Project OccamProject OccamExecutive Offsite OverviewExecutive Offsite Overview

January, 2003January, 2003

Motivation for OccamMotivation for Occam

Competitive Threats in SMB Market Current: salesforce.com — aggressively targeting Siebel Imminent: Microsoft CRM — history of starting in the SMB space and then

expanding into larger enterprises If left unchecked, they can continue to gain strength

Market Opportunities in SMB Market Validation: Salesforce.com — $100M run-rate in 2003

Gartner: SMB CRM spend will be as large as the enterprise market by 2006

US Census: Companies with 10 – 1500 employees comprise 40% of total employees in the US.

% of CRM Spend

Employees Revenue 2002 2006

< 100 < $50M 2% 6%

100 – 2500 $50M - $1B 31% 47%

> 2500 > $1B 67% 47%

Occam stops a real threat and addresses a real market

Salesforce.com Revenue HistorySalesforce.com Revenue History

1999 (1) 2000 2001 2002 2003 (est)

Revenue

(% growth)

$0.1M

—

$5M

n/a

$16M

220%

$44M

175%

$82M

86%Accounts (cumulative)

90 820 2,200 5,300 8,900

Users (cumulative)

1,100 9,800 30,000 72,000 122,000

Annualized Revenue Run Rate ($M)

$0.8 $8 $20 $60 $100

SFDC is expected to grow to $100M in 2003• 3 years to get to $60M – 5,300 accounts/72,000 users (by end of 2002)

• 4 years to get to $100M – 8,900 accounts/122,000 users (by end of 2003)

(1) Began selling in Q4 ‘99

Salesforce.com Sales Strategies and TacticsSalesforce.com Sales Strategies and Tactics

Strategies: Tactics: Occam Implication:

Pricing/Contracting

Make pricing very attractive for the SMB market – adopt subscription pricing model

Avoid high, upfront pricing Avoid cost to implement

$65/user /month for Professional Edition

$125/user/month for Enterprise Edition

36% discount given for 2 year contract

Leverage SFDC pricing model - proven attractive to SMB market

Sales Organization/Structure

Drop cost of Sales – shorten sales cycle and sell over the phone where possible

Organize Sales to meet needs of SMB Market

Prepare to move “up-market”

Sell predominantly via Telesales and Direct Sales

Major Accounts: >$300M Rev accounts ; 40 Outside sales reps

Mid-market: <$300M Rev accounts; ~75 Inside sales

Use Telemarketing for cold calling; Inside/Outside Sales to close deals

For 2003: Hire & train approx. 110 – 140 Sales staff

For 2003: Invest in EMEA Telesales

Dedicated Occam Telesales unit needed

Issue: potential conflict with existing Siebel Sales Force & Accounts; second team needed for enterprise telesales?

Sales Compensation& Quota

Motivate Sales reps to drive rapid account adds

Tie-in commissions to reasonable account retention period

Drive high morale

Pay reps immediately as if account had paid for 12 months up front

Reps keep commission if account remains for 6 months.

11% - 20% commissions based on contract length

Monthly quota is $80K for 120 users at $65/user for 12 months

Evaluate similar as feasible for Occam

Salesforce.com Sales Strategies and Tactics (cont’d)Salesforce.com Sales Strategies and Tactics (cont’d)

Strategies: Tactics: Occam Implication:

Lead Generation & Qualification

Target business contacts and avoid IT groups – leverage salesforce.com business benefits

Maintain focus of Sales Reps Maximize trial / minimize

barriers to purchase

Compelling offer: Free trial - 30 days for 5 users

Leverage SDR’s to do cold-calling; Sales Reps to close deals

SDR’s pass off qualified leads to Reps – who conduct discovery call

Evaluate similar as feasible for Occam

Dedicated SDR’s needed to support Occam

Product Demonstration

Demo product “real time” over the phone

Target business users

Target: CFO and other non-IT decision makers

Show: Reports and queries, Outlook sync, .pdf views, Forecasts

Demo positioning: discredit value of IT organization; depict IT as the business users’ opposition

