VERBATIM TRANSCRIPT OF THE TPRO CONFERENCE CALL 11/14/97 - Part 2
John Jenkins:
I'll re-emphasize some of the things that Doug said along the way here. We're very about the revenue growth and the gross margin growth in the 1st quarter, and I want to re-emphasize Doug's point that taking 15-20 of our senior engineering people off of the revenue production side to do the Y2K product was a conscious decision we made in the beginning of the quarter because our visibility, as we've discussed before, about how quickly the Y2K ramp up was going to take off was certainly cloudier than it is today. So we made the decision to dedicate that resource to development by contrast to revenue production and not to hire at that point to back fill those people. As a result, we lost the revenue and gross margin production that would have ordinarily been associated with those people; and I should say, its not lost. Its simply delayed because the project execution that was not supported by those people remains yet to be done.
The critical piece of that was for us to be able to get the Y2K product out on time, Oct. 15, aside from the positive of meeting a deadline in the world of software production being important. The other important part of this is that we had product pre-CD in demonstration laptop form to be able to show to clients when they were in the middle of, in many cases, their 1998 budgeting process. Many of our prospective clients and clients had, by the time we got there in Aug. and Sept., become aware of the plant level issue, were searching for solutions, didn't know where to turn. We showed up on the doorstep with a viable product, even in demo form at that time, and made their decision making a lot easier. So for us to have a product that we could demo instead of just saying, "Gee, we'll have one in Jan." made a significant difference for us in the response level, and I'll get to that more specifically in a moment.
The other key thing that I want to emphasize is I know that many of you are interested in our organization because we do have a base business that the Y2K both fits on top of as we speak and also supports over the long term. I think the numbers that we're showing here indicate that we continue to pay attention to and be successful in execution of our base business. I will say that in the course of the last couple of weeks, we've received in excess of $6MM worth or orders in our base business, including a large order in Chicago that we're very proud of as demonstrating the synergy of putting together this organization. The order in Chicago was Chicago sales office presence coupled with technology that's actually resident in Denver. So its a good proof of concept for us and we're really excited about it.
Jumping over to the Y2K side, I guess about 45 days ago we were talking about the acceleration in interest.
That interest continues to accelerate at an even sharper slope. We have, everywhere that we have presented to CIO/Y2K program manager levels in large organizations, multi-plant organizations, we have either, on the heals of the presentation, received an RFP or been told we will receive an RFP. We have had no, nobody tell us that oh gee, we like what you have but we like this other stuff better or we don't think we need what you have. Our sales people . new turf for them to show up and not have to sell hard to book business. Somebody asked me the other day about the cycle time from presentation to actual RFP or order. We've had some cases where its been a 2 week cycle on a multi-plant engagement from making a presentation to having a corporate wide order. Again, our timing is great, we're meeting with people at the time they're laying out their 1998 plans. They're aware of the issue at this point in part due to the investment that we've made in terms of broadcasting that, and its happening very quickly as we speak.
I have a piece of paper in front of me here that is our attempt to track a Y2K pipeline. It changes daily. The one I'm looking at has 41 accounts on it with a total plant coverage embedded in those accounts of over 3500. An interesting piece here, again cycling back to the base business is that 80% of these accounts are new to the company period, end of argument. 100% of these accounts or 100% of the selling level in these accounts is new to us. We may have done work in a facility for someone like Bristol Meyers on a single facility basis, but historically in the base business, we've never had access to multi-plant decision making levels in the organization. And certainly, our model downstream as we expect to hold onto that access and live in these accounts after year 2000. So, we're extremely excited, [???] we're in demand [???] we're managing our demand, and as Doug alluded to before, recruiting heavily on the execution side. We're also adding to senior staff. The press release mentioned the addition of Ken Owen from Fluor Daniel, which is a major increase in our executive selling capability as well as program management capability. So its a very exciting time for us as we sit here today.
The press release does mention some new accounts by name. There are more. These are the ones at this point that were comfortable with having their name trotted out, I guess, for public exposure. We have booked a couple of very significant multi-plant orders that are addressed in here. And again, these right now, are for the assessment stage only, and we certainly and fully expect that those will role out to remediation engagements as well. I've also spoken in the past about the uplift opportunity on our basic billing rates where historically a project program manager in the base business might bill between $75 and $90 an hour. We have already secured business at a billing rate in excess of $160 an hour. So everything on that side that we expected to happen is definitely happening, and we have not yet seen any increase in pay scale requirements.
I guess the other point to make here is that our next CD productions run of 20,000 is, in fact on schedule for Nov. A number of those will be going out to the Wonderware distribution chain, which to this point, we have not yet turned on, which will certainly increase the scope of our proposal activity and opportunity dramatically from where we are today. And the results we have sitting on the table today are purely the result of our direct selling activity targeting multi-plant clients, a lot of word of mouth, a lot of referrals from IT service companies. I mentioned in the press release that we actually have formative alliance relationships with a couple of the large players here who are, as our model suggested in the past, running into the requirement to support the factory control level, don't have the resources and are coming to us to fill that void in their product offering. |
