Veritas Case Study

This is an individual assignment - not a team assignment.

Put yourself in the person of Paul Sallaberry. You have all the facts in this case study that you need to know - the industry, the competitors, the market position of the two merging companies, the logic for the merger, the financial markets perspective on this decision and the hoped-for long-term strategy for the sales organization. So as Sallaberry, where do you start? You can debate whether the merger was a good strategy or a questionable strategy? Page 10 of the case study discusses the rationale for the merger but remember the valuation of VERITAS fell from $1.6B to a little over $600M based on the announcement. But the merger is done so the question is where you go from here if you are Paul Sallaberry.

As Paul Sallaberry asks, what are the sales strategies of this merger? You must make decisions to make believers out of the financial community that this merger will generate additional value for shareholders. Some options are:

1. You can do nothing and just leave the sales forces separate entities. In the middle market the two sales forces would compete against each other.
2. You can integrate the two forces. All sales reps are integrated. Here you need to consider how to integrate. Do you mix everyone up and let every sales rep from both companies sell every product? Do you segment your salesforce by product offering? How do you handle the management overlap of the two companies? How do you approach the training for the two sales forces? How do you maintain intact the morale of the two sales forces, or does just one organization overtake a second organization?
3. You can integrate the two sales forces but maintain a market segmentation of the sales forces. Veritas reps could handle the high-end customers and Seagate reps could handle the low-end two-tier distribution channel. Who would handle the mid- range? How would you structure the OEM and VAR segments? How do you handle the compensation differences? How to you handle the management span of control differences. How are the sales profiles integrated?
4. You could just merge the two sales forces, put the best people in the job and eliminate the redundancies. The end product here is one sales force, one sales organization which will be comprised of mostly Veritas's sales reps and managers. Issues begin with the sales reps.Some considerations as part of this integration are:
   • Sales Culture - Win at all cost individual vs. a team approach where 70% of the performance is basically guaranteed. What do you do here?
   • Organization - You need to protect the two-tier low-end organization and you must provide for migration of accounts from small account applications to large account applications. Make sure to consider all market differences. You want an environment of cooperation and not competition. How would you structure your organization?
   • Compensation levels at target performance and compensation solutions are different. How do you get these two organizations to work together with all market segments? Can you have different target incomes for the organization you proposed. You don't want conflict and competition among your salesforces. The question is, there are compensation solutions but most important can you afford the solution? You are not expected to make compensation plan. Remember this is a sales call on Paul. Sell him the concepts and the specific recommendations. Implementation (creating the actual plan) is part of what he would spend $1M to complete.
   • Management span of control and competency. Who does what? Are there cost opportunities here?
   • Cost savings and morale. From a sales perspective, what are the areas that should be considered?

The Assignment

This is an individual assignment - not a team assignment.

You are the salesperson for the University Consulting Corporation. What is the best option for integrating these two sales forces? Sallaberry is worried about integration issues which are highlighted above. Present a solution that you would propose as a consultant to Sallaberry and then sell Sallaberry your solution. Sallaberry is the customer, and you are the sales rep. You must make value here and get Sallaberry to want to employ University Consulting to help him with this merger of two sales forces. You can assume this consulting contract is for $1 million $$. You can choose as your foundation one of the four options listed above or choose a new option. You need to address the bullet points above to make a complete solution for Sallaberry.

You will need to weigh the risk as Sallaberry pushes forward to demonstrate to the VERITAS shareholders that this acquisition was a wise move.

Please compare your responses in Power Point slide format - 10 slides or less.

I find this format focuses on your thought process and involves less interpretation on my part of your writing style. With the PPT slides, your sales presentation will come to life. In addition to the sales presentation in PPT, I would like you to outline the sales call selling points that you would use to present the sales presentation to Sallaberry. Please use the notes section of the PPT slides to fill sales call outline. So, I can look at your slides and in the notes section I can review your thought process on the value proposition and the sales strategy as you add value to influence Paul's decision. I do not want to see lots of words in the note section of each slide. I am looking for the bullet points that reflect your mental checklist of what you are trying to accomplish with Paul. Your performance in this case will reflect the value you received from the lectures, the videos, the class discussions, and the readings assigned. So, to reinforce my object with this case, the PPT is what you are selling to Sallaberry, and the notes section reflects your thoughts on what you are trying to accomplish on each slide. Think of the bullet notes as a mental check list to use when you are selling Paul. For instance, a reminder to ask probing questions, to confirm and your strategy to create value. Each slide has an objective so in the note section tell me why it is there. You can assume that we all know the foundation information on the case so there is no need to recreate that. You are a consultant, and you are trying to sell Paul your solution so he will sign a contract with you, so don't forget to close.