Evaluate similar as feasible for Occam

Closed Deals Close deal without need for customer visit

Close deal in 4-5 calls after demo

Final closure occurs when prospect goes online, enters customer information, # of users

All online: agree to terms, license agreement and signs up for training

Evaluate similar as feasible for Occam

Salesforce.com Marketing Strategies and TacticsSalesforce.com Marketing Strategies and Tactics

Strategies: Tactics: Occam Implication:

Positioning/Messaging

Tap unmet needs of the SMB market – straightforward, easy to use application

Leverage negative perception of Enterprise SW in SMB Market – expensive and slow

Create a unique value proposition versus the market leader (Siebel)

SFDC messaging themes: Position SFDC as #1 in CRM in SMB Simple, easy to use & adopt Low TCO and rapid speed to deploy Credible: over 5,000 accounts and

numerous customer success stories Strong negative mention of Siebel in

outbound messaging (e.g. reference Nucleus Report in WSJ add)

Some of SFDC positioning also applies to Occam

See proposed Occam positioning in Appendix

Awareness Build SFDC brand as antithesis of Siebel - “No software!” tagline

Leverage the brand equity of Siebel – build high SFDC mind share as better CRM alternative

Establish SFDC competitive position as appropriate for any sized business (not just SMB market)

Leverage Advertising and PR to drive leads

Advertising: Frequently compare self to Siebel –

exploit Siebel disadvantages to software; promote SFDC advantages

E.g. “I will not spend my summer vacation installing Siebel”

Invest in high profile print campaign directly targeting Siebel by name 75% of the time - targeting key pubs: (Business Week, Fortune, Forbes, Fast Company, etc.)

High profile Wall Street Journal Ads Total Ad spend $1M - $2M/Qtr.

PR: Aggressively leverage “PR

personality” of Founder to attract prospect interest/drive leads

Dedicated Occam advertising needed to create unique value proposition – different from Siebel Enterprise

Issue: need to leverage strengths of Siebel brand equity - while at the same time - create Occam unique value proposition

Salesforce.com Marketing Strategies and Tactics (cont’d)Salesforce.com Marketing Strategies and Tactics (cont’d)

Strategy: Tactic: Occam Implication:

Lead Generation

Leverage Advertising and PR activities as primary lead source

Source of Leads: 50% - Advertising 15% - PR 15% - Online 15% - DM 5% - Referral

Advertising: leverage “call 1-800 No Software” call-to-action to drive inbound leads to Telemarketing

PR: Create strong perception of SFDC account add momentum. Reinforce messaging/positioning.

Online/Other: Drive leads primarily from website and regional events to SDR’s

DM: Not fully leveraging this channel

Dedicated Occam Advertising needed to drive leads via direct response

Issue: Siebel typically leverages Advertising/PR for overall brand awareness vs. lead generation

Targeted DM a viable tactic to consider for Occam

Occam Growth Options — ScenariosOccam Growth Options — Scenarios

SFDC revenue run rate provides a baseline• SFDC grew by investing in Sales/Marketing activities

• 110 - 140 Inside/Outside sales reps added by Year 3; expanding into EMEA• Approx. $1M - $2M in Advertising investment per Qtr. by Year 3• >4 years to achieve $100M run rate due to pace of investment

Occam pace to $100M business size also depends on level of Siebel investment• Varying investment level in Sales/Marketing drives pace of growth• Four scenarios make sense to look at prior to establishing Occam plan:

Occam Growth Options:(1 = conservative; 4 = aggressive)

Time to $100M Run Rate

(1) Grow same rate as SFDC 45 months

(2) Grow 100% Faster Pace 35 months

(3) Grow 200% Faster pace 30 months

(4) Grow to $100M Run Rate in 24 months 24 months

Occam Growth Options — Revenue and Accounts/UsersOccam Growth Options — Revenue and Accounts/Users

2003 assumes

7/03 launch

2004 2005 2006 2007 Time to $100M Run

Rate

(1) Grow same rate as SFDC

Rev ($M):

