MarketScope for Price Optimization and Management Software for B2B, 2011

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1 Research Publication Date: 29 July 2011 ID Number: G MarketScope for Price Optimization and Management Software for B2B, 2011 Michael Dunne The market for price optimization and management software for B2B sectors is experiencing a rebound, due to corporate interest in driving profitable growth. Best-ofbreed vendors dominate this field, with PROS, Vendavo, Vistaar Technologies and Zilliant having the greatest market visibility Gartner, Inc. and/or its affiliates. All rights reserved. Gartner is a registered trademark of Gartner, Inc. or its affiliates. This publication may not be reproduced or distributed in any form without Gartner's prior written permission. The information contained in this publication has been obtained from sources believed to be reliable. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of such information and shall have no liability for errors, omissions or inadequacies in such information. This publication consists of the opinions of Gartner's research organization and should not be construed as statements of fact. The opinions expressed herein are subject to change without notice. Although Gartner research may include a discussion of related legal issues, Gartner does not provide legal advice or services and its research should not be construed or used as such. Gartner is a public company, and its shareholders may include firms and funds that have financial interests in entities covered in Gartner research. Gartner's Board of Directors may include senior managers of these firms or funds. Gartner research is produced independently by its research organization without input or influence from these firms, funds or their managers. For further information on the independence and integrity of Gartner research, see "Guiding Principles on Independence and Objectivity" on its website,

2 WHAT YOU NEED TO KNOW The market for prepackaged price optimization and management software supporting B2B commercial activities experienced a turnaround in 2010 and is continuing to attract attention from increasingly more enterprises. Gartner estimates this software market generated approximately $180 million to $190 million in revenue worldwide in New initiatives are being pursued because of mounting interest among enterprises for improving margins and revenue, increasing responsiveness to market volatility, and extracting greater efficiencies and impact from pricing activities within sales and marketing processes. This MarketScope analyzes the progress of key vendors in delivering applications for price analytics, optimization and execution functions, where innovation and growth is predominantly driven by best-of-breed specialists. PROS and Vendavo receive ratings of Strong Positive, while Vistaar Technologies and Zilliant receive ratings of Positive. To better understand the vendor landscape, managers and pricing practitioners in sales, marketing, finance, sales operations, product management and price administration should review this MarketScope with their IT counterparts when considering B2B pricing software initiatives. STRATEGIC PLANNING ASSUMPTION(S) Through 2014, investments in price optimization and management software will help increase gross margins, on average, by more than 2%. MARKETSCOPE Price optimization and management software for B2B commercial activities represents a modest size, innovative market that poses high potential business benefits to enterprises seeking opportunities to improve margins, revenue, and overall sales and marketing effectiveness. This niche market successfully weathered the recent recession and is beginning to regain momentum. Vendors' product lines have continued to mature overall, particularly with best-of-breed specialists, while interest in exploiting pricing software has grown among increasingly diverse enterprises in various vertical industries. Gartner estimates this market for B2B has generated approximately $180 million to $190 million in worldwide revenue in 2010, taking into account the total sales of products, services, subscriptions, maintenance fees and any additional, postimplementation consulting work captured by competing software providers. The 2010 market sizing represents a shift from estimates of $160 million to $180 million for 2008 and These estimates are complicated by the fact that several vendors' product lines pertaining to pricing represent components of total portfolios, while most best-of-breed vendors are private and free of disclosure requirements. Leading vertical industries include chemicals, distribution, components, industrial manufacturing, heavy equipment, medical devices and high-tech manufacturing. Communications and energy are also notable segments, while business services, high-tech software and consumer goods (particularly in beverage) represent emerging sectors. Software vendors are becoming more adept at entering and servicing different industry verticals, but enterprises should carefully evaluate the business process expertise, implementation experience and references of prospective providers. Most of the demand for pricing software originates in North America, followed by Western Europe. However, initiatives are beginning to emerge in the Asia/Pacific region and South America. Publication Date: 29 July 2011/ID Number: G Page 2 of 24

3 The market potential for price optimization and management software is considerable, because defining and defending optimal prices is a fundamental imperative for producing returns for stakeholders. Such solutions offer the promise of helping firms better identify underlying shortcomings in pricing practices that erode revenue and margins, perform opportunity analysis and more intelligently discern prices that target markets will bear, as well as realize efficiencies in deploying, administering, and enforcing prices and pricing policies. The complexities of pricing for B2B sales processes are stimulating interest among firms tasked with managing considered sales, formal bid processes, negotiated agreements and account relationships. B2B models often require cross-departmental collaboration (i.e., between sales and marketing) and rigorous deal management processes to communicate and enforce pricing policies, and handle exceptions. Moreover, B2B sales cycles tend to have relatively higher transaction costs and longer sales cycles than business-to-consumer transactions, providing companies with additional incentives to investigate pricing solutions. Four corporate objectives for adopting B2B pricing solutions are to: Defend and improve profitability (i.e., gross margins or even pocket margins). Defend and grow sales without sacrificing margins. Improve governance and consistency in pricing practices and realized prices (like eliminating rogue discounting). Increase organizational agility in tailoring pricing for specific market conditions or sales cycles. Firms have become more ambitious in their pursuit of optimization capabilities. In 2010, more than one-quarter of the calls that Gartner received from clients and prospects were inquiries about the potential for price optimization in generating pricing guidance for sales forces. Confidence in achieving business objectives has been bolstered by a growing number of pricing software use cases, where enterprises successfully mitigated deterioration in revenue and margins for specific lines of businesses. Firms often acquired better capabilities for dissecting the elements that underpin pricing, superior insight into margin performance, and improved decisionmaking for managing product and/or service portfolios. Moreover, five key, underlying market trends are encouraging investigations and diffusion of pricing technologies in B2B enterprises: 1. The widespread use of spreadsheets for analyzing and managing prices is increasingly viewed as inadequate, if not harmful. 2. The software of many vendors has progressed sufficiently to satisfy a majority of common customer requirements out of the box, or through the configuration of software features, often as a result of productizing work with clients, particularly around price analytics and execution. 3. The professional service organizations of software vendors are acquiring more experience in supporting projects of varying scope and complexity in different B2B segments in different regions of the world. 4. Third-party consultancies (such as Accenture and Deloitte) are increasingly pursuing pricing opportunities with greater enthusiasm, raising awareness among potential users and providing validation of this market. Publication Date: 29 July 2011/ID Number: G Page 3 of 24