MERGER RATIONALE Product and Channel Compatibility Over a cup of coffee, Sallaberry recalled the rationale behind the decision to merge VERlTAS with Seagate's NSMG: We were in a tornado. The data management industry was about to explode with growth. As a result, lots of players were in a urry to enter the market, so the key to long term success was to expand sales to penetrate the growing market as quickly as possible. It was all about market penetration and establishing a strong market presence. [11 such an environment, VERITAS' strategy was to move quickly to expand its sales capabilities and increase market share. The company needed to target not only the high end, where it already had established products, customers, and distribution channels, but all segments of the market. Expansion into new market segments would require not only Windows-based products, but also the 2-tier reseller and distribution network through which customers bought low-end products. Sallaberry estimated that it would take VERJTAS at least three years to build Windows-based products and develop the accompanying sales channels from scratchassuming that everything went according to plan. Given that VERJTAS knew next to nothing about this market segment or its products, chances were that the transition would take even longer than three years. By that time, the battle for dominance of the data storage management market already would have been decided. \"Our worst enemy,\" concluded Sallaberry, \"was time.\" Ecosystem Sallaberry described the dynamics of the data storage management software industry as follows: The backup software industry was like an ecosystem, with a food supply and creatures that eat the food. VERITAS fed at the high end of the food chain, by selling high-end, enterprise-wide soware for UNIX platforms to large companies. Seagate fed at the low end of the food chain, by selling low-end Windows NT products to SOHOs. Each company was fat, happy, and well established in its own 'stratosphere,' but both companies were stuck in their respective feeding grounds. [f Seagate tried to move up the food chain to sell higher-end products, their products could not compete against established players like VERITAS and Legato. Plus, other companies would then come in steal the low-end market share to which Seagate NSMG was not paying attention. And VERITAS just didn't have time to build products and distribution channels required to feed from the low end of the food chain. Both VERITAS and Seagate NSMG needed to offer a complete, diverse product line in order to expand into new \"feeding grounds\" and become long-term players in the expanding data storage management software industry. However, neither company had the time or the opportunity to build new products or channels from the ground up. This scenario made VERITAS and Seagate's NSMG ideal merger partner candidates in terms of both complementary products and distribution channels. They each had what the other needed. Gaining Access to Emerging Companies as Customers Gaining access to the low-end market segment would do more than provide VERITAS with an additional revenue stream Over time, access to low-end customers would also enhance VERlTAS' market position at the high end of the market, in addition to reducing opportunities for the competition. It was a classic case of \"one plus one equals three.\" Many small, emerging companies purchased Windows-based data storage management software products. If VERlTAS could capture these companies as low-end customers when they typically bought Seagate's products, it stood to reason thatprovided they were happy customersthey would stick with VERITAS solutions as they grew in size and migrated to high-end products. It would be much easier to upgrade a happy customer from a VERlTAS Windows product to a VERlTAS UNIX product than to migrate a similar company from a competitor's software to a VERlTAS solution. In addition, it was much cheaper for VERITAS to win customers when they were small than when they were shopping for high-end enterprise solutions through the direct sales force. Low- end products purchased through the distribution channels were bought; they were not sold. As a result, VERITAS could penetrate an emerging account that could later be up-sold to more expensive solutions without wining, dining, and consulting with the customer. Gaining Better Access to Enterprise Customers Another key strategic driver behind the merger of VERITAS and the Seagate NSMG was that many large companies already used Seagate's Backup Exec within their departments. Before 1998, the decision to buy storage management software was often made on a department-by- department basis by IT personnel. As a result, the purchasing of products such as Seagate's Backup Exec was fragmented; it was not an organized or strategic decision for the entire enterprise. But the trend was now changing. As data storage needs exploded, more CIOs were taking an active role in coordinating the purchase of data storage management software for their enterprises. More than ever before, the key for a vendor to capture lucrative new business was to get in front of a company's C10. A CIO might ask, \"Why should I see VERITAS instead of Legato or Computer Associates for an enterprise-wide storage solution?\" After the merger of Seagate NSMG and VERITAS, the answer would be, \"Because you are already a happy VERlTAS customer. You currently use our Backup Exec software within your departments; now we can upgrade your software to NetBackup smoothly and efciently. We can offer everything to you.