 
|
|
| The Steps in the System iWant Business Case | ||||||||||
| One: Gauge the size of the AS/400, iSeries, and System i5 installed base | ||||||||||
| Estimates vary, of course, so here is a spread to cover three different scenarios: | ||||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | ||||||||
| Customers | 200,000 | 215,000 | 225,000 | |||||||
| Installed Base of Servers | 450,000 | 500,000 | 550,000 | |||||||
| Average Servers per Site | 2.25 | 2.33 | 2.44 | |||||||
| Two: Calculate how many machines get distributed if everyone moves | ||||||||||
| You can change the percentages in BLUE BOLD below to change the distribution of machines; they will automatically change in the other scenarios. | ||||||||||
| iWant 520 | 427,500 | 95% | 475,000 | 95% | 522,500 | 95% | ||||
| iWant 550 | 18,000 | 4% | 20,000 | 4% | 22,000 | 4% | ||||
| iWant 570 | 4,500 | 1% | 5,000 | 1% | 5,500 | 1% | ||||
| Three: Reckon how many System iWant machines are bought and how many are leased | ||||||||||
| I will assume that 35 percent get bought and 65 percent get leased. You can change the BLUE BOLD percentages below and it will change them in the other scenarios. | ||||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | ||||||||
| System iWant to Buy 520 | 149,625 | 35% | 166,250 | 35% | 182,875 | 35% | ||||
| System iWant to Buy 550 | 6,300 | 35% | 7,000 | 35% | 7,700 | 35% | ||||
| System iWant to Buy 570 | 1,575 | 35% | 1,750 | 35% | 1,925 | 35% | ||||
| 157,500 | 175,000 | 192,500 | ||||||||
| System iWant to Lease 520 | 277,875 | 65% | 308,750 | 65% | 339,625 | 65% | ||||
| System iWant to Lease 550 | 11,700 | 65% | 13,000 | 65% | 14,300 | 65% | ||||
| System iWant to Lease 570 | 2,925 | 65% | 3,250 | 65% | 3,575 | 65% | ||||
| 292,500 | 325,000 | 357,500 | ||||||||
| Total Machines | 450,000 | 500,000 | 550,000 | |||||||
| Four: Now, figure out when people will move to the new line | ||||||||||
| The goal would be to get people to move very quickly, but installed bases are very slow about moving. | ||||||||||
| Again, you can change the percentages in BLUE BOLD if you don't like my estimates. This distribution is used for both buy and lease customers. | ||||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | ||||||||
| Year 1 | 67,500 | 15% | 75,000 | 15% | 82,500 | 15% | ||||
| Year 2 | 112,500 | 25% | 125,000 | 25% | 137,500 | 25% | ||||
| Year 3 | 157,500 | 35% | 175,000 | 35% | 192,500 | 35% | ||||
| Year 4 | 67,500 | 15% | 75,000 | 15% | 82,500 | 15% | ||||
| Year 5 | 45,000 | 10% | 50,000 | 10% | 55,000 | 10% | ||||
| 450,000 | 500,000 | 550,000 | ||||||||
| Five: Set an an average price for bought and leased machines | ||||||||||
| Leases are 36-month, $1 payout leases at 5 percent interest; annual payments, including interest, shown: | ||||||||||
| Averages are derived from the System iWant table from last week's issue using a mathematical average across all machines. | ||||||||||
| I am depreciating the acquisition of a System iWant in three years. | ||||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | ||||||||
| Average 3-Year Cost | Average Users | Average 3-Year Cost | Average Users | Average 3-Year Cost | Average Users | |||||
| System iWant to Buy 520 | $22,658 | 34 | $22,658 | 34 | $22,658 | 34 | ||||
| System iWant to Buy 550 | $45,214 | 60 | $45,214 | 60 | $45,214 | 60 | ||||
| System iWant to Buy 570 | $139,802 | 172 | $139,802 | 172 | $139,802 | 172 | ||||
| System iWant to Lease 520 | $8,178 | 34 | $8,178 | 34 | $8,178 | 34 | ||||
| System iWant to Lease 550 | $16,261 | 60 | $16,261 | 60 | $16,261 | 60 | ||||
| System iWant to Lease 570 | $50,280 | 172 | $50,280 | 172 | $50,280 | 172 | ||||
| Six: Multiply it all out to build a sales matrix | ||||||||||
| I love doing the math, man. | ||||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | ||||||||
| BUY | Machines | Machines | Machines | Scenario 1 | Scenario 2 | Scenario 3 | ||||
| System iWant to Buy 520 | Revenue | Sold | Revenue | Sold | Revenue | Sold | Users | Users | Users | |
| Year 1 | $508,537,894 | 22,444 | $565,042,104 | 24,938 | $621,546,315 | 27,431 | 763,088 | 847,875 | 932,663 | |
| Year 2 | $847,563,157 | 37,406 | $941,736,841 | 41,563 | $1,035,910,525 | 45,719 | 1,271,813 | 1,413,125 | 1,554,438 | |
| Year 3 | $1,186,588,419 | 52,369 | $1,318,431,577 | 58,188 | $1,450,274,735 | 64,006 | 1,780,538 | 1,978,375 | 2,176,213 | |
| Year 4 | $508,537,894 | 22,444 | $565,042,104 | 24,938 | $621,546,315 | 27,431 | 763,088 | 847,875 | 932,663 | |
| Year 5 | $339,025,263 | 14,963 | $376,694,736 | 16,625 | $414,364,210 | 18,288 | 508,725 | 565,250 | 621,775 | |
| System iWant to Buy 550 | ||||||||||
| Year 1 | $42,727,504 | 945 | $47,475,005 | 1,050 | $52,222,505 | 1,155 | 56,700 | 63,000 | 69,300 | |
| Year 2 | $71,212,507 | 1,575 | $79,125,008 | 1,750 | $87,037,508 | 1,925 | 94,500 | 105,000 | 115,500 | |
| Year 3 | $99,697,509 | 2,205 | $110,775,011 | 2,450 | $121,852,512 | 2,695 | 132,300 | 147,000 | 161,700 | |
| Year 4 | $42,727,504 | 945 | $47,475,005 | 1,050 | $52,222,505 | 1,155 | 56,700 | 63,000 | 69,300 | |
| Year 5 | $28,485,003 | 630 | $31,650,003 | 700 | $34,815,003 | 770 | 37,800 | 42,000 | 46,200 | |
| System iWant to Buy 570 | ||||||||||
| Year 1 | $33,028,263 | 236 | $36,698,070 | 263 | $40,367,877 | 289 | 40,635 | 45,150 | 49,665 | |
| Year 2 | $55,047,104 | 394 | $61,163,449 | 438 | $67,279,794 | 481 | 67,725 | 75,250 | 82,775 | |
| Year 3 | $77,065,946 | 551 | $85,628,829 | 613 | $94,191,712 | 674 | 94,815 | 105,350 | 115,885 | |
| Year 4 | $33,028,263 | 236 | $36,698,070 | 263 | $40,367,877 | 289 | 40,635 | 45,150 | 49,665 | |
| Year 5 | $22,018,842 | 158 | $24,465,380 | 175 | $26,911,918 | 193 | 27,090 | 30,100 | 33,110 | |
| LEASE | Annual | Cumulative | Annual | Cumulative | Annual | Cumulative | ||||
| System iWant to Lease 520 | Revenue | Machines | Revenue | Machines | Revenue | Machines | ||||
| Year 1 | $113,629,757 | 41,681 | $126,255,285 | 46,313 | $138,880,814 | 50,944 | 1,417,163 | 1,574,625 | 1,732,088 | |
| Year 2 | $416,642,441 | 111,150 | $462,936,045 | 123,500 | $509,229,650 | 135,850 | 3,779,100 | 4,199,000 | 4,618,900 | |
| Year 3 | $984,791,223 | 208,406 | $1,094,212,470 | 231,563 | $1,203,633,717 | 254,719 | 7,085,813 | 7,873,125 | 8,660,438 | |
| Year 4 | $1,666,569,762 | 250,088 | $1,851,744,180 | 277,875 | $2,036,918,598 | 305,663 | 8,502,975 | 9,447,750 | 10,392,525 | |
| Year 5 | $2,424,101,472 | 277,875 | $2,693,446,080 | 308,750 | $2,962,790,688 | 339,625 | 9,447,750 | 10,497,500 | 11,547,250 | |
| System iWant to Lease 550 | ||||||||||
| Year 1 | $9,512,708 | 1,755 | $10,569,676 | 1,950 | $11,626,644 | 2,145 | 105,300 | 117,000 | 128,700 | |
| Year 2 | $34,879,931 | 4,680 | $38,755,479 | 5,200 | $42,631,027 | 5,720 | 280,800 | 312,000 | 343,200 | |
| Year 3 | $82,443,473 | 8,775 | $91,603,859 | 9,750 | $100,764,245 | 10,725 | 526,500 | 585,000 | 643,500 | |
| Year 4 | $139,519,723 | 10,530 | $155,021,915 | 11,700 | $170,524,106 | 12,870 | 631,800 | 702,000 | 772,200 | |
| Year 5 | $202,937,779 | 11,700 | $225,486,421 | 13,000 | $248,035,063 | 14,300 | 702,000 | 780,000 | 858,000 | |
| System iWant to Lease 570 | ||||||||||
| Year 1 | $7,353,399 | 439 | $8,170,443 | 488 | $8,987,487 | 536 | 75,465 | 83,850 | 92,235 | |
| Year 2 | $26,962,462 | 1,170 | $29,958,291 | 1,300 | $32,954,121 | 1,430 | 201,240 | 223,600 | 245,960 | |
| Year 3 | $63,729,456 | 2,194 | $70,810,507 | 2,438 | $77,891,558 | 2,681 | 377,325 | 419,250 | 461,175 | |
| Year 4 | $107,849,849 | 2,633 | $119,833,166 | 2,925 | $131,816,482 | 3,218 | 452,790 | 503,100 | 553,410 | |
| Year 5 | $156,872,508 | 2,925 | $174,302,787 | 3,250 | $191,733,065 | 3,575 | 503,100 | 559,000 | 614,900 | |
| Seven: Add it all up--machines, time, and price | ||||||||||
| This is just the revenue to move the installed base to the System iWant. I assume that those leasing renewed their leases through the five year term. | Year 5 Stats | |||||||||
| Scenario 1 | Scenario 2 | Scenario 3 | Scenario 1 | Scenario 2 | Scenario 3 | |||||
| Annual | Cumulative | Annual | Cumulative | Annual | Cumulative | |||||
| Revenue | Machines | Revenue | Machines | Revenue | Machines | Users Buy | Users Buy | Users Buy | ||
| Year 1 | $714,789,524 | 67,500 | $794,210,583 | 75,000 | $873,631,641 | 82,500 | 5,736,150 | 6,373,500 | 7,010,850 | |
| Year 2 | $1,452,307,601 | 180,000 | $1,613,675,113 | 200,000 | $1,775,042,624 | 220,000 | Users Lease | Users Lease | Users Lease | |
| Year 3 | $2,494,316,027 | 337,500 | $2,771,462,252 | 375,000 | $3,048,608,477 | 412,500 | 10,652,850 | 11,836,500 | 13,020,150 | |
| Year 4 | $2,498,232,995 | 405,000 | $2,775,814,439 | 450,000 | $3,053,395,883 | 495,000 | Total Users | Total Users | Total Users | |
| Year 5 | $3,173,440,866 | 450,000 | $3,526,045,407 | 500,000 | $3,878,649,948 | 550,000 | 16,389,000 | 18,210,000 | 20,031,000 | |
| Eight: Add in growth inside the existing base and add new customers; then add maintenance for acquired machines and other software sales | ||||||||||
| It would take a lot of time to reckon all of this. Clearly, it would be a lot of money. I have made my point. | ||||||||||