4 5. Hosted and software-as-a-service (SaaS) delivery models are increasingly being considered (and made available) to expedite implementations and improve time to value. This is the third MarketScope we've written to help sales, marketing and pricing departments evaluate vendors competing in the B2B price optimization and management software market, based on their progress in delivering broader and deeper solutions across three functional domains: price analytics, price optimization and price execution. This research also evaluates the maturity of the vendors' organizations, consulting resources and partnerships; their market coverage of geographies and vertical industries; and the experiences of their customers in exploiting price optimization and management solutions for economic gain. Market/Market Segment Description The price optimization and management software market for B2B commercial relationships encompasses three segments that, together, help companies implement and improve closed-loop pricing processes supporting sales channels. These segments are: Price analytics supports discovery processes to identify and explain historical trends in realized pricing (typically from transactional data), the impact of market dynamics and pricing anomalies. Price optimization primarily concerned with supporting segmentation, modeling and forecasting requirements to identify and define optimal pricing strategies and project price recommendations. Price execution focuses on functionality that supports the dissemination of pricing information, providing guidance on pricing practices and deal development, definition and administration of pricing rules and models for ordering and quoting systems, and the automation of approval processes. Inclusion and Exclusion Criteria To be included in the MarketScope for Price Optimization and Management Software for B2B, a vendor must: Offer packaged, stand-alone software applications that support price optimization, price analytics or price execution functions for B2B sales channels. Provide price optimization or price analytics software as part of a standard packaged price optimization and management offering. Have at least 10 customers that have deployed or are actively deploying on the latest two versions of its price optimization and management software in the past 18 months. Have won at least four net new accounts in the past 18 months. Demonstrate active efforts to market price optimization and management software to B2B organizations in two or more vertical industries and regions (for example, North America and EMEA). Retain a sufficient cash position to fund at least one year of business operations at the current burn rate. Demonstrate active efforts to invest in and develop its price optimization and management software for B2B sales channels. Publication Date: 29 July 2011/ID Number: G Page 4 of 24

5 Retain sufficient professional service resources, either internally or through partners, to fulfill customer demand for the next 12 months. Possess a credible vision and commitment to competing in the price optimization and management market for the next three years. A separate entry for Oracle E-Business Suite has been dropped from the MarketScope due to low visibility in the price optimization and management market. This MarketScope will focus on pricing functionality provided with Oracle's Siebel product line. Rating for Overall Market/Market Segment Overall Market Rating: Promising A distinct pricing application software market continues to gain mind share from B2B enterprises concerned with systematically improving pricing strategies and practices to defend and increase margins and sales (see Table 1). This interest is increasingly encouraged and substantiated by projects that manage to yield compelling ROI, even in difficult economic periods. Moreover, competing vendors continue to introduce more-comprehensive, prepackaged functionality based on enhancements and experiences from past engagements, particularly in the areas of price analytics and price execution. However, the market remains immature, with the number of deals and projects still modest and distinguished by small vendors concentrating on specific industries. Although awareness of the importance of pricing is diffusing across executive leadership teams in different B2B organizations, the volume of budgeted projects for implementing technical solutions may be constrained in the near term by uncertainty over the economy. Evaluation Criteria Table 1. Evaluation Criteria Evaluation Criteria Comment Weighting Overall Viability (Business Unit, Financial, Strategy, Organization) Viability encompasses an assessment of a vendor organization's financial health, stability and competitive position in the B2B price optimization and management software market. This criterion evaluates the availability of resources that enable a vendor organization or specific business unit to continue to satisfactorily invest in, market and support products for this market. standard Publication Date: 29 July 2011/ID Number: G Page 5 of 24

6 Evaluation Criteria Comment Weighting Product/Service Customer Experience The product/service criterion assesses the breadth and sophistication of solutions offered by a vendor organization to compete in the price optimization and management software market. Consideration is given to progress in assembling packaged functionality that comprehensively addresses requirements for price optimization, execution and analytics. In addition, this criterion assesses the progress of vendor organizations in delivering enhancements that facilitate system accessibility, flexibility and usability; ease integration efforts; as well as automate closed-loop pricing processes. The ability to satisfy the requirements of target industry verticals is also taken into account. For the customer experience criterion, we review a vendor's programs, support organizations and business practices for ensuring that client requirements and expectations are satisfied, and that business benefits are successfully extracted from investments in price optimization and management software. Specifically, this includes an assessment of customer satisfaction with technical, implementation and account support from a vendor and/or partners. A key consideration is the number of successful, live production deployments substantiated by quality references. standard high Publication Date: 29 July 2011/ID Number: G Page 6 of 24

7 Evaluation Criteria Comment Weighting Offering (Product) Strategy Source: Gartner (July 2011) This criterion assesses a vendor's vision and road map for product development and delivery during the next three to five years. This includes an evaluation of a vendor's capacity to effectively recognize and respond to changing market requirements for securing superior price analytics and optimization innovation, and automating key pricing processes supporting sales channels. This criterion appraises the validity of development strategies in delivering packaged pricing software for achieving competitive differentiation. standard Figure 1. MarketScope for Price Optimization and Management Software for B2B Source: Gartner (July 2011) Vendor Product/Service Analysis Model N Founded in 1999 and based in Redwood Shores, California, Model N is a best-of-breed provider of revenue management solutions that focuses on helping enterprises improve oversight on the quality of business transactions. The vendor offers a software suite that automates and integrates processes pertaining to pricing, incentives, rebates, contract management, channel management (i.e., shipping and debit) and settlements. Model N has traditionally delivered deep functionality for specific vertical industries, namely life sciences and semiconductors. Model N is leveraging its experience in price management and price execution, contract management and other revenue management competencies to deliver broader pricing solutions encompassing analytics and deal management capabilities, and to compete in a wider high-tech market (components and software), as well as in discrete manufacturing. Publication Date: 29 July 2011/ID Number: G Page 7 of 24

