUSINESS MARKETS

Term III

Precise Software Solutions

Case Submission

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Case Facts:

 “Precise Software Solutions located in Westwood, Massachusetts, developed

softwares that helped its clients to monitor, evaluate and manage the performance of
their information technology (IT) systems”
 “In 2000, the market for “performance management and availability” software was a
small but growing one” and Precise focused on this niche market.
 Most of the company’s revenue comes from managing Oracle Database Application
and Precise/SQL which provides DBA with information on how Database is
functioning.
 CEO of Precise Software Solutions, Shimon Alon is contemplating to launch this new
product of the company called “Insight” in Oracle OpenWorld happening in Sept,2000
which has the potential to revolutionize the entire IT operations, amongst thousands of
IT Prospects.
 At the same time, his team does not think they are ready to launch the product in the
said event but management needs to decide that when and how to introduce this new
product, Insight, to the market because Alon thinks that any delay might give Precise’s
competitors time to develop a similar product but at the same time going to market too
early could be just as damaging as going too late.

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

why not?

Though we have come across both counter arguments which could favor the decision of Go-
To-Market and which discourages the same decision but according to the below mentioned
strong reasons Alon shouldn’t introduce Insight at OpenWorld 2000:

 With under developed product, if in case it happens to go through any issues or

problems or errors, it would cause a very heavy loss of reputation for the company.

 By launching it in such prestigious event, it would create a hype in the market leading
to very high customer expectation and a very high possibility of product not living up
to the expectation because of not enough functionality developed on the same.

 Rushing through the alpha beta phase of testing and compromising the process could
lead to very unfavorable results which again has a very high probability.

 Biggest issue would be with pricing that in case the company launches the product
which is not fully functional as they planned, they would have to release a basic
version which will not be able to fetch the desired price and then trying to increase of

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 raise the price with later updates, once the customer is used to what they have would
be immensely difficult, so it is not worth rushing into without proper marketing or
pricing strategy.
 Plus, as Alon fears, this would give a chance to competitor to witness their product and
develop their alternatives while they try to make it more functional and at the end, they
will have to witness a severe competition when they could have been first movers to
take the full advantage of the market capturers.

2. What should Precise strategy be for insight? Should they launch a

separate sales force for the new product or sell it through their existing
sales force? How good is their current sales force?

 Precise should deploy a mix strategy for selling Insight which is a combination of
utilizing their current in-house sales force as well as their distribution channel.

First of all, as we can see from Precise’s Income Statement, their current Sales and
Marketing Expenses already eats 70% of the Revenue generated directly. Launching a
separate sales force before they have made any kind of sales or have gotten commitment of
purchase from the market, the company will not be able to bear the burden of another Sales
Force adding it to the loss further.

We suggest the change in the Sales Strategy with changing the combination of current Sales
Force.
 Precise should deploy their in-house, very well-trained team on getting acquainted
with new product “Insight” and the benefits are as below:
• The DBAs are very well gelled with the current sales-representatives, hence
pitching, converting and leveraging the old relations for the new product would
be very do-able by the current sales team.

 And, utilize the distribution channels to push the sale of their current mature product
more by putting the targets and commissions on them which as of now they are
contributing to 45% of the revenue generated, with the added incentives, they will be
able to sell more since they are already proficient in the same,

 direct selling strategy with current sales force for Insight should work because it
provides a solution for more complex functionality, it will be easier for their Sales
Team to achieve better results with the help of in-house separate team.

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  And direct selling approach will yield better results because a functionality as
innovative and as complex as theirs will need a very well prepared and focused sales
team which can raise thorough and subjective awareness of the client's concerns, as
well as provide the solutions which will lead the Sales team in pursuing and
converting client in their favor.

 Precise has an excellent sales force at the moment, thoroughly trained in their current
offerings with great interpersonal relations with DBA’s because they were seen as
valuable partners. But presently the company uses a generalist approach while training
its sales force and now clients wish for end-to-end services deployment, which will be
higher in cost and needs to be proven to provide better ROI.

 But Insight being a very different product than their usual offering, they will need to
invest on the training for the Insight to their inhouse team because such a complex
product requires in-depth knowledge, and the current sales staff is already deployed in
their current marketing of ongoing products and services which will need some
transition time and since we have advised them not to launch the Product now in the
market, they have time to go through the transition for their sales team with ongoing
commitments.

Accounting to the risk inherent in the mix strategy, but being very considerate of the
fact that they are already running in loss due to heavy Sales and Marketing expenses,
they shouldn’t push it right now with the separate sales force unless they see some
concrete traction in the market.

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3. Develop an ROI model for Precise/SQL product?

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 A Savings associated with DBA productivity

Work Hour Per week (std. 40hr) 40

Total Work hour/year (52 weeks) 2080
Average DBA annual salary ($) 60000
Salary per hour 28.85
Hours saved per DBA per week 9.4
Total annual saved hours 488.8
Saving per DBA (in $) 14100
Average number of DBAs 10
Total Annual Saving 141000

B Saving in end-user productivity

Average End User salary 30000

Average Employee burden rate (as percentage 33%
of salary)
Improvement in end-user response time per 25%
transaction
Saving per end-user 2475
Number of Simultaneous users 215
Total savings from end-users 532125

C Savings due to deferral of Hardware upgrades

Average annual hardware budget affected by 1430000

Precise/SQL
Hardware cost saving if postpone purchase by 30%
one year
Probability of postponing hardware purchase by 60%
3 months
probability of postponing hardware purchase by 13%
1 year ( 60%^40
Total Hardware cost saving 55598.4

Net Saving = A+B+C 728723.4

Installation cost of 10 DBA @ average price of

$20000 and considering 25% discount on list 150000
price.

4. How should Precise Insight be priced?

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  Pricing for Precise Insight should be determined by the value it provides to each
individual customer with the level of customization they opt for.

 Our pricing strategy for Insight is to evaluate the level of capability provided from
Basic model or Default Modules to fully functional complete product suite. And for
this, the company needs define or segregate the functionalities based on efforts and
value they perceive.

 As a result, if Precise Insight is given with limited functionality, such as a Basic

version with first level of functionality or modules, the price should be the standard
price decided. And as they go up by addition to the features offered, price can step up.

 Price should take into account the number of users who are using the system at
whichever functionality or using the entire Suite.

 The econometrics of this strategy is that the more users that use a system, the more
money the customer will pay by employing the product.

whether to harvest the Riesling grapes immediately or leave them on the vines
whether to harvest the Riesling grapes immediately or leave them on the vines

1.2 OBJECTIVE
To maximise the revenue (Expected monetary value) either by harvesting or not

1.3 PROBLEM STATEMENT

To decide whether to harvest the Riesling Grapes immediately or to leave them on the vines
in an uncertain weat