Users:

$1

3,675

$7

12,272

$22

37,908

$64

99,196

$151

207,197

45 months

(2) Grow 100% Faster Pace

Rev ($M):

Users:

$2

7,351

$14

24,543

$44

75,816

$128

198,391

$303

414,394

35 months

(3) Grow 200% Faster pace

Rev ($M):

Users:

$3

11,230

$21

37,019

$66

113,928

$192

297,791

$454

621,795

30 months

(4) Grow to $100M Run Rate in 24 months

Rev ($M):

Users:

$4

15,125

$32

56,975

$104

181,175

$268

397,175

$592

802,175

24 months

Achieving rapid revenue growth requires substantial customer volume:• Conservative scenario: adds 250 accounts in 2003; 45 months to $100M run rate• Aggressive scenario: adds 1,040 accounts in 2003; 24 months to $100M run rate

Occam Growth Options — RevenueOccam Growth Options — Revenue

$0

$50

$100

$150

$200

$250

$300

2003 2004 2005 2006

Reve

nue

$M

Same Growth rate asSFDC100% Faster Growth

200% Faster Growth

Grow to $100M run ratein 24 mo's.

Occam Revenue Growth ($M) Scenarios

Occam Growth Options – AccountsOccam Growth Options – Accounts

0

5,000

10,000

15,000

20,000

25,000

30,000

2003 2004 2005 2006

Acco

unts

Same as SFDC

100% Faster

200% Faster

Grow to $100M run rate in 24mo's.

Corresponding account volume required to drive revenue growth

Occam Sales & Marketing Resource Requirements — AssumptionsOccam Sales & Marketing Resource Requirements — Assumptions

Telesales Close rate: 10% Avg # calls per closed account: 10 Calls per rep per day: 8

Marketing # leads needed to generate 1 qualified lead: 10 % leads by source:

Direct Mail Response rate: 2% Cost per piece: $1.50

Advertising Response rate: 0.5% Print Ad cost ($ per 1000): $650

Direct/Online Mktg Advertising & PR Telemarketing Word of Mouth20% 50% 20% 10%

Occam Sales & Marketing Resource Requirements — SummaryOccam Sales & Marketing Resource Requirements — Summary

Occam pace to $100M run rate size depends on several factors:• Level of investment in Telesales (headcount)• Level of investment in Marketing driving Lead Generation (budget)• 2003 resource requirements: see below• Resources needed beyond 2003: see following slides

Occam Growth Options: (1 = conservative; 4 = aggressive) 2003 Resource Requirements by Option

Time to $100M Run

Rate(1) Grow same rate as SFDC 25 Telesales/Telemarketing reps

$1M Marketing spend / qtr45 months

(2) Grow 100% Faster Pace 50 Telesales/Telemarketing reps$2M in Marketing spend / qtr

35 months

(3) Grow 200% Faster pace 75 Telesales/Telemarketing reps$3M in Marketing spend / qtr

30 months

(4) Grow to $100M Run Rate in 24 months

100 Telesales/Telemarketing reps$4M in Marketing spend / qtr

24 months

Occam Headcount Requirements — Telesales/TelemarketingOccam Headcount Requirements — Telesales/Telemarketing

0

50

100

150

200

250

300

350

400

450

2003 2004 2005

Head

coun

t

Same as SFDC

100% Faster

200% Faster

$100M run rate in 24mo's.

Occam Marketing Spend ($M) RequirementsOccam Marketing Spend ($M) Requirements

$0

$5$10

$15

$20$25

$30

$35

$40$45

$50

2003 2004 2005 2006

$M /

Year

Same as SFDC

100% Faster

200% Faster

$100M run rate in 24mo's.