8 Model N initially competed in the medical device industry with one product line, which was then further developed to address pharmaceuticals and biotechnology requirements. These efforts yielded two offerings, marketed as Model N Revenue Management Suite for Medical Technology, and Model N Revenue Management Suite for Pharmaceutical Suite, respectively. Another product line was acquired through the purchase of Azerity in 2006 to compete in the semiconductor market, providing the basis for the Model N Revenue Management Suite for High Tech. Compared with best-of-breed competitors, Model N has a respectable revenue base, having generated more than $50 million in revenue for fiscal The vendor has stated it is profitable. Model N possesses strong competitive positions in life sciences and semiconductors particularly with price execution and contract management, as well as managing rebates and deferred revenue from partner channels that can fund diversification efforts. The vendor has more than 425 employees, and is aggressively expanding the services and R&D organizations in India. Model N traditionally focused on the North American market, but has built a relatively respectable European presence, with approximately 20 employees to support sales and services. Model N offers two primary components for addressing pricing issues within its three product lines: Price Management for creating pricing conditions, price books and price lists, leveraging a pricing engine to support quoting and contracting functions Performance Analytics for performing historical analysis of prices, including evaluating pricing strategies, contributions to revenue byproducts, the impact of rebates and discounting, as well as overall sales channel effectiveness In addition, Model N has released two modules providing in-line process support to salespeople for developing and closing deals: Deal Analytics for supporting evaluations of opportunities and quotes within sales cycles, including profitability, special price requests and deal quality, based on histories of similar deals Deal Management for tracking demand and visibility into opportunities, as well as providing quoting functionality Model N's applications are written in Java, support HTML and JavaScript for browser access, and run on Oracle Databases. A single-tenant SaaS offering was recently launched, with at least three clients already deployed in live production. Model N's cloud computing offering provides clients with their own application and database instances that reside on a shared infrastructure. Analytics are based on Cognos TM1 engine for multidimensional analysis, while Cognos is also used for reporting, and QlickTech is employed to deliver slice and dice capabilities. Connectors for SAP and Oracle applications are available; Model N's solution has received Powered by SAP NetWeaver certification and supports Intermediate Document (IDoc) integration. Model N has worked to develop a common set of technical underpinnings for its software suite to aid efforts to market to cross-industry opportunities. This common technical platform consolidates a number of capabilities, including the workflow engine and security administration features from the life sciences offerings and software configuration tools from the high-tech product line. In addition, components from partners are incorporated for example, contract authoring tools from Selectica, and reporting tools and analytics from IBM Cognos as well as integrations to third-party software like SAP, salesforce.com and Zilliant. The platform will support the sharing of data between applications within different vertical portfolios. Publication Date: 29 July 2011/ID Number: G Page 8 of 24

9 However, the pricing-specific initiatives for broader high-tech and discrete manufacturing markets are relatively new, with sales and implementations of pricing analytics having commenced over the past 24 months. Further proof points will be needed to confirm the value of Model N's new pricing analytics in live production installations. Initial responses from clients and prospects have been positive on the what-if scenario modeling capabilities. The vendor's operational experience with price execution, rebates, deferred revenue and managing partner relationships should help users as the vendor further expands its price analytics offering. Model N does not provide price optimization functionality, although it has formed a pricing science team, while a partnership was recently established with Zilliant to provide price optimization capabilities. While Model N has established a consulting partner network for clients in life sciences and medical devices, similar networks for pricing initiatives in high tech and manufacturing are less mature. Model N receives a rating of Promising, for organizational viability, pricing execution experience, particularly with integration of pricing with rebate and contract management functions, vision and focus on improving deal quality, as well as strong positions in semiconductors and life sciences. However, Model N's initiatives in pricing analytics, SaaS and expansion in new industry verticals are relatively new and need to establish track records with successful implementations. Rating: Promising Navetti Based in Stockholm, Sweden, Navetti is a modest-sized vendor that has focused on delivering pricing solutions for aftermarket spare parts for industrial manufacturers since Gartner estimates that Navetti generated less than $10 million in revenue in However, the vendor has been gaining visibility in Europe with capital equipment suppliers and prospects from the transportation industry. Navetti focuses on establishing value-based pricing for parts that accounts for market perceptions of different products and product families across geographies, utilizing value profiles (i.e., value equivalence line charts) and price waterfall analyses. Emphasis is placed on helping clients better orchestrate pricing schedules (i.e., introducing new prices, retiring prices) and pricing between different items in multiple markets, as well as on refining pricing in relation to competitors. The vendor's solution is called Navetti PricePoint, and consists of four primary modules: Price Management for setting and optimizing international reference prices, global price lists and employing pricing rules defined by business users to enable value-based pricing Market Management for setting and optimizing local list prices, defining regional price corridors, and employing pricing rules defined by business users to account for specific market conditions (currency fluctuations, inflation and competitor landscape) Cost Tracker for defining and maintaining key elements, figures or heuristics for modeling cost to service Transfer Price Management for evaluating and allocating profits in corporate structures, taking into account taxation and forecasts in different national markets In 2010, Navetti released Performance Management, a business intelligence module for reporting. It leverages an internally developed reporting tool to provide 50 predefined reports out of the box. A deal management module is being developed to render corporate discounting practices for global and local settings, and to provide guidance to deal desks and frontline salespeople. Publication Date: 29 July 2011/ID Number: G Page 9 of 24

