Inpart

InPart

Background:

Under the profound vision of a strong executive leadership team, one year old Silicon Valley start-up, InPart, is ready to launch its innovative product, DesignSuite, an online catalog of digitized 3D standard mechanical part designs. InPart would like to establish DesignSuite as a one stop shopping for designers and engineers needing 3D part content worldwide. With an objective to scale as a market leader in technology solution as well as in sales $ volume as fast as possible, InPart is at a decision fork to choose the right sales, marketing and pricing options for their Go-to-Market strategy. Refer to Exhibit 1 for SWOT Analysis and Sales and Pricing Options for InPart.

Recommendation:

Sales: InPart should license DesignSuite content in an OEM arrangement to Parametric Technology (PTC), the best, largest and fastest growing CAD system manufacturer, for resale.

Pricing: InPart should negotiate favorable royalty rates in a bundled sales arrangement on a per sale basis. Since PTC’s customer base includes small individual designers, medium businesses and large long-term enterprise customers, InPart should propose PTC to implement its overall pricing strategy which comprises of three pricing models for end consumers: Perpetual License, Annual License and By-the-Part pricing. The overall pricing strategy will attract PTC’s different customers effectively and InPart will get royalty/commission on a transaction basis.

Future: Once established, the above Sales and Pricing model should be enhanced to other CAD System Vendors such as IBM/Dassault Systems, Structural Dynamics Research Corporation (SDRC), Computervision, Autodesk, and EDS Unigraphics.

Support:

Sales: Exhibit 2 compares pros and cons of four different Sales options for InPart. Direct Sales and Inside Salesforce options are not recommended because they demand heavy investment in term of time and money to build sales department within InPart. In a long run it may bring brand name recognition, but it will increase time-to-market by a much bigger factor. The option of selling through resellers is also less desirable because of the potential poor service and installation quality outcome. InPart will be able to leverage resellers’ strong customer relationship and will be able to reduce the sales expenditure, however, managing, controlling and maintaining long term relationship with multiple resellers is questionable because of their internal competition.

The best option for InPart is to leverage Pidwell’s former association with PTC and establish an OEM arrangement to sell DesignSuite to PTC customer in a bundle sale promotion. InPart will be able to reach to PTC’s large enterprise customers quickly and will get high volume sales via perpetual or annual subscription. InPart will also be able to sell DesignSuite to PTC’s small to medium scale designers by selling its services per part basis. InPart will be able to leverage PTC’s industry experience, customer-base, sales, marketing, and training to penetrate into the online catalog market of 3D design market as a leader. Exhibit 3 shows the Sales volume for next five years if InPart makes sales partnership with PTC and compares this option with Resellers, Direct Sales and Indirect Salesforce options. (Some high level assumptions are made to derive the projections.)

Pricing: InPart should charge PTC well negotiated royalty rates in the bundle sales arrangement. The option of charging flat $20,000 partnership fee for initial setup with $10,000 annual publishing fee seems limiting, especially considering higher revenue potential of royalty or commission per transaction basis. InPart should propose its overall pricing strategy for all three different market segments of PTC customers. Exhibit 4 summarizes the pricing for small, medium and large market segments. Perpetual Licensing will be desirable by PTC’s long-term large volume corporate customers. Annual Licensing with volume discount will attract medium-large customers. Individual designers will be able to download designs per part without having to incur installation or licensing fees.

Summary: The proposed Sales and Pricing strategy will enable InPart to achieve its objective to be a market leader in technology solution as well as in sales $ volume, in the fastest possible manner.

Exhibit 1: InPart SWOT Analysis and Future Options

Strength

в”Ђ Clear Vision

в”Ђ Strong Executive Leadership

в”Ђ Niche product

в”Ђ VC