Hosting Operations Headcount and Capital RequirementsHosting Operations Headcount and Capital Requirements

Initial Resource Requirements

Subsequent Resource Requirements

Infrastructure For up to 50K users:

$16M expense (servers, bandwidth, security, etc)

15 operational staff

Each additional 50K users:

$8M expense

7-10 operational staff

Application Management

For up to 15K users:

3 operational staff

To support up to 200K users:

4 additional operational staff

Customer Support

For up to 15K users:

9 support analysts

To support up to 50K users:

15 additional support analysts

Acquisition AlternativeAcquisition Alternative

Upshot $71M in funding. (HQ in Mountain View)

VC: ABN AMRO, Advanced Technology Ventures, others Individuals: Bob Finocchio (ex-Pres 3COM), Tom Proulx (Intuit co-founder),

others Sample customers: Xerox, Rodel, Imaginit, Virtual Source, Recovered Capital,

Extensity, Jamcracker, Morrisey Hospitality, and eGain Revenues, # customers/users, # employees: Unknown Claims to beat Salesforce.com in two out of three sales situations

Salesnet Founded in 1997. (HQ in Boston) Claims to have customers with over 1,000 users (customer names not given). Other

sources say Salesnet has customers with between 650-1000 users. Sample customers: British Telecom, Charter Communications, Software AG,

Sovereign Bank, Staples, American Express and Tellabs Funding, revenues, # customers/users, # employees: Unknown Focuses its value proposition on building and enforcing sales methodologies within an

organization. Has an easy to use "Process Builder" for companies to build their own sales

methodologies.

Key DecisionsKey Decisions

Occam Revenue Pace and Goals Next steps: Select revenue growth and investment scenario desired

Sales Ops Plan – when & how many Telesales Reps to be hired Hire as early as 6/03 Reporting relationship (PM vs Sales) Plan to avoid channel conflict Next steps: hire a Telesales VP to build Sales Operations plan

Marketing Plan – finalize budget and commit resources Initiate Marketing Planning team ASAP Set Q2 budget and resources Finalize Messaging/Positioning Initiate Marketing timeline Next steps: Dedicate/Hire headcount to manage Occam marketing activities

Activate Corp. Marketing Resources to work w/ PM to build plan Finalize 2003 Occam Marketing Launch

Key IssuesKey Issues

Headcount PM Headcount

Currently have 3 PM’s and one manager. Need two more PM’s. Need a dedicated UE resource

Marketing Headcount Need two dedicated resources

Alliances Headcount Need a dedicated resource

AppendicesAppendices

Product PlanProduct Plan

Version 0.5 Beta targeted for March 2003 “Soft” launch to industry analysts and press Sign up non-paying beta accounts Base sales application Includes contacts, accounts, opportunities, and calendar/activities Includes architectural framework with field customization and CSV import

Version 1.0 Targeted for June 2003 “Hard” launch to customers Sign up paying accounts Fully functional sales application Adds reporting, Outlook/Palm sync, and lead management

Version 1.5 Targeted for September 2003 Functionally match SFDC Adds forecasting, service, campaign management, offline client

Architectural RoadmapArchitectural Roadmap

Aligned with Big Sky design Dan Kearns is involved with Occam discussions

Have also discussed this with Peter Lim and Matt Malden Big Sky team will be kept aware of Occam’s requirements Occam team will be kept aware of Big Sky’s plans

Will leverage Big Sky when it’s available Will act as a “Reach” (i.e. Customer Facing) architecture client

Proposed Marketing MilestonesProposed Marketing Milestones

1. Define target market, messaging, & value proposition by 1/15/03.

2. Establish 2003 budget and headcount by 1/31/03.

3. Establish Working Copy of Marketing Plan by 1/31/03, including draft: FUD campaign strategy Q103 Soft Launch Q203 Full Launch Q303

4. Finalize Strategic Marketing Plan by 2/15/03. Launch Plan Brand & Awareness Strategy and Tactics Demand Generation Strategy and Tactics Identify and commit internal marketing support resource

Occam Marketing Resource Requirement TimingOccam Marketing Resource Requirement Timing

Marketing Launch Phase Jan/Feb March April/May/June July

FUD Campaign

       

Soft Launch

       

Hard Launch

       