10 Navetti typically hosts or locally deploys its applications, providing separate application instances, databases and hardware for each client. Navetti PricePoint technology is based on the Microsoft.NET Framework, using Microsoft C#, T-SQL and JavaScript; it runs on Microsoft Internet Information Services (IIS) and the Microsoft SQL server 2005 database. For integration, the vendor released the Navetti Agile Integration Suite (NAIS) for developing connectors to third-party systems utilizing XML or flat files. Historically, integrations to SAP ERP applications were common (over half of the installed base required such work). Navetti has secured accounts in several substantial industrial firms in Europe. In addition, it has won clients outside Europe, and has supported the international operations of European-based firms. In many cases, references wanted to improve the orchestration of pricing across national markets. References have stated they selected Navetti for domain expertise in parts pricing, and found the vendor's staff to be responsive during implementations. With regard to Navetti's software, references commented favorably on the ability to price for kits, the search functionality and the fact that the solution is cost competitive. A dedicated deal management module has not been released yet for general availability, and the NAIS and business intelligence capabilities are relatively new. With regard to reporting functionality, references indicated a desire to see the product mature further, while additional proof points will be needed to confirm the value of NAIS in easing clients' ERP integration requirements. The vendor has not secured partnerships with major consultancies to support implementations. Meanwhile, English is the only language supported out of the box by the software package. Navetti receives a Promising rating for its experience with aftermarket spare parts pricing and for establishing a respectable clientele of industrial manufacturers in Europe. However, the vendor is relatively small in scale, lacks a mature consulting partner network, and will need to build further visibility in Europe and North America to counter growing competition from other pricing vendors targeting spare parts pricing. Rating: Promising Oracle Since 2008, Oracle had been the only large application vendor active in the price optimization and management software market for B2B, assembling a set of capabilities marketed as Oracle Price Management. Oracle intended to capitalize on the scale, global presence and large E- Business Suite and Siebel installed base for configure, price, quote (CPQ) software. Oracle's focus on the B2B pricing analytics market has been inconsistent during the past two years, while product initiatives usually resonated with the Siebel installed base. As a result, this MarketScope focuses on pricing software assets available with the Siebel product line, while a separate section analyzing Oracle E-Business Suite has been retired. During the past 18 months, Oracle has shifted focus from competing in the general price optimization and management market to augmenting price execution and CPQ functionality available under the branding of Siebel Customer Order Management. Oracle offers the following capabilities: Oracle Price Analytics an application based on Oracle Business Intelligence Enterprise Edition (OBIEE) that provides dashboards and reports on historical pricing trends and activities Oracle Price Segmentation a toolkit based on OBIEE that leverages Oracle Data Mining to define customer requirements utilizing clustering capabilities Publication Date: 29 July 2011/ID Number: G Page 10 of 24

11 Oracle Deal Management functionality for applying price waterfall analysis to deal evaluations, to determine deal profitability and provide discount guidelines Oracle has released a version of the deal management application for performing analysis on opportunity data within Oracle CRM On Demand. Oracle has attracted modest attention from Siebel customers in high tech and manufacturing (industrial and components), largely from firms that heavily invest or are interested in Oracle's price execution and CPQ applications. This considerable CPQ installed base comprises over 800 clients on more-recent major releases (specifically 8.x and 7.8). Siebel's pricing execution capabilities are delivered through two modules: Siebel Dynamic Pricer for pricing engine functionality and generating price master lists, service agreements and purchase agreements Siebel Price Administration for publishing to Dynamic Pricer price list information, product and deal discounting guidelines, and available incentives While customers have evaluated the pricing analytic products and considered proof of concepts or pilots, no installations of Oracle Price Analytics or Oracle Deal Management have been confirmed as successfully deployed in live production environments for pricing teams, deal desks or sales channels. Oracle Deal Management is being rewritten, and transitioned from acquired code originating from Revenue Technologies to the Siebel code base. The planned Price Planning module for optimization functions has not appeared on Oracle's published price lists, nor has it appeared in any pricing evaluations. Further proof points are needed to validate the availability and quality services resources for the pricing analytics and deal management applications. The vendor's partnering strategy for the Price Management Suite remains immature, with specialist consultancies experienced with Siebel engagements (such as CRMantra and amind Solutions) demonstrating interest. No substantial commitments have been made by the pricing practices of larger consultancies for providing resources for Oracle Price Analytics. However, clients have provided positive feedback on Siebel Dynamic Pricer for managing price lists and tailoring offers for specific products and product lines, including the ability to validate offers based on eligibility and the compatibility of products. Clients have also described the workflow functionality as relatively easy to use for defining rules. Overall application performance and scalability have received good comments regarding support for large user populations (more than 1,000 people) and transactions (up to 100,000 transactions per hour). Siebel Dynamic Pricer has been implemented to support user populations in the Americas, Europe and Asia. Several firms in high tech and discrete manufacturing are beginning to investigate the Oracle Deal Management application for quickly deploying initial, high-level analytics capabilities, hoping to avoid taxing implementation projects while gaining experience with this competency. Furthermore, Oracle is one of the few providers of sales configurators that offer pricing analytics as a native option, anticipating the larger trend of analytics increasingly being integrated with CPQ solutions (others, such as BigMachines and SAP, are partnering with price optimization and management specialists). Oracle receives a Promising rating for the Price Management Suite for Siebel clients, because of organizational viability and global presence, the strength of client feedback on Siebel Dynamic Pricer and vision of cross-selling pricing applications with CPQ offerings within the Siebel Customer Order Management solution. However, no live production references have been confirmed to validate capabilities of the pricing analytics and deal management modules. Further proof points are needed to qualify associated consulting expertise for the pricing domain. Publication Date: 29 July 2011/ID Number: G Page 11 of 24

12 Rating: Promising PROS Founded in 1985 and based in Houston, Texas, PROS is a longstanding provider of price optimization solutions originally in yield management that successfully diversified into the B2B pricing field. PROS capitalized on extensive pricing science expertise, organizational scale, investments in R&D, and revenue streams from the airline and hospitality industries to establish a strong B2B market position with a compelling, broad application suite. Moreover, PROS has intensified marketing efforts in promoting a vision of configurable pricing software applications for B2B, expanding partnerships and raising visibility among large enterprises. In addition to the hospitality and airline industries, PROS targets the manufacturing, distribution and business services sectors; and has gained notable traction in transportation, heavy equipment, automotive parts, chemicals and energy, as well as distributors of business equipment and healthcare supplies. PROS has focused on North America and Europe, and built up a European presence since 2007, with staffing approaching 30 employees. PROS has competed in Asia for yield management and revenue management opportunities, and has begun to appear on shortlists for B2B evaluations in that region. Publicly traded since 2007, PROS provides greater transparency of operations than its best-ofbreed competitors in B2B pricing, which are all privately owned, and retains one of the largest organizations. It generated $71 million in revenue in 2010, up from $68.8 million in 2009, while reporting $55.8 million in cash and cash equivalents. It invests heavily in R&D, which represented approximately 29% of its revenue in PROS has more than 380 full-time employees, including approximately 30 price scientists, more than 20 salespeople and about 85 contractors. PROS has secured approximately 150 client companies, with over 40% focused on supporting B2B requirements. PROS' traditional strengths lie in the domains of price analytics and price optimization, but the vendor has invested significantly in developing price execution functionality during the past four years, especially in introducing competitive deal management capabilities. The vendor's product line for B2B implementations is called PROS Pricing Solution Suite (PPSS), and consists of three primary modules: Scientific Analytics for performing historical analyses and diagnosis of realized prices, reporting, dashboarding and visualization of pricing trends Price Optimizer for modeling pricing constraints, projecting prices and generating price recommendations for price lists and price books, as well as for related administrative functionality Deal Optimizer for delivering pricing guidance, what-if modeling and execution capabilities for negotiated and solution selling to sales teams, as well as sales support organizations Underpinning these modules is a foundation of analytics and optimization capabilities that comprise components for segmentation, demand modeling and price testing. PROS has developed a configuration workbench for deploying software modules, to mitigate the need for custom coding. This facility consists of a library of more than 40 functions, a rule editor, a segmentation modeling feature and administrative interfaces to enable implementation teams to work with a common code base to expose features; define or arrange rules, formulas, workflows and layouts; and audit changes. Publication Date: 29 July 2011/ID Number: G Page 12 of 24

