Assignment Question 1:

What were the significant changes in Precises financial

performance from 1998 to 1999? What opportunities and
challenges can you identify from your income statement
analysis?
From 1998 to 1999, we can see from the income statements that
the Precise financial performance was getting better. The total
revenue almost doubled and the cost of revenues relative percent
had decreased from 88.3% to 85.5%. The expense on sales &
marketing had decreased greatly relatively from 92.7% to 68.1%.
The general & administration expense had also dropped from 20.6%
to 13.8%. The R&D expense dropped from 35.8% to 24.9%
relatively. The OI% increased from -65.5% to -23.0%. So compared
with the performance in 1998, the Precise company performance
better on improving OI and cutting Cost of revenues, G&A and M&S.

Opportunities:
o More profit can be obtained from performance
management and availability market since estimated by
Dataquest the market would get doubled by 2003. And
the Precises cost of software license was decreasing
relatively. So the company could still obtain a lot profits
from Precise/SQL.
Challenges:
o The companys OI% was getting better but still not
good. Their total operating expense was greater than
their total revenue, so the companys challenge was
how could they cut the expense and increase their
operating income.

Describe (list at least 6 descriptors of) the current target

customers for Precise/SQL. Then, describe (your opinion !)
the appropriate target customers for Insight. Are the Insight
target customers the same as the SQL targets, or are there
significant differences? If so, identify those differences.
Current target customer for Precise/SQL:
o Companies using applications utilizing Oracle databases.
o Medium-large business customers
o Demanding for finding and fixing the underlying
problems of applications.
o Mostly target users who are DBAs.
o Aim to improve the poorly written code of the
application developed by in-house IT groups or contract
developers.
o Not cost-conscious, able to pay for the price ranging
from $15,000 to $25000 for license.
o Aim to improve the DBA productivity and database
performance.

o The users in the target company might be

geographically distributed.
Target customer for Insight:
o The business customer using enterprise-wide
applications.
o Aim to improve end-to-end response time.
o Online retailers whose sales depended critically on the
ability to deliver information quickly to the users
browser.
o Companies engages in e-commerce.
o The users of the target company are not DBAs but more
generate users.
o Long sales cycle and more complex decision-making
process
o Decision makers are CTO or business unit manager
Differences:
o The essential goal of their target customer was different.
The customer of Insight aimed to improve the end-toend performance on the whole system but the customer
of SQL only concerned with applications using database.
o The customers user concentration was different. The
SQL products user mainly concerned at DBAs but the
Insight product users were more distributed from the
customers to companys employees.
o More precisely, the customers of Insight were searching
for solutions to improve the performance of their IT
infrastructure but the customers of SQL were just
improving their proprietary applications.

What are Precises competitive advantages over its major

competitors (Oracle, BMC, Quest, etc) ? Its OK to speculate
about advantages they might have, even if they are not
proven in the case.
The Precises leaders have very insightful thoughts and high
executabilities.
Their product performed better than their competitors.
Their sales rep have a deep relationship with companies DBAs
and are experienced in selling products to DBAs.
They have more experience development team on database.
They have a reputable brand among customers to do what
they claim to do.
Their reasonable and effective sale process.
Quantify (in $$ !) the benefits the average customer gets
from Precise/SQL. Use the data in Exhibit 4, and show the
customer benefits separately for the database administrator,
the CTO, and the business unit. What does this analysis

suggest about the proposal that Insight should be priced at

$250,000 ?
We assume the standard work hours for a DBA/CTO/end user is
8hours/day, 40hours/week.
o For DBAs:
For each DBA, Total saving hours = 488.8
Burdened DBA salary: $79,800
Unburdened DBA salary: $60,000
Work hour each year: 2080
Each DBA(unburdened): saving = $14,100
Each DBA(burdened): saving = $18,753
Total DBAs(unburdened): $141,000
Total DBAs(burdened): $187,530
o For CTO: make decision about whether or not but
hardware
Postpone by 3 months: saving = $1,430,000*0.6*(0.3/4) =
$64,350
Probability of postpone purchase by 1 year: 0.6^4 = 0.1296
Postpone by 1 year: saving = $1,430,000*0.3 = $429,000
o For business unit: mainly concerned with end-users
Number of transaction per day: 194,000
Prior using Precise/SQL, total seconds spent: 194,000*15 =
2,910,000
Each users transaction number per day: 194,000/215 = 902
Each user spent time each day: 902*15 = 13530 seconds =
3.76 hours
Percent of time spent for a day: 3.76/8 = 47%
%time saving: 47%*25% = 11.75%
Burdened user salary: $30,000*1.33 = $39,900
Unburdened user salary: $30,000
Saving per user: $39,900*11.75% = $4,688
Total user saving: $4,688 * 215 = $1,007,920
o Total saving: $1,624,450
Assume the license each is $20,000, the cost for the company
to get the SQL might be $20,000*10 = $200,000. Only 12.3%
of the saving revenues. So this means the SQL brought many
savings to the customer company, so the Insight be priced
$250,000 is OK and acceptable.
What explicit decision criteria (objectives) should Precise
use in evaluating decisions about the Insight product?
Identify at least 5 objectives.
Revenues: Since the company wants to grow into $100 million,
and the revenue in this market is high.

Market share: a new market with no direct competitors and no

current product.
Gross margin: High gross margin and a substantial value
position
Expenses: High R&D since there are a lot of difficulties to
overcome and not sure M&S since the sale rep are
inexperienced in selling products to IT managers but the
benefits are more tangible and understandable for customers.
Speed to market: might be slow, if go to market with a
lightweight version, t hen competitors like Quest might have a
chance to catch up.
Pricing: How much should the product be priced
Sale strategy: How much should the products price be? By
which channel should the product be selled?

Product decision: Should Precise launch Insight at Oracle

OpenWorld 2000, or should it wait for OpenWorld 2001?
Explain the positives-and-negatives of your choice.

Positives:
o Being the first one to get into the market means more
opportunities.
o Setting up standards in the market which can be
beneficial for the company.
o Being identified as innovative company in the emerging
segment.
o No direct competitors and no current products.
o More time to figure out the real needs of customers and
potential problems in developing products and more
time to adjust the strategy.
Negatives:
o Reputation might get diminished: If Precise creates an
expectation and show up with partial solution, it might
have negative impact on companys reputation.
o Impact on process: Precise might rush through the alpha
and beta phases, missing important insights.
o 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.
So I would suggest the Precise launch Insight at Oracle
OpenWorld 2000. Right now the market is brand new with no direct
competitors and current product, first moving in will give company many
opportunities to define the standard of the product and quickly build up brand
and distinguish their product. Though the time schedule is tight, they can try
their best to get their product as functional as possible. Even if at last the final
version is not as expected, they might use their previous brand image to
appeal some companies to try out their new product with discount price and

get feedback so as to adjust their product. Even though other competitors

want to catch up, the precise still will get one year ahead of them and this will
give the company advantages.