Marketing Resources needed well in advance of 7/03 Launch• FUD Campaign - PR Resources needed ASAP thru 3/15• Soft Launch - PR/AR resources needed 2/1 thru 6/31• Hard Launch - Multi-function Marketing resources needed as early as 2/1

ActivityResources: (PR)

Activity

Resources: (AR/PR)

ActivityResources: (AR/PR/DM/Tele/Adv/Online)

Proposed Profile of Target SegmentsProposed Profile of Target Segments

Unsophisticated SMB

Enterprise Division Conservative Enterprise

Company Unsophisticated small and medium sized businesses <$300M in revenues <1500 employees

Unsophisticated divisions of enterprise businesses >$1B in revenues total <4000 employees total

Conservative Enterprise Businesses >$300M in revenues >1500 employees

Buyers Enterprise-wide sale Target CxOs, VPs of

sales, marketing, service Avoid IT

Departmental sale Target GMs, department

Mgrs Avoid IT

Enterprise-wide sale Target CxOs, VPs of sales,

marketing, service Neutralize IT w/ upgrade path

Key Barrier to Software Purchase

Unable to make upfront commitment for software– Just too expensive

Unable to get IT to provide timely or adequate support– No deployment support

Unwilling to make upfront commitment for software – Budget stalled

Siebel Branding Does not resonate – too big, too complex, too slow, too expensive

Resonates well at strategic level

Resonates well at strategic level

Willing to outsource? High Moderate Moderate

Absorb upfront costs? Very low Very low Low

Customization needs Low Low Low Initially

Integration needs Low Low Low Initially

Level of IT involvement Low Low Moderate

Upgrade to on-premise S/W?

Low High High

Salesforce.com’s High Level PositioningSalesforce.com’s High Level Positioning

Elements Salesforce.comLeadership in SMB: #1 Small Biz Sales

Solution

Credibility: Track Record- 5,000 accounts and multiple references

Trustworthy/Reliable: Hosting / Operational expertise and reliability

Affordability/ROI: Low TCO and speed to deploy

Ease of Use Simple & easy to adopt

Preliminary Occam PositioningPreliminary Occam Positioning

Siebel Positioning SFDC ResponseNOW

Get immediate results Deploy in hours or days, not months No software or hardware to install Industry-specific solutions accelerate deployment Lowest total cost of ownership It’s simple math - Limited risk with ROI in just weeks

Immediate CRM Solution, immediate results

Avg. implementation of 30 days No software to install No hardware to purchase ROI in two months

INTUITIVE

Drive user adoption Intuitive, easy to use interface Productivity tools designed for users, not just managers Online or offline access Unmatched MSFT Integration and Partnership Embedded best practices

High user adoption rates Easy to use Web interface Adoption rates top 90%

COMPLETE

Enable Real CRM Not just SFA with token service and marketing Marketing and service designed for marketing & service

professionals Robust PRM delivers leads and improves sales effectiveness

Award-winning CRM solutions with integrated online sales service, and marketing applications

Includes Analysis and Reporting PRM through CRM

Smart. Intuitive. Now.

Occam Positioning (cont’d)Occam Positioning (cont’d)

Siebel Positioning SFDC ResponseSMARTER

Promote smarter sales decisions Powerful interactive analytics with alerts, not static reports Intuitive role based dashboards Embedded best practices Integrated sales methodologies Leading business process intelligence Siebel vs “Dot com” vendor choice

Robust, yet easy-to-use reporting and analysis tool and sales method support

Reporting is analytics

RELIABLE

Partner with the CRM market leader Universally recognized leader in CRM Leverage proven best practices from over 3,500 successful deployments,

ranging from 10 to 10,000 users Over 1,000,000 production users Fiscally disciplined business, profitable and cash-flow positive since 1995 Fanatical focus on customer satisfaction and traditional core values.

Highest levels of satisfaction for any software company. Over $2.1 billion in cash

A proven solution Ranked as #1 Online CRM

solution provider and #2 overall provider of CRM Solutions

More than 5,000 companies worldwide rely on salesforce.com

Why would you trust Siebel for a hosted solution- backup, security, service risks.