13 The vendor's software is primarily written in Java, with the user interfaces supporting XML, Dynamic HTML (DHTML), JavaScript and Adobe Flex. The applications run on both Microsoft SQL and Oracle Databases, with Microsoft Analysis Services and Mondrian employed respectively to enable multidimensional analyses. PROS has focused on leveraging Microsoft Reporting Services for reporting functionality. Third-party mathematical solver libraries are embedded to support optimization functions (such as IBM ILOG's CPLEX and LOQO). Apache Tomcat is predominantly employed as the Web server for Servlet execution, although WebSphere, WebLogic and NetWeaver are also supported. The vendor continues to focus on improving system usability and performance to deliver better inline process support for increasingly broader and diverse user populations (such as directly supporting sales teams with reviewing deals). Many clients commented positively on the interfaces, characterizing them as sufficiently intuitive for different types of users to quickly master. Load balancing, distributed and 64-bit processing are supported to facilitate scalability. A number of B2B deployments have entered production that support hundreds of thousands of items, and populations of several hundred users or more. The software supports Unicode and double-byte languages, but prepackaged language translations are unavailable. Multiple currencies, time zones and units of measure are also supported. A key component of PROS' strategy is to expand the ecosystem of products and service partners to promote market visibility, technical integrations and faster implementations. With more than half of its clients invested in SAP ERP, PROS joined SAP's EcoHub program and is certified for SAP Process Integration (PI) and NetWeaver (under the Powered by SAP NetWeaver program). Connectors are available for the SAP ERP Sales and Distribution module, as well as for SAP CRM 7. The vendor is a gold-certified, globally managed partner of Microsoft, with integrations to Microsoft SharePoint and Microsoft Office. Cast Iron is a partner for creating connectors, while mobile access has been enabled for users of Windows Phone 7, and BlackBerry, iphone and ipad devices. In 2011, PROS received certification for a connector to Oracle E-Business Suite, and is listed in Oracle's partner catalog. PROS has partnered with BigMachines for delivering pricing insights for CPQ projects. Two solutions have been developed to target midmarket opportunities (projects for less than half a billion revenue under management) in the salesforce.com client base: PROS Price2Profit for defining and setting prices for a product portfolio; and PROS Quote2Win for reviewing price lists and price books, enforcing guidelines and generating appropriate prices for quotes. The two solutions were built on the Force.com platform, written in Apex and hosted in salesforce.com's data center. PROS also hosts internal software instances on behalf of clients, but usually on a temporary basis for B2B projects, to facilitate implementations. Clients receive their own discrete application and database instances when hosting, although the hardware infrastructure is shared. The recently released PROS Price2Profit and PROS Quote2Win applications for salesforce.com represent an initial move to offering SaaS multitenant applications for a broader market. PROS has made significant progress since the last MarketScope in expanding and deepening its network of services partners, and attracting mind share from the consulting community. The vendor now has positioned itself successfully as a leading partnering candidate for consultancies investing in pricing strategy and pricing software implementation practices. It has secured relationships with two leading system integrators, Deloitte and Accenture, and has further cultivated ties with other consultancies, such as IBM, Kalypso, L&T Infotech and Wipro. It has begun to reach out to resellers, such as Habber Tec and Integritas Pacific, to address specific geographies and industry verticals. Clients often cite PROS' pricing science as a key reason for successful projects, and as a leading factor for selecting the vendor, along with the availability of a functionally broad suite. Feedback Publication Date: 29 July 2011/ID Number: G Page 13 of 24

14 from customers has been positive about PROS' services and methodologies for analyzing pricing processes, identifying pricing needs, integrating and reviewing complex datasets, validating results and providing recommendations. Development and productizing work have received favorable comments, such as incorporating innovations around optimizing prices for groups of stock-keeping units (SKUs). PROS has compromised a long track record of profitability that extended back to 1999, as a result of the recent recession and a willingness to invest in the business, reporting a net loss of $1.9 million for However, PROS is experiencing a respectable acceleration of business in 2011, with 24% year-over-year revenue growth reported in the first quarter, while realizing a small profit of $1.2 million. PROS has also experienced a change in management, with the president and CEO retiring in 2010, and the addition of new heads of marketing and sales; but a new president and CEO was hired from within PROS, and possesses considerable experience with the organization and pricing industry. PROS receives a Strong Positive rating for overall organizational viability, competitive position in target B2B segments, breadth and quality of its pricing services, a broad product suite, product strengths in pricing analytics and optimization, and vision for delivering more configurable, prepackaged software. Manufacturing and distribution organizations interested in analytics and optimization should place PROS on their shortlists. Rating: Strong Positive Servigistics Founded in 1999, Servigistics is a best-of-breed provider of software solutions for managing aftermarket service parts, field service activities and service logistics. It was acquired in 2009 by a private equity firm, Marlin Equity Partners. The new owners reinforced Servigistics' strategy to deliver an integrated application portfolio to underpin its vision for service life cycle management. The suite currently includes applications for parts planning and pricing, field service, reverse logistics, warehouse management and warranty management. Headquartered in Atlanta, Georgia, Servigistics has approximately 400 full-time employees and over $60 million in revenue as of year-end 2010; it's estimated that the pricing business generated over $10 million in revenue (for 2010). Servigistics' pricing offering has gained visibility in the automotive, heavy equipment and hightech industries. While the bulk of the pricing business originates in North America, the vendor is also competitive in Europe and Asia, benefiting from recognition of its expertise in aftermarket spare parts pricing and visibility from projects with marquee customers. The pricing solution, Service Parts Pricing, offers segmentation and optimization functionality designed to help large global organizations identify optimal pricing when accounting for critical factors that impact a parts business, including product life cycles, volume, competitive pressures and differences in geographical markets. Price optimization capabilities focus on improving insight into the price elasticity of aftermarket spare parts, and enabling clients to exploit competitive pricing information in their price-setting processes. Advanced simulation capabilities are provided to assess the impact of pricing policies, as well as analytics to explore the ramifications of pricing issues for different groupings of parts. Through development work with clients, the vendor has introduced support for attribute-based pricing to enable analyses based on standard characteristics of parts, as well as improvements to multiple currency support. Similarly, analysis of pricing for groups of parts and accounting for relationships among parts within groups, as well as support for managing promotional prices, has been developed. Publication Date: 29 July 2011/ID Number: G Page 14 of 24

