SaleSoft Case Analysis

Group 1 – Section B

Background (1/2)

Sales Automation: any system that automated some or all uses of all processes used in sales order cycle

• Drop in hardware prices• Enhanced software (Networking and OS)• Developments in communication technology

SA market estimated at $1 billion in 1995, with projected growth of 40% pa for next 5 years

Rapid growth due to

Background (2/2)

Industry Landscape Over 300 vendors offering

solutions addressing few SA areas Niche firms with annual

sales of less than $5 million Couple of big players: Brock,

Sales Technology Established in mainframe

environment

Issues with SA systems Time to install a typical SA

project: 20-30 months High level of customization

required High failure rate for startup SA

firms Trust issues with clients

SA solutions

Existing products Low end: CMS

Simple contact managers or call reporting systems

80% SA systems used were CMS in early 1990s

ACT by Symantec market leader in CMS

CMS lacked integration across marketing, sales and service functions

New Wave High end: CSAS

Integrated systems for sales, marketing and CRM

Back end DSS Better use for greater variance

and uncertainty in sales order cycle

Target market: industries involving big ticket items

Most SA vendors intended to launch CSAS systems by 1995

Highest potential in the Banking Industry

Comprehensive Sales Automation Systems (CSAS)

Efficiency Timely distribution of leads Increased customer contacts Improved visibility of performance Improved account planning Increased communication

Effectiveness Improved accuracy of forecasting Insights into customer activity Visibility into buying cycle Better territory maintenance Effective sales training

SaleSoft

Founded by Greg Miller in 1993

• Ex President of Symix Computer Systems, which provided MRP solutions

Company was founded to market PROCEED, a CSAS system

Niche player in CSAS arena

Current Capital Structure: $800,000 in equity and $2 million in VC funds

Market share: 0.1%, estimated to become 1.3% in 1998

Revenues: $305,000

Client base: 5, estimated to double by end of 1995

PROCEED SMRP ®

Allowed customers to automate their entire marketing, sales, and customer service operations

8 modules Sales System

o Field Saleso Opportunity Managemento Sales Management

Marketing Systemo Campaign Managemento Marketing Encyclopediao Literature Fulfillment

Services Systemo Incident Trackingo Relationship Management

Competitors Sales Technology with > $50

million sales Others competitors also bigger

in terms of revenues Pricing

PROCEED priced highest at $2400/user

Snap of Sales Technology next highest at $2000/user

Currently, only 3 modules of PROCEED (Sales System) rolled out

Major Prospects Financial Services Computer hardware mfg.

Buying Cycle for PROCEED

Step Key Players Duration

Realization by senior management Potential customers 21-30 months

Evaluating potential to automate existing processes and order functions

In collaboration with SA consultants 3-4 months

Working out relationship among various functions and process of collection, storage and analysis of data

Done by SA consultants with support of customer’s information systems department

2-3 months

Finalizing the software and hardware to be bought

Performed mainly by customers 6-8 months

Pilot testing the CSAS after customization

Vigorous tests to check if product meets customer needs

3-5 months

Modify CSAS software in response to the feedback

3-4 months

Roll out of full scale system 4-6 months

Stakeholders

DMUs for purchase of CSAS solution

CEO CFO VP Sales Sales Managers VP Marketing Sales Reps VP MIS

Role of SA consultants Evaluate potential to automate

existing processes and order functions

Working out relationship among various functions and process of collection, storage and analysis of data

• Customer finalizes the software and hardware to be bought

Current approach of selling PROCEED

Have sold three existing modules to 5 customers in computer software industry

Having an installed base of approx 300 users

Currently pursuing sales opportunity with over 20 prospects in computer software and hardware, financial services and banking.

Number of user per prospect was about 200 to 600

Focusing on industries that involved high-ticket items with long, complex sales order cycle and involved consultative team selling

Industries with high number of user per prospect

Trojan Horse (1/3)

SA system to be developed from the Sales Management modules of PROCEED

Concept developed through feedback from Sales VPs of client organizations

Would also incorporate functions to be installed in other PROCEED modules

Would cost around $700,000 and 3 months to develop and market

Trojen Horse (2/3)

Value TH will provide Improve selling efficiency

Keeping track of all the opportunities and ensuring sales persons efforts on most-profitable opportunity

Reviewing of expected closing dates of all opportunity and probability of closing them on time

Anticipating any shortfall in sales Setting up of early and timely

intervention program for making up of shortfall

Difference from PROCEED TH is focused only on sales

Significantly reduced number of people involved in buying cycle

Easier to quantify benefits Simplified the selling process

Needed minimal customization as compare to PROCEED Reduced cost of customization

Trojan Horse (3/3)

Customer Acquisition Developed based on customer

feedback, addressing specific needs

Simple installation, low customization

Easier to sell than PROCEED Less requirement for customer

education Much bigger target market than

PROCEED

Customer Retention Easier to quantify benefits of TH Better Consumer Satisfaction Opportunity for customer to scale

up to implement other SA modules Higher sales might lead to higher

switching costs for clients

TH Pricing

Low Price ($400) Higher demand Better possibility of acquiring new

customers At par with other CMS products Beneficial if sale of PROCEED is

possible to newly acquired customers

Easier to sell at low price

High Price ($1000) Lower demand Lesser possibility of new customer

acquisition Price would be higher compared

to similar CMS products High price will make it difficult to

sell TH and will demand a lot more customer education

May put off potential customers who have already invested in hardware/software

Go-No Go Decision for TH

Parameters TH PROCEED

Market Demand Favorable Unfavorable; might pick up later since demand for integration of sales and marketing functions is going up

Profitability Higher, since demand is higher as of now

Lower, since demand is low, but margins are higher

Competition High competition, as big players are likely to enter this segment

Low competition due to less availability of CSAS products

Marketing and Sales Costs Lower, after initial investment

Higher

Sales Force Capability Requirement

Easier to sell Tougher to educate customers and explain benefits

Entry Barrier Low High

Differentiation Low High

Go-No Go Decision for TH

CSAS has a market potential of $2.2 billion

With a penetration of 26%, $1.48 billion is still untapped

The biggest player has sales of $50 million in CSAS market

Assuming TH is priced at $400, it needs to achieve 6 times sales in order to earn similar revenues as PROCEED

TH may bring short-term returns, but long term prospects are not encouraging because of low product differentiation and increased competition

PROCEED Seems a Better Option

Impact of SaleSoft Organization Structure on Sales

Sales of PROCEED Current functional organizational

system does not suit focused client-based selling

Coordination is required between different departments such as development, sales, and marketing for better customer targeting

Better education of sales reps required – More coordination

Sales of TH Current functional structure suits

sales of TH as it does not require client-focused selling

Less customization requirement further reduces the need to multi-functional project teams

Needs less education of sales reps – Less coordination of teams

Thank You