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ICICI-Infotech's North American Strategy for Success Part Two: Customer Focus and Innovative Pricing

Written By: Joseph J. Strub
Published On: November 23 2004

Introduction

ICICI-Infotech has developed a well-earned and respected reputation in the Europe, Middle East, and Africa (EMEA) region of the world. Now it has set its sights squarely on the North American market. To reach this target, ICICI-Infotech has developed an intriguing strategy to attract new customers. This research note explores this strategy to assist you in determining whether ICICI-Infotech and its enterprise resource planning (ERP) offering, ORION, makes sense for your company, deserving a closer inspection and careful consideration.

After providing some background information on the company, the strategy is examined from the viewpoint of its market focus, customer focus, and innovative pricing. You'll see how pricing, both for software and professional services, is critical to making this strategy work and is the underlying foundation for the other two components. The research note concludes by discussing the challenges facing ICICI-Infotech and presenting user recommendations.

This is Part Two of a three-part note.

Part One provides a brief background of the company and discusses its strategy in terms of market focus.

Part Three analyzes the challenges facing the company and presents user recommendations.

Customer Focus

ICICI-Infotech complements its market strategy of concentrating on process manufacturing industries with similarly minded, sharpened focus on the customer base. Initially, the company has targeted small to medium-size enterprises (SME) as its most appropriate install base. While larger software vendors such as SAP, IBM, and PeopleSoft are working down the food chain, ICICI-Infotech has wisely chosen to start at the opposite end, but not necessarily at the bottom.

Under its customer strategy, ICICI-Infotech's ORION offering is particularly attractive to companies who are not making their initial foray into enterprise-wide software. Implementation experiences gained throughout the world have taught ICICI-Infotech that young, maturing companies cannot take full advantage of features, functions, and integration provided by the full scope of the ORION software. This does not mean the company will turn away these prospects. However, customer expectations must be carefully established. Again, this is why ICICI-Infotech is targeting companies migrating from legacy systems or software that is simply out of gas.

Specifically, ICICI-Infotech's ideal customer is a composite of several factors. The ICICI-Infotech customer has revenues in the range of $10 to $100 million (USD). The customer has between 100 to 500 employees of which 25 percent, or as many as 125, are dedicated, concurrent users. Since ICICI-Infotech's implementation support includes such functions as database initialization and fine-tuning, data conversion, and remote location setup and access, in addition to the more traditional tasks as training, software installation, and module-by-module configuration, a large IT staff is not a prerequisite. In fact, typically an ORION customer will have no IT staff or a staff of three personnel. This is particularly apropos since ICICI-Info does not provide the ORION source code but rather keeps the code in escrow to quell any ongoing business concerns. Finally, because of its ease of roll out and deployment, ICICI-Infotech focuses on customers with multiple manufacturing locations.

ICICI-Infotech's customer strategy understands that the workflows and procedures for SMEs are as complex as those of large enterprises. However, what differentiates these two classes of companies is the volume of data processed. As you will see, ICICI-Infotech's customers need the ORION software to manage the complexities of their businesses. But they do not want to be charged at the same rate as larger companies with greater data and, therefore, more instances of processing.

Innovative Pricing

As has been alluded to previously, software pricing is the component that makes the North American strategy work for both ICICI-Infotech and its customers by giving credibility to the market and customer focus. As depicted to the right, innovative pricing consists of three segments: software, enhancements or mods, and professional services. As you will learn, all three can play a compelling role in penetrating the process manufacturing marketplace and encouraging prospects to listen to ICICI-Infotech's message.

ICICI-Infotech employs processor-based pricing for ORION. While traditionally reserved for hardware manufacturers, under the processor-pricing algorithm the customer and ICICI-Infotech jointly scope out the size of the server hardware needed to satisfy the processing requirements of the business over a four- to five-year period. Accordingly, using a software-pricing model grounded in a per-processor basis is simpler than pricing on a per-user basis. Vendors and customers don't have to constantly keep track of how many employees, partners, and customers are using their software or whether users are concurrent or not. Furthermore, they are not restricted to the initial allocation of end user licenses as the software gains wider acceptance and utility. Additionally, while a customer gets all of the ERP modules up front, if the company will not be using a particular module, say consolidations or field maintenance services, the processor is sized and priced accordingly.

While kinks may still need to be worked out to try to satisfy every customer, ICICI-Infotech is approaching a pay-as-you-grow model. Such a model can be particularly attractive to SMEs who don't need each and every ERP feature and module on day one.

ICICI-Infotech bolsters its subroutine-like architecture for enhancements with extremely competitive pricing on two fronts. First, as typical with many software vendors, enhancements with general applicability to a majority of users are completed on a no- charge basis and, then, become part of the baseline software. Whether your business can wait on the vendor's time schedule is another issue altogether and requires further negotiations.

Secondly, ICICI-Infotech leverages the fact that its development centers are located in India where the cost of living and wage scales are lower than in other parts of the world. This means that the company's internal cost of developing an enhancement is also lower. ICICI-Infotech then passes these savings onto its customers in the form of lower hourly rates for development that are, on average, 50 percent less than rates in the United States. Of course, customers must overcome the emotional issue as to whether they are comfortable with the fact that their support group may be located halfway around the world. The reduced costs can help alleviate the discomfort. Be assured that ICICI-Infotech has a group of developers based at its New Jersey headquarters. However, the major development efforts come from India.

Because of ORION's ease of deployment, ICICI-Infotech argues convincingly that its implementation costs are lower than implementing ERP packages of comparable scope in organizations of similar size. Whereas the industry ratio of software dollars to implementation dollars is typically $4 or $5 for every dollar spent on software, ICICI-Infotech has brought this down to the $3 or $2 dollar range.

When you combine its processor-based pricing, lower than average development costs, and ease of rollout, ICICI-Infotech offers an attractive pricing option that should intrigue prospects into taking a closer look.

This concludes Part Two of a three-part note.

Part One provides a brief background of the company and discusses its strategy in terms of market focus.

Part Three analyzes the challenges facing the company and presents user recommendations.

About the Author

Joseph J. Strub has extensive experience as a manager and senior consultant in planning and executing ERP projects for manufacturing and distribution systems for large to medium-size companies in the retail, food and beverage, chemical, and CPG process industries. Additionally, Mr. Strub was a consultant and Information Systems Auditor with PricewaterhouseCoopers and an applications development and support manager for Fortune 100 companies.

He can be reached at JoeStrub@writecompanyplus.com.

 
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