15 A research services arm is available to help clients understand publicly available, competitive pricing information for price-planning exercises. The vendor offers Web crawling capabilities to support such research projects. For price execution, Servigistics supports the generation of price lists and price books, and offers workflows to automate processes around price book project management, approving and communicating pricing. A complaints management module is available to support automation of complaints processes with dealer organizations. Similarly, a collision-part pricing module is offered for reporting on data compiled by insurance adjustors. Service Parts Pricing is written in Java and SQL, supports Java Platform, Enterprise Edition (Java EE), and runs on Oracle and Microsoft SQL server. Intellicus is leveraged for report writing functions, and Servigistics has developed its own extraction, transformation and loading tool for accomplishing integration work. The solution has been certified for Powered by SAP NetWeaver and Oracle Fusion Middleware. Servigistics supports multiple currencies and offers comparatively good coverage of international languages, including double-byte support for Asian character sets and localized versions for French, Spanish, German, Brazilian Portuguese, simplified Chinese, Japanese and Korean. The software has been deployed on-premises for perpetual licenses tied to revenue, as well as hosted, based on a term license for monthly and annual usage. On-premises installations have scaled to accommodate large SKU counts ranging from half a million to more than one million tracked items, while hosted implementations have accommodated analytic exercises performed against hundreds of thousands of parts. Servigistics experienced management changes following the acquisition, as well as a measure of turnover in pricing-dedicated staff, but also absorbed a number of acquisitions, making 2009 and 2010 a transition period for the organization. While clients have commented favorably on frequent interactions with the new management team, some have noted difficulties with Servigistics' project teams with resolving issues encountered in implementations. Clients have reported requiring customization coding to satisfy business requirements, which, in certain cases, led to delays in project schedules. While ongoing support services are split between the U.S. and India to deliver 24/7 availability, several clients felt that the quality of services had dipped as a result of support originating from India. The Servigistics pricing organization had been characterized as being more focused on the automotive industry, although the vendor has acquired more experience with the trucking and heavy equipment industries during the past 18 months. This should prove helpful, because the level of competition has been increasing from pure price optimization and management vendors. Servigistics will need to solidify positions in heavy equipment and high tech, and demonstrate traction in parts for facilities and aerospace and defense. While modest relationships have been secured with consultancies like Accenture and IBM, Servigistics should accelerate efforts to expand ties with system integrators to increase available implementation resources. Servigistics receives a Promising rating, because of its vision for parts planning and pricing within the context of a service life cycle management software suite, and experience with very large enterprise pricing initiatives for aftermarket spare parts. However, the vendor's pricing business remains modest, marked by relatively low deal volume. Furthermore, the company has experienced leadership changes, while competition has been intensifying in the parts pricing field. Rating: Promising SignalDemand Founded in 2004, SignalDemand is a small, best-of-breed vendor based in San Francisco, California. It distinguishes itself by marketing price optimization and analytic solutions via a SaaS Publication Date: 29 July 2011/ID Number: G Page 15 of 24

16 delivery model for commodities industries. With a strong focus on the disassembly and marketing of food products, SignalDemand has accumulated domain expertise in managing volatility in costs, harmonizing demand and supply, and optimizing product mixes, including byproducts and product substitutions. Gartner estimates the vendor's revenue approached $6 million at the beginning of 2011 (SignalDemand's fiscal year ends in February). Because SignalDemand is a SaaS vendor and sells access to its software on a subscription basis (typically with multiyear contracts), bookings are often substantially larger than recognized revenue estimates. SignalDemand has concentrated on providing analytic and forecasting capabilities for comparing historical prices on large data volumes; determining trends in price changes based on complex sets of factors, such as available quantities, demand, seasonality and capacity constraints, and generating projections for pricing activities. In response to the recession, SignalDemand modularized its product line to enable clients and prospects to selectively subscribe to solutions encompassing progressively richer functionality: MarketForecaster generates market forecasts utilizing publicly available, third-party market data on commodities PriceForecaster generates forecasts on key select products for a single division or business unit, utilizing internal data, as well as publicly available market data; supports commodity forecast accuracy analysis and includes price list templates PriceManager provides comprehensive historical analysis and forecasting of prices; includes the Forecasting WorkBench module for price simulation; supports volatility and product forecast accuracy analyses and includes templates for price lists PriceOptimizer offers functionality available with PriceForecaster and PriceManager, introduces optimization capabilities to define best possible prices to clear inventory, and includes support for product opportunity analysis, incremental margin analysis and sale variance analysis EnterpriseOptimizer fully functional offering, includes support for forecasting, modeling of demand and costs considerations, projecting prices and product mixes, and quoting features Predominantly written in Java, the software runs on Oracle, although third-party tools written in C++ are embedded. The vendor leverages the General Algebraic Modeling System (GAMS) and solvers like CPLEX and CONOPT for optimization functions. MicroStrategy and Adobe Flex are utilized for reporting and analytics, as well as a free version of R to support modeling and forecasting functionality. SignalDemand licenses technology from Informatica for data extraction and transformation requirements. For user interfaces, Adobe Flex is predominantly employed to improve the usability of applications. Customers have commented positively on the interfaces and the ability to navigate across large datasets for different views of customers and products. SignalDemand markets its offering in the Americas, Europe and Asia/Pacific, and formally targets food processing, foodservice, grocery, chemical and milled products sectors. The vendor has gained the most traction in food processing, and the bulk of its client base is located in North America, although it has made inroads in Asia/Pacific with recent wins. The vendor has a small team of price scientists and staff holding Ph.D.s that clients have rated highly, based on their expertise and responsiveness. SignalDemand has secured relationships with SAP (it joined the EcoHub program, and is a SAP premier PartnerEdge partner) and IBM (under the IBM Consumer Products Industry Framework) to provide solutions specific to commodities industries. SignalDemand has secured a compelling position in the food processing sector as a specialist in pricing analytics and optimization, earning favorable reviews for its expertise and services. Publication Date: 29 July 2011/ID Number: G Page 16 of 24

