Case Study 4: Precise software solutions

Vaibhav Yadav EPGP11MM- 045

Asst. Manager Manipal Hospitals Bangalore

1.Should Alon plan on introducing Insight at Open world 2000? Why or Why not?
The arguments in favour of launching INSIGHT are:
1. Setting expectations in the market: defining ‘end-to-end’ space
2. Being identified as the player in the emerging segment - First mover advantage, can establish a
market presence and be the first in this field with this type of product
3. This annual conference gathered together thousands of interested and motivated prospects, who
could hear about and see demonstrations of new product. This means a good marketing platform
for the new product with least expense in terms of cost and time and maximum impact.
4. Delaying the product beyond the Open World will give enough time to competitors to identify
and exploit the new opportunity.
5. There is always an option to pull out Open World if they think that they will not be able to
make it
6. Figuring out potential problems in space before others
The arguments against launching INSIGHT are:
1. Reputation: If Precise creates an expectation and show up with partial solution, it might have
negative impact on company’s reputation
2. Impact on process: Precise might rush through the alpha and beta phases, missing important
insights
3. 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
4. Going to market too early with a product with not enough functionality will damage the
reputation of the product and might not be attractive in terms of value to the customers.
5. Also, going too early with an immature product will allow competitors to come up with better
alternative solutions and snatch the chances from Precise to be a leader in the industry.
6. The product if developed targeting Open World could only have the monitor functionality in
the best case scenario, however the complete analyse functionality would be missing and will
be seen as a gap.
7. The company is still not sure on how they will market the product and how they will price this
product

The best approach in our opinion is keeping the product Insight under wraps and announces it only in
2001. An immature product, with just monitor functionality and no nice user interface, will be seen as
a down product by customers. Since a GA version could only be available in 18 months from now, and
a fully functionality only in 2 years, it will give time to competitors to see and copy the product.

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?
Arguments for single sales force
 1. They have been successful in selling multiple products (Interpoint as well as Pulse) in the past.
2. They are experienced and successful. They know the space and their expertise has not been
debated till now.
3. They have developed strong relationship with the DBAs and have been viewed as important
problem solvers.
4. There is a fixed cost associated with starting and running a sales force.

Arguments for multiple sales force

1. The buying process is quite different. DBAs bought SQL because it helped her to win
‘blamestorming’ session. But the sales of INSIGHT are based on an understanding of CIO’s
pain points.
2. 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.

Yes, a direct selling approach should be used for this product. Insight being a premium priced solution
with more complex functionality, a trained and dedicated sales force will achieve better results. The
sales team will then be able to gather more and more knowledge on end to end IT deployments at
customer places, and suggest them best possible configurations for the insight solution and accurately
estimate their ROI resulting in better sales. Also, Insight being new to market, and not already
established product, in-fact being a product first of its kind would be harder to sell through VARs, and
system integrator.

Precise currently has one sales team to sell all products through dual channel distribution system. Each
sales person is paid base salary of 75000 $ and then commission depending on sales made. The average
rep made sales of up to $800,000 annually thus earned $120,000. The highest paid rep about $300,000

The new sales force should be different from existing ones, i.e. not shared with the existing products.
They need the top guys in the sales industry, being a premium priced holistic solution that provide a
perceived value addition to end user needs to be promoted and sold aggressively.

3.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.

DBA Savings
Assuming they work 45 hours a week 45
Hours saved per DBA per week 9.4
Average DBA salary $ 60000
Hours worked Per Year 52 * 45 2340
Hours Saved per year 52 * 9.4 488.8
Savings Per DBA (9.4/45) * 60000 12533.33
Number of DBAs 10
Savings for all DBAs 10 * 12533.33 125333.33

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%
 Cost of Capital Saving 1430000*.3*.6*3/12
Savings 64,350

User Savings
Number of Daily transactions per user 194000/215 903
Daily end user response time per user 903*15 3.76hrs
End User Salary 30,000
Average Employee Burden Rate 33%
End User Time Improvement 25%
Improvement in End user response time .25*3.76 .94 hrs
% of response time saved per user .94/8 11.75%
Savings Per User 30000*.1175*1.33 4688
Number of Users 215
Savings for all users 4688 * 215 1007920

Total Savings
= 125,333.33 + 64,530 + 1007920
= 1322936

Cost of 10 DBA installations with 25% discount

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

ROI = 705%