Inside The Buyers Head Tim Clark May 4

May 4, 2009 Prepared for SIIA Software Summit San Francisco Tim Clark, Partner 349 First St., Suite A Los Altos, CA 94022 www.factpoint.com +1-650-233-1748 Copyright 2009 The FactPoint Group Inside the Buyer’s Head

FactPoint Background

Help clients identify and address early adopter market opportunities. Founded in 1992.

Acquired by Jupiter Research in March 2000; spun-out in July 2001.

Custom research, not reports.

Methodology: In-depth phone interviews with target customers.

Reference accounts: Adobe, Oracle, NEC America, SonicWALL, SugarCRM, Groundwork Open Source, KACE, UnivaUD, Socialtext, Unisfair, rPath, Palamida.

Project types:

Identify new opportunities

Accelerate sales

Segment markets

Strategic market entry

Competitive positioning

Agenda: Inside the Buyer’s Head

Introductions

Doom and gloom

Six things NOT in the Buyer’s Head

10 Thoughts Inside the Buyer’s Head

Lessons on Selling in a Recession

Q&A

Audience background

On-premise

On-demand/SaaS

Hardware appliance

Virtual appliance

Open source

Multiple modes

Other

What’s inside the buyer’s head?

“ They’re DISORIENTED ”

--William Soward, CEO, Adaptive Planning, March 2009

Survey Overview

Performance and Planning Poll is conducted quarterly

Current poll -- February 2009

Prior poll -- October 2008

Managed by Adaptive Planning and the BPM Forum

Gathers input on key economic indicators

Solicits feedback on planning processes

Participants are financial professionals from companies of all sizes in over 20 industries

It’s Bad, and Will Get Worse Before It Gets Better

A total of 86% say conditions are worse now than they were 6 months ago

Current Conditions How would you describe the current economic conditions in your industry vs. 6 months ago? Much Better Better Much Worse 12% 29% Same Worse 57% 2% 0%

For enterprise companies (>$500M), a full 73% expect worse conditions

Significant deterioration vs. last quarter, when just 27% expected worse conditions in 6 months

Future Expectations Compared to today, how do you expect conditions in your industry will be in 6 months? Much Better Better Much Worse 42% 3% Same Worse 40% 15% 0%

Companies’ Performance Will Suffer High Degree of Uncertainty How would you characterize the current level of economic uncertainty facing your business? Low Medium High Very High 5% 33% 39% 23%

For enterprise respondents (>$500M), a full 72% report “high” or “very high” uncertainty

More Challenges Ahead What do you expect for your company in 6 months versus now?

51% expect lower revenues (vs. 43% last quarter)

48% expect decreased capital spending (vs. 44%)

52% expect decreases in headcount (vs. 43%)

61% expect erosion of profit margins (vs. 46%)

Goldman Sachs sees global IT spending down 9%

Six things NOT in the Buyer’s Head

“ I want to add a new software vendor today.”

Memo to ISVs 1: Offer multiple modules of functionality.

Memo to ISVs 2: Add value to existing applications. In an M&A environment, some ISVs will be dropped.

ORACLE!!

“ I hope it takes at least six months to get new software into production.”

Memo to ISV 1 : Shorten time to value—avoid long implementations.

Memo to ISV 2 : Improve specific business processes that cause customer pain.

Memo to ISV 3 : Prove your concept—quickly. QuickStart packages lower risk (and costs) for your customer and you .

“ I want another information silo with my application data.”

Memo to ISVs: Buyers want to integrate new software with what they already own.

Example: Integration is a challenge for SaaS providers.

“ Show me a pretty UI. Skip the financial stuff.”

Top 5 Global Pharmaceutical

Total: Summary of Savings

One-year hardware purchases avoided: $ 201,656

Annual ancillary costs to run hardware $ 806,624

First-year software licenses savings $ 280,000

Software maintenance (after year 1) $ 42,000

Annual time saved processing results $ 42,000

Annual FDA compliance savings $ 2,055

Annual quality improvements/savings $ 2,433,050

__________

First-year savings $ 3,765,385

Annual savings [1] $ 3,325,729

[1] After the first year, annual savings drop because the savings on “hardware purchases avoided” is a one-time savings of $201,656 and because software licenses ($280,000) are a one-time expense, replaced after year 1 by software maintenance fees of 15% of original licensing.

GROUNDWORK Overview

“ We want to fill out your entire software suite.”

“ We already have several components of your enterprise software and we want the rest.”

Memo to ISVs: Focus on specific needs. Buyers want software to solve a problem.

“ We’re planning to hire a dozen PhDs to help us come up with a new algorithm for managing our supply chain.”

Memo to ISVs: Buyers are looking to leverage proven “best practices” in their industry. They want expertise built into the software to avoid developing that expertise on their own.

Example: ITM Software (acquired by BMC 2008)

Requirements for a Vendor Management Solution

“ Institutionalize leading practices with a business process solution.”

(http://factpoint.com/Vendor-Management-for-Banks.pdf)

10 Thoughts Inside the Buyer’s Head

Money woes Our non-personnel budget got killed Layoffs always hit IT first Getting capital spending approved is tough.

Greater demands Business requires us to enable new revenue sources With fewer people to do the work, we’re trying to automate business processes.

Virtualize more? … but it saves money. We’ve virtualized servers, but I’m not ready to virtualize mission-critical applications…

Make it simple, social Make my life simpler, not more complex. Yes, we support social networking, but nobody has figured out how to make it strategic.

I want a life At the end of the day, I just want to tuck my kids in bed.

Lessons on selling in a recession

Play the budget angles