\" With a full spectrum of Windows and UNIX products, VERITAS would be able to act as more than a software vendor. The company could take on the role of corporate data management consultant, offering strategic solutions to tackle the complex and evolving data needs of multinational, multiplatform companies. \fVERJTAS district manager than to a VERITAS regional manager in terms of both responsibility and revenues. Julian and Sallaberry both agreed that VERJTAS managers were much more experienced in the direct sales model than their Seagate counterparts. However, they also felt that incorporating no Seagate sales managers into direct sales roles would damage the morale of the Seagate reps. [n a recent meeting, Leslie had told Sallaberry that there was broad agreement that Michael Sotnick was not only Seagate's best sales manager, but also a positive role model well respected by his Seagate peers. Beyond Sotnick, though, Sallaberry was uncertain as to the performance levels of the rest of the Seagate sales managers. International management overlaps also existed and were exacerbated by cultural differences and geographic distances from VERJTAS and Seagate corporate headquarters in California. Offices in France and Japan posed the two biggest challenges. According to Sotnick, \"The two situations were volatile, involving territorial managers who were less than willing to embrace change.\" For example, when Sallaberry moved the two France sales teams into the same building to reduce costs while he tackled the question of global sales force integration, both the VERJTAS and Seagate country sales managers used a measuring tape to make sure that his counterpart did not have a bigger ofce. In Japan, the colocating of the VERITAS and Seagate sales teams did not fare much better. The sales ofces of both companies were located near one another, and both ofces had enough excess space to house both sales teams. As a result, it made nancial sense to close down one of the two ofces. Yet a bitter dispute over which of the two groups would move into the other's ofce building erupted. Unhappy Japanese employees inundated senior management in the U.S. with emails, and Sotnick had to travel to Japan to try and sort out the unrest. WEIGHING INTEGRATION OPTIONS Pacing his ofce, Sallaberry tried to organize his most pressing thoughts. After discussing the situation with him, the consultants were composing a set of integration proposals. He had to be ready to make some rm decisions on how to structure his new sales force. Sallaberry knew that any effort to integrate the VERITAS and Seagate NSMG sales forces carried risks. However, some form of sales force integration seemed necessary to accomplish his goals to become the trusted supplier of data storage management solutions to Global 2000 and emerging companies alike, to establish a \"refuse to lose\" sales culture, and to create harmony both within the sales force and between the sales force and channel partners. While VERITAS and Seagate each had world-class brand names within their respective segments, the success of the merger depended on synergy. The new sales force needed to marry the intensity and closing skill of pre-merger VERJTAS with the operational savvy of pre-merger Seagate. Yet Sallaberry realized that he had to achieve this balance of strengths in a way that minimized potential conflicts. For example, if he had all the VERJTAS reps focus on direct sales and all the Seagate reps focus on 2-tier channel sales, what would happen in the case of a lucrative customer, like Boeing, who could be served by either channel? Sallaberry imagined factions of his own sales team competing against each other for VERITAS 1999 (A): Integrating Safes Forces SMIZ'QA p. 15 deals. It would be a shame and a nancial travesty if two groups of VERITAS reps disparaged each other in the marketplace. Sallaberry also was wary of alienating Seagate's channel partners, who were critical to maintaining the company's sales momentum. These partners, especially the larger resellers and distributors, were already worried that the VERITAS direct sales force would soon begin to siphon sales of Seagate products away from the 2-tier channel. He needed to make a statement to the Seagate NSMG channel partners that their business was safe and valued. Lastly, whatever nal structure the new sales force took had to address the culture, compensation, and duplicate management challenges he faced. Every member of his team needed to know their role, share a positive working relationship with their peers, and be motivated to close sales. What to Do? In addition to nalizing the planned structure of the new sales force, Sallaberry had to decide how to roll out the changes. He debated the merits of a multi-phase integration plan versus making all of his proposed changes at once, as well as the possibility of rolling out the nalized structure one geography at a time. Sallaberry knew that he needed to implement a long-term solution, designed to take VERlTAS from $400 million to several billion dollars in sales over the next ve years. The sales goals were aggressive and the current situation was complicated. Was there an easy way to do this? Or would less complicated solutions not be sustainable in the long term? In the end, Sallaberry's instincts and experience told him that the simpler the plan, the better. Complexity increased the risk of poor implementation and execution, which could be disastrous to VERITAS. He needed to nd a way to structure the sales force into two or three clearly dened units. These units needed to use high-touch, relationship-driven sales tactics to service high-end customers; have broad-based sales capabilities to serve the wide range of mid-level customers; and leverage economical and efcient channels to sell to low-end customers. Unfortunately, there was no room for error. He had to be right the st time, and the plan had to be implemented without missing any short-term revenue targets.