James, agreed. However, due to some of the confusion concerning what bookings mean that others have voiced, I have taken the liberty of getting the info from the horses mouth for all to see. For those that have not downloaded the last conference call and read each and every line I would recommend doing so if you are serious about TAVA. There is a wealth of info in it. The extracts that I have here were pulled primarily from pages 6,9,12 and 13.
TAVA TECHNOLOGIES
Moderator: Scott Liolios
May 12, 1998
As said in the intro, I'd like to take a few minutes and talk about the what I call the general state of trade. I guess in short summary, while we've sat here in the past and expressed frustration that the Y2K demand ramp has been slow to develop and you've heard me talk about my own frustration with people wanting to do pilot projects on their way to comprehensive programs, I think what we can now confidently say is that the wait is over.
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The wave of demand is upon us and the ramp-up appears to be making up significantly for the time lost in the first couple of quarters. Specifically to this point of how do we measure that backlog? Historically, we have always reported backlog as only the face value of an order placed.
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We do not report any expected value for the full program to come out of that initial order. And as a result, using an example phase one in a Y2K project, it may be a time and materials order for the inventory, and assessment phase alone might be something like $200,000.
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That's all we show as backlog when certainly, our expectation and history has shown that the follow-on rollout on a time and material base will be significantly larger than that. So with that as a definitional backdrop, we've got a total backlog as of 3/31 is up about 15 percent over 12/31.
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The point of all this is that that does not begin to tell the story of the change in our business climate. As one specific example, our backlog does not carry any value- that large multi-site agreement that we announced last month- those orders will in fact be booked individually by site as they are executed.
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So as a result, while our backlog content is changing in mix from a fixed price to time and materials, there's an effect that it actually understates or has an apparent depressing effect on the total value of that backlog. While in truth, the expected value of the projects engaged is increasing dramatically.
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In the future, we will be attempting to provide some kind of an estimate or forecast of total project revenues that are expected to come out of the booked backlog figure.
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More specifically, I think with all of that, to emphasize the acceleration that we talk about in the press release of the Y2K business, I can and within the guidelines of our Safe Harbor, project and forecast that we would expect to book between 8 and $10 million worth of Y2K orders in this month alone.
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Again, I'm using the booked backlog definition that does not include an extended valuation, as I've just talked about.
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Kevin (Fallon): ÿ ÿThank you, John. Just in case anyone is wondering, yes, it is raining today in Portland.
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Ladies and gentlemen, while I'm pleased to discuss our Y2K deployment activities, today I would also like to review two other aspects of our business-the TAVA products and our newly formed TAVA Consulting.
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First, let's focus on our current engine. As you may know, in contrast to the business domain, Y2K activity in the embedded systems (lair) can be likened to finding needles in haystacks.
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However, once they're found, one needs a plan to quickly bring remedial action to the problems. What we are finding is that different tactical actions are required for different technology groups within the plants.
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Therefore, the more deployment options available, the more effectively one can collapse the schedule, which is the number one concern. John has already updated you on the solution provider partner program. I would like to explain how the solution providers integrate with our overall Y2K program.
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But first, let me talk about a typical customer engagement. In a Y2K program there are four stages-inventory, assessment, conversion planning, and remediation.
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Many of our customers have started with a pilot in order to evaluate their Y2K exposure. The pilot usually includes inventory and preliminary analysis, and may involve anywhere from one to 20 sites. The typical cost is approximately 100,000 per site, however, the range has been from 60,000 to 1 million.
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For example, a small low-tech consumer products plant may be 60,000 whereas a pharmaceutical campus may be $1 million. At the end of the pilot, customers are still not able to accurately estimate their exposure.
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However, at the end of the pilot there is empirical evidence of a sizable problem, a high probability of production outages, and if an outage occurs, a major business exposure.
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At this point, which is where TAVA is today on our earlier pilots, we usually move into full assessment, conversion planning, and remediation of the pilot group and negotiations for the full-scale program.
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Conservatively, a full-scale program per-site costs could be greater than eight times the cost per site for the pilot. So let's follow the money here. Assume a consumer goods company has 50 plants.
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Russ (Welty): ÿGood morning. I wanted to clarify one thing first. Did you say, John, that in this current month it'd be expected to book about eight to 10 million in Y2K backlog?
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John (Jenkins): ÿYes. Y2K orders. Yes.
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Russ (Welty): ÿY2K. And would that be for just a few customers or several customers? What- you know, kind of what average per customer would that imply?
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John (Jenkins): ÿI haven't looked at the details, Russ. There are several major customers, so some of this would be- and again, I want to go back to the definition of when orders usually come in.
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The usual first stage in a Y2K order for a multi-site client as an example, it might purchase in the first stage all of his tools and well basically the CDs. There may be a minimum database hit of actual dollar amount in that first order and then everything else. But most likely it's for the tools only, then with the database hits billed as the database is accessed.
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And then the services are on a time and expense basis thereafter. So these orders, again going back (definitially), are front end- I don't want to say front end loaded that's the wrong way around, but they're kind of the tip of the iceberg of our expectation for any individual clients as they roll through the full program.
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Number of individual clients across that, Russ, probably, I don't know, 15- something like that.
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Russ (Welty): ÿOkay. So what you're basically saying then here is that, if I can restate it, is that this eight to 10 million obviously has the potential to grow significantly on orders of magnitude as you progress down the path. Is that right?
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John (Jenkins): ÿI'd say potential, Russ. I don't know if I'd use orders of magnitude. You know, it depends- as Kevin was saying, it depends on the industry and everything else.
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But certainly, you know, Kevin's statement about the multipliers between the inventory and assessment phase and full remediation are based on experience.
Russ (Welty): ÿOkay. Sounds good.
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vcall.com
Regards to all
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