17 However, SignalDemand is a modest-sized company with a relatively new partner network (albeit with two premier technology providers). While it has elevated overall deal volume from offering more entry-level solutions, the number of deals for the higher value, flagship optimization capabilities remains constrained. Prospects have characterized initial proposals for optimization capabilities as relatively expensive with an annual subscription at times exceeding $1 million a year requiring further justification for projects to proceed. In addition, more proof points are needed to confirm momentum and experience with verticals outside the food processing and food distribution services. SignalDemand has acquired only a limited presence in Europe, although new opportunities are emerging in Asia/Pacific and Latin America. Interestingly, a number of outsourced resources are based in Asia that could prove useful in aiding entry into Asia, including Red-7 in China for the user interface and quality assurance work, and Nuevora in India for segmentation and analysis services. The software supports multiple currencies and Unicode, but is available only in English out of the box, and will likely require localization if further opportunities emerge outside North America. SignalDemand receives a Promising rating based on its success in delivering price optimization solutions via a SaaS model to the food processing and foodservice industries. Having endured the recession, SignalDemand is experiencing a rebound, facing fresh opportunities with product mix and promotion optimization requirements for different commodity sectors, and for new markets in Asia and Latin America. SignalDemand will need to demonstrate that it can effectively sustain business growth, provide service for a growing multinational clientele, ensure scalability and performance of the SaaS infrastructure, and enter in new verticals, such as specialty chemicals. Rating: Promising Vendavo Located in Mountain View, California, Vendavo is privately owned and distinguished in the marketplace by its strategy to solely concentrate on B2B industries and penetrate corporate buying centers through a close relationship with SAP. Founded in 1998, the vendor secured a reseller agreement with SAP in 2005 that helped it build a compelling market position in B2B price optimization and management, with both the SAP installed base and the market overall. In addition, SAP invested in Vendavo through SAP Ventures, supported joint development projects and placed Vendavo's offering on its price list, reselling the software as SAP Price and Margin Management by Vendavo. Gartner estimates that Vendavo generated approximately $50 million in revenue in 2010, not including additional revenue recognized by SAP on the product. Vendavo has stated it is profitable, and is estimated to have at least 100 name brand B2B corporate organizations as clients. Vendavo employs more than 300 full-time staff, and retains onshore and offshore capabilities for product development, configuration work and quality assurance. Offshore resources are located in India and Eastern Europe. The vendor experienced a change in leadership, with the retirement of Alan Crites as CEO and president in 2010 (succeeded by Neil Lustig, who joined Vendavo in 2007). Vendavo has targeted B2B industries that traditionally invested heavily in SAP ERP, including chemicals, manufacturing, high tech, distribution, mill products, medical devices and consumer goods. The vendor has acquired a strong reputation in the chemicals industry, and gained momentum in discrete manufacturing, electronics distribution and high tech. The vendor's product line, Vendavo Enterprise Pricing Suite, is composed of four primary modules: Publication Date: 29 July 2011/ID Number: G Page 17 of 24

18 Price and Margin Analytics for pricing analytics, including in-memory multidimensional analysis, dashboards, visualization, price waterfall representations and causality analysis Price Optimization for segmentation functions and developing optimization models based on Vendavo's Pricing Power and Pricing Risk methodology Price Setting and Administration for price execution functionality for managing and communicating prices and policies on an ongoing basis, including generating and updating price lists and price books Deal Execution for deal management functionality, including deal analytics and approval workflows for sales and sales support staff (such as price desks, bid desks and sales operations) The software is written in Java, supports Java EE standards, runs on Oracle 10g, Oracle 11g and IBM DB2 9.5, and includes in-memory analytics based on 64-bit processing. The vendor has gained experience in supporting deployments for several hundred users and hundreds of thousands of items. For user interfaces, support is provided for HTML, XML, JavaScript, and Adobe Flash, Acrobat and Flex for rich interface environments. Unicode, double-byte character sets, multiple currencies and multiple units of measure are supported, but additional services are required for localizing modules to support multiple languages, which customers active in European and Asian markets have accomplished. Vendavo's products are predominantly deployed as on-premises applications, although a hosted option is available. Vendavo is a SAP Solution Extensions partner, which represents the closest of partnering arrangements sponsored by SAP. Vendavo Enterprise Pricing Suite is certified as Powered by SAP NetWeaver and provides integration to SAP ERP via Vendavo Process Integration Modules. Vendavo originally concentrated on standard integrations with the SAP Sales and Distribution module, as well as with Material Master and Customer Master records and the SAP NetWeaver PI software. Vendavo has extended standard integrations to SAP CRM 7 and SAP Internet Pricing and Configuration (IPC) functionality. Vendavo has established a partnership with BigMachines for delivering pricing analytics and inline guidance to CPQ deployments. Vendavo also has joined salesforce.com's AppExchange program and developed a prebuilt integration to salesforce.com's opportunity management system. Vendavo's software suite stands out for its strong price analytics and deal management capabilities, particularly for exploring data within the context of price waterfalls. Customers have described the analytics as fast and efficient in compiling large amounts of transactional data for in-memory analyses. Causality analytics provide differentiating capabilities that help clients discern underlying reasons for changes in pricing elements over different time periods. Vendavo's focus on deal management proved differentiating, especially support for deal evaluations by deal and price desks for line-item reviews and approval processes. Vendavo has gained experience in extending deal management functionality to sales forces. Vendavo continues to invest in its pricing science, optimization capabilities and related methodology, Pricing Power and Pricing Risk. The underlying technology for Price Optimization was changed in 2010, with Angoss Software's KnowledgeSEEKER substituted for MatLabs. The Pricing Power and Pricing Risk methodology concentrates on helping organizations identify the best prices for particular products or circumstances, taking into account the risks of losing deals. A small, but growing, number of Vendavo clients are employing the optimization capabilities and methodology, while the offering is beginning to gain visibility with prospects. Vendavo's pricing science team remains modest, with less than 10 pricing scientists. Publication Date: 29 July 2011/ID Number: G Page 18 of 24

19 Vendavo's offering had been perceived by prospects at times as more of a toolkit for developing pricing software solutions for complex enterprise; however, the vendor has invested in packaging more content and improving system usability in recent releases. The Vendavo Price Console is available to provide a configuration environment to facilitate the assembly of common objects used by clients, as well as to maintain pricing models, pricing rules and dimensions. The Vendavo Price Console also provides interfaces for managing price setting and execution processes. Vendavo offers a ProfitVision program, which includes a package of best practices, content on metrics and dashboarding, services, and pricing analytics to help clients rapidly gain experience and benefits from its pricing software. This offering is hosted under Vendavo's Pricing Intelligence OnDemand solution that provides clients with their own application instance and database, as well as discretion on upgrade cycles. Vendavo retains one of the largest pools of third-party consulting resources, which includes not only SAP, but also personnel from Accenture, Deloitte and IBM Global Services trained on Vendavo's products. Accenture and Deloitte are Vendavo's leading third-party consulting partners. The total number of third-party consultants capable of delivering billable work for implementations is estimated to exceed 150 consultants. Vendavo receives a Strong Positive rating for its focus and visibility in B2B markets, overall viability and the size of the B2B installed base, relatively large partner network and close relationship with SAP, and product strengths in pricing analytics and deal management. Enterprises should place Vendavo on their shortlists, if they are SAP clients or active in B2B industry segments for chemicals, discrete manufacturing and high tech, and interested in price analytics and deal management. Rating: Strong Positive Vistaar Technologies Founded in 2000, and headquartered in Parsippany, New Jersey, Vistaar Technologies is a small, privately owned software vendor that initially focused on helping product marketing, marketing, sales operations and pricing administration departments with managing product portfolios and associated pricing. Emphasis was placed on enabling closed-loop analysis and business planning functions. Vistaar introduced its software in 2006, and gained notable traction with pricing analytics initiatives. Subsequently, Vistaar honed its focus to offering a software suite targeting pricing and promotion management, to support key planning functions pertaining to price optimization and management, and to deliver relevant pricing insights to sales channels and to track outcomes. Vistaar is estimated to have 200 employees, with more than half located in India, and to have generated more than $11 million in revenue in The vendor markets to high-tech, consumer goods (consumables), manufacturing, services and life sciences industry verticals, and has gained notable traction in the beverage and alcohol industry, while also gaining visibility in software and high-tech hardware companies. It also has gained clients in industrial manufacturing and healthcare products and medical devices. Although Vistaar largely competes in North America, it also has a sales presence and client in Europe, and several clients in India. In the first half of 2011, Vistaar experienced an upturn in business, closing approximately the same number of net new clients that would normally be won in a typical fiscal year. The software offering is called Vistaar and is designed to be a configurable solution that clients can tailor to expose functionality based on preferences for price analytics, planning, managing price lists, supporting bid or deal reviews, and associated workflows. The vendor recently modularized the software to offer four primary functional modules that can be implemented independently on top of the Vistaar platform: Publication Date: 29 July 2011/ID Number: G Page 19 of 24

20 Price & Revenue Planning simulation, what-if analysis and scenario planning capabilities for assessing target markets' customers and competitors, as well as aligning pricing strategies with financial objectives Price & Incentive Setting analytics, segmentation and price optimization functionality for defining optimal prices, promotions and marketing incentives Sales & Channel Management for monitoring pricing performance from multiple perspectives, including territory, customer, channel and sales resources Deal & Contract Management for quoting, deal analysis, deal guidance and what-if analysis functionality Vistaar provides its own in-memory multidimensional analytics, with read/write capabilities, that supports 64-bit processing. The in-memory analytics runs on Oracle 10G, which is certified for supporting the persistence of clients' pricing models, although data can be extracted from sources residing in Teradata and Microsoft SQL Server, as well as from Oracle 10G. The software is written in C++ and Java, with a JavaScript engine and VBA script employed for configuring the solution. The base software also includes the Vistaar Pricing Engine, to support price execution functions. Excel had been available relatively early as a front end that appealed to many end users, such as business analysts, accustomed to working with spreadsheets. Although Unicode is supported, the software is currently available out of the box only in English. Clients have conducted extensive modeling, analytic and forecasting exercises. Recent feedback from references indicated that Vistaar was capable of supporting 20 to 300 users, working with 5,000 to hundreds of thousands of product items. In certain cases, installations have worked with more than 1 terabyte of data in-memory. The software is available for on-premises deployments through purchases of perpetual licenses, as well as through a hosted option that can be subscribed to via annual contracts. Pricing is determined by functionality needed and the number of named users. Price optimization represents a relatively new area for Vistaar, which only invested in its price science team and optimization capabilities during the past three years. The vendor retains approximately 10 price scientists. Statistical capabilities are being extended by leveraging thirdparty tools like Alterian, SAS and SPSS to enhance the sophistication of segmentation, multidimensional analyses and forecasting capabilities. A combination of techniques is being utilized to support different applications of optimization, including configuration and bundling analysis, forecast and demand modeling, promotions and deal margin optimization. The vendor's executive team has received positive comments from references on their oversight on the progress of implementations. Interestingly, Vistaar has been viewed as retaining stronger technical experience with Oracle applications, as opposed to SAP's, which most competitors have focused on. The service partner network remains modest, with one relationship of significant duration with Tata Consultancy Services, as well as relationships with Sogeti and Patni, The feedback from references on Indian-based consultancies had been lukewarm in terms of ability to address sophisticated technical or business pricing concerns. Vistaar Technologies receives a Positive rating for its vision of improving pricing functions spanning marketing, product management and sales operations; success with large firms in deploying price analytics for complex requirements, and for its progress in incorporating new workflow and optimization capabilities. High-tech firms with configured products and consumer goods companies with beverage/alcohol portfolios should investigate Vistaar. Rating: Positive Publication Date: 29 July 2011/ID Number: G Page 20 of 24