VERBATIM TRANSCRIPT OF THE TPRO CONFERENCE CALL 11/14/97 - Part 4
Q&A (cont.)
Jack Moss - Investment Tech
Q: We're a small hedge fund. What do you see in revenue for the future on your CD?
A: JJ - Well, the opportunity (let me just roll it out that way for the moment), first of all when we sell tools, its a combination of the CD, which is sort of the key to the compliance data base - so there's our pricing model there (and if I'm being redundant for some of you, I apologize) - but its basically $4000 for the CD. That includes the methodology and several support tools. Then to switch on and have access to the vendor compliance data base, your talking about $5000 per site. The CD price is per seat. So in a straight forward model, you've got somebody who buys 1 CD. He pays 4000 for that, he's going to pay 5 for the vendor compliance data base access, and he's then going to pay $200 per vendor compliance report. Most organizations that we're looking at on the small end of the "average range" would have at least 100 unique devices in their facility. So its 100 x $200 = $20,000. He buys some training along the way. You can get to a model that says between $30,000 and $35,000 on an average basis per individual facility. The total facility count out there is, on a conservative basis, between 70,000 and 100,000 facilities that have to address this problem. So its a very large number at the high end. We won't reach all those facilities and not everybody's going to pay retail price. When you sit at the table with somebody that's got 600 sites to address, there's a fair amount of negotiating pressure from his side of the table. But I think we've used a conservative number of about $20,000 per site for a straight up tool purchase by a client. I still think that number works and I have no reason to push it one way or the other at this point. The mix of tools and services is hard for us to pin down today. We've got a wide range. Some organizations have absolutely no engineering staff and they want to buy services wrapped around tools. Others have solid engineering staffs and are really looking at tools and projects.
DK - I would just reiterate that. What we've done in our internal projections, is that we've attempted to forecast revenue on a per facility basis on average. We have seen fairly wide band width right now around that number. The band width between the low side and the high side is fairly broad. So we're continuing to learn more information about how to do better forecasting every day as we get additional contracts.
Q: So what are you basically going to do for enhancing the marketing on this product?
A: JJ - We've got a direct sales activity targeted at multi-plant corporations. We've got the Wonderware distribution channel that will in the course of the next 90 days, take us into somewhere between 15 and 20,000 new accounts through the release of their package suite 2000 effort. Wonderware as a marketing partner as an example right now is getting about 1 call per hour concerning compliance of their own product. Those calls are being handed over to us as leads, and we're following up with our own promotional literature. Wonderware, again as a partner, is emphasizing that when they receive a call from a client about the compliance of their software, that they're aggressively telling the client he must look at his entire systems, not just at the Wonderware software upgrade issue. We have in parallel, on Monday afternoon, a meeting with Square D Group Schneider senior executive strategic account sales management. So we're opening up using them as a channel into their strategic accounts which include a range of people from IBM to Mars to Koch Industries and others. And we are developing what we call a sort of a single franchise model where we are developing a network of other system integrators that we will train and license to resell our tools and provide services to the geographic areas that we don't have access to.
Seth Whitehorn - Lapra
Q: Two actually. The first one, the fellow you just hired, is he there to sort of spruce up your infrastructure, or is he there also to get you into new markets? Second question, I do recall, I know I've asked, but I haven't seen any follow-up, this arrangement with that insurance company, it seems to me if I understand it, its better than chicken soup. And yet there's been no other further verbiage on your part to suggest, not how explosive it could be, but [???] a waste of fax paper [???] in the end this is going to put some money on the table, or maybe its not going to put some there. Maybe its just a, I don't know, a help to brand name your product and nothing more than that. If that's not true, then what do you expect to get from this insurance company in terms of revenue, be it leads or business or to help you get business for 98 or 99? So the first one is the fellow - is he just there for infrastructure or is he there to get you into new markets, and the second question is the insurance company. Is that going to ring some bells or is it just there to put your name on the marquee?
A: JJ - Let's take the first one first - easily. Ken Owen is a senior executive who's been around the systems integration business for 20-25 years. His initial charter is to do 2 things. One is develop formalized alliance relationships with some of the IT service Y2K providing companies who are doing business systems Y2K service. As indicated before, we have dialog ongoing with several of those people right now. We've actually engaged in some joint proposal activity. What Ken is going to do is go down the path of formalizing those, selecting 2 or 3 very good ones. In addition, Ken is going to be driving, because of his experience base, this franchise model of going out and qualifying other system integrators, developing the system for us to deliver product to them, train them, and essentially monitor that activity. He also has, because of his experience, a lot of large corporate account client exposure that we expect to tap as well.
As far as Aon, no its not just a name on the marquee. Aon sells business interruption risk insurance themselves. So they are dealing with the risk management people, again, in large organizations, and are certainly in the process of reissuing their own insurance, asking questions about Y2K compliance in the business system and at the factory floor level. So we expect them to be a source of leads for us. That has, in fact, already begun to happen, and we expect to see that grow.
Q: Well that's good. If Aon does this business risk, can you go to Marsh Mac (I don't know if they do business risk) .? [Question condensed]
A: JJ - Marsh Mac actually does. Marsh Mac and Aon are the 2 key competitors in that arena as far as we understand it. I think working with Aon, even though its not formally exclusive, working with Aon would preclude us from going to Marsh Mac directly. There is another angle that some of the A&E (Architect & Engineering) firms, one in particular that we're working with [???] write business risk - not the insurance - but they write the assessments. They'll come into as an example, in the utility market, there's and organization who comes in once a year and does an overall business assessment for the utility that the utility then has to build into its overall response plan. And those people are now coming to us and saying, "Gosh, people are just waking up. What have you got, what can you offer, how can we work together." So its another path in through the same general opening of risk abatement.
Q: One other question. At a conference I just attended with Pru Bache, they gave out a figure that GM has 300,000 computers globally running their robots. If GM wants to be a client of yours, how would you approach somebody like that with that many gizmos to be checked out? [Question condensed]
A: JJ - The gizmo count that you heard is consistent with what we know of GM. We have had and have an ongoing dialog with GM. The way that we would work with somebody that large is by providing access to our data base. GM is a client who obviously has a significant internal engineering resource that can address, we would hope, their issues given tools that can make their own resource more effective.
Q: Is GM a client?
A: JJ - Not yet.
Q: So they could be a client for Y2K.
A: JJ - Yes.
Q: You have approached them yet or are they on the list to be approached?
A: JJ - There's a dialog going on between us. |
