business overview & proposed strategy bruce cardinal gale group corporate division may 21, 1999...

Business Overview &Proposed Strategy

Bruce CardinalGale Group Corporate DivisionMay 21, 1999

Confidential and Proprietary. Do Not Distribute.

Corporate Division Overview

ComputerSelect Results

The IT Market Opportunity

Sierra Concept Overview

Sierra Plan

Next Steps

Agenda

Leverages current assets• IT customer base• ComputerSelect brand• Product and company content

• Market dynamics attractive• Fastest growing U.S. industry• High rate of change increases demand for

information• High risks associated with wrong decisions

• New opportunity for Thomson

Why IT Vertical?

Corporate Division

0

2,000

4,000

6,000

8,000

10,000

12,000

Dec-95 Dec-96 Dec-97 Dec-98 Mar-99

CS WebComputerSelect CD

Changes in Customer Base

9,710

8,593

6,178

4,781 4,391

• The number of customers is dropping as we target higher dollar accounts and spend less effort on smaller CD sales

ComputerSelect

0%

20%

40%

60%

80%

100%

Per

cent

age

of T

otal

Rev

enue

s

The Gale

Corporate Division

generated

revenues of $40

million in 1998Resellers

57%

ComputerSelect25%

InSite18%

$40 Million

Lines of Business

Corporate Division

Changes in Revenue Base

$000's CS CD CS Web

Total Contract

Value

Total Contract Value 1/98 11,711 - 11,711

Addition of New Customers 947 792 1,739

Loss of Customers (5,143) (12) (5,155)

Migration of CS CD to CS Web (795) 795 -

Existing Customers Upgrade 382 334 716

Existing Customers Downgrade (904) 235 (669)

Total Contract Value 3/99 6,198 2,144 8,342

• Loss of CS CD customers is major reason for revenue decline• CS Web is growing at an increasing rate

ComputerSelect

0

5

10

15

20

25

Dec-95 Dec-96 Dec-97 Dec-98 Mar-99$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000CS Total Contract Value

Average Contract Value

• Average revenue per customer is rising as the mix shifts to more web sales

Sales Trends

ComputerSelect

• Majority of CS Web sales are small installations . . .1 to 3 concurrent users

Breakdown of CS Web Accounts

45%

19%

5%

31%

6 or MoreConcurrent$14,395+

Standalone$1,550

1 Concurrent$2,995

3 Concurrent$7,595

ComputerSelect

Source: OES 1996 Employment Statistics

Outsell Jan. 1999

Target Market SizeTarget Market Size

Number ofProfessionalsSpending ($M)

HighTechnology

OtherIndustries

Total U.S.Market %

Marketing 69,000$690

N/A 69,000 4%42%

IT Professionals 596,000$954

1,043,000 1,639,000 96%58%

Total 665,000$1,643

1,043,000 1,708,000 100%100%

The IT Market Opportunity

Research and Advisory Services

The IT Market Opportunity

Company1997 EstRevenue

($M)

1998 EstRevenue

($M)MarketShare

AnnualGrowth

Rate

Gartner $511 $642 65% 26%

Forrester $40 $62 6% 52%

META $51 $73 7% 42%

Giga $20 $39 4% 94%

Yankee$18

$19 2% 6%

IDC $100 $115 12% 15%

IntelliQuest $37 $46 5% 25%

Total $777 $957 100% 28%

Company1997 EstRevenue

($M)

1998 Est.Revenue

($M)MarketShare

AnnualGrowth

Rate

IDG 1,876 2,060 54% 9.8%

CMP1 474 478 12% .8%

Miller-Freeman 192 194 5% 1.0%

Ziff-Davis 1,153 1,108 29% -4.0%

Total 3,696 3,840 100% 3.9%

Major IT Publications

1CMP acquired by Miller-Freeman in April 1999

The IT Market Opportunity

New Content •Customer Experience

• Market Research Panel (IntelliQuest)

• Expert Opinion• Licensed content (Giga or Gartner)

• Training Resource Center• Original content

• Links to CBT sites and Amazon.com

• Bug Reports and Alerts• Original content

• Cambridge/IT Group support

• Web Search Results• Aeneid technology

• Integration of Indices

• Computer Database and DataSources

• Outside experts (Giga/Gartner)

• Expanded journal coverage (80+)

Content Sources

Existing Content• Computer periodicals (100+)

• DataSources product data

• Indexing and term mapping from

Computer Periodicals Database

and DataSources

Project Sierra

$2,500Price %

$5,000Price %

Revenue ($M) 1 32.8 100% 65.6 100%

Publisher Royalties 4.9 15% 9.8 15%

IT Research License Fees 5.1 16% 10.2 16%

Sales Staff and Commissions 6.8 21% 12.8 22%

Gross Margin 16.0 49% 32.8 48%

Customer Experience Panel 1.7 5% 1.7 2%

DataSources Maintenance 0.4 1% 0.4 1%

Training and Bug Report Maintenance 0.6 2% 0.6 1%

Technology & Customer Support 1.3 4% 1.3 3%

Marketing 1.7 5% 1.7 3%

Allocated Division Overhead 5.0 15% 5.0 8%

Total Fixed Costs 10.7 33% 10.7 14%

Contribution to Gale Group Overhead 5.3 16% 22.1 34%

1Assumes 4% penetration of IT user market

Economic Model

Project Sierra

Announce InSite transfer May 24• Re-focus sales force on ComputerSelectPresent MBDI June 7Further validate market opportunity June 15• Market analysis and research• ComputerSelect customer feedback• OCTO and Thomson CIOsVerify cost model June 30• Negotiate panel and IT analyst deals• Clarify internal editorial/development costsNegotiate ZDNet partnership June 30Commence implementation June 30• Create phased development plan• Implement Phase 1

Next Steps

Project Sierra

New Technology needed by organization

Technology Purchasing Process

Research and identify technology and vendor options

Research using third party data Search Web for vendor sites and user groups Network with peers

New Technology needed by organization

Technology Purchasing Process

Create “short” list(3 - 5 Vendors)

Conduct research on vendors Compare products (specs, integration)

Research cost-of-ownership issues Evaluate aftersale support

Research and identify technology and vendor options

Technology Purchasing Process

New Technology needed by organization

Obtain customer references Look for bug information Refine cost-of-installation model Investigate and purchase training

Select vendor anddeploy technology

Technology Purchasing Process

Create “short” list(3 - 5 Vendors)

Research and identify technology and vendor options

New Technology needed by organization

Maintain new technology

Follow developments at vendor Monitor bug alerts Evaluate potential upgradesObtain ongoing training

Create “short” list(3 - 5 Vendors)

Research and identify technology and vendor options

Select vendor anddeploy technology

Technology Purchasing Process

Select vendor anddeploy technology

Create “short” list(3 - 5 Vendors)

Research and identify technology and vendor options

New Technology needed by organization

PROJECTