Buyer behaviour issues

Installing IDM enterprise-wide confronted companies with complex issues. These related to defining their needs across the organization, choosing the right mix of products and technologies, selecting suppliers who would be around in five years' time to support these solutions and ensuring they could be integrated into the existing infrastructure.

Qumas estimated that organizations were spending approximately US$4-5 billion annually on FDA compliance and related overheads. Digitized integrated document control presented a cost-effective solution to their document management problems. The potential for long-term income from a customer was significant, with licence extensions, implementation consultancy and an annual recurring licence fee for use of the product. In addition, a sale into an individual site opened the opportunity to roll out the product into the other sites in the client company. Typically the first sale into a client site was valued at US$150,000, plus an annual software licence fee (around 20 per cent of the original sale value).

The USA was the most critical arena in the Qumas drive for market dominance. It constituted over 70 per cent of the regulated industry with more than 90,000 FDA-regulated sites. Further market analysis identified more than 11,000 potential client sites for Qumas in the USA. It was also a rapidly growing market. The primary factors driving market growth were:

• the move by regulatory bodies to cover wider areas and products

• stricter environmental requirements, leading to ever more regulatory legislation

• pressure from the FDA to move towards electronic documentation.

In addition, the increasing imperative of time to market in many of the regulated sectors was focusing attention on speeding the development and approval processes. IDM had obvious potential to contribute to this. This level of spend, coupled with the fear and cost of failure, ensured a significant incentive for users to look at strategies for reducing this cost and increasing the level of compliance.

Many US pharmaceutical companies had relocated their manufacturing facilities outside the States. This move was an attempt to benefit from attractive labour costs and tax regimes, and allow easy access to new markets prior to exporting back to the USA. The company's market research indicated that there were an additional 15,000 potential sites located outside the USA. In gaining major market share in the USA, Qumas would automatically win market share in other geographical locations. This was because most global manufacturing facilities for the FDA-regulated sector were part of US corporations. Here also was where the FDA maintained stringent control with the most frequent policing of its compliance regulations.

However, international expansion highlighted to customers the need for interoperability among the various document management products. Customers did not want to have a manufacturing plant in Ireland using one system while an R&D facility in California used another. Without standards and standardization, organizations would be creating 'islands' of information.

This goal - to have a homogenous corporate standard-was not entirely new. Some customers always had this objective and it was this need that competitors like Documentum and the other enterprise-wide providers had been reacting to with their offerings. Documentum's sales strategy reflected this; unlike Qumas, it had tended to adopt a top-down approach, sales pitches were more likely to be made at client HQ to the directors of the IT department. Qumas, on the other hand, had been visiting quality assurance managers at plant level. The strength of Qumas's approach was that it was meeting customers with very definite problems, and was offering them immediate solutions. For Qumas, this had compared favourably with the top-down strategy of convincing customers of the long-term strategic benefits of IDM. Qumas was, as a result, operating on a comparatively shorter sales cycle. Recently, however, it was coming up against IT managers who were vetoing the Qumas option as it failed to comply with the increasing adoption of homogenous corporate standards. Customers were also pushing the industry to adopt a standard for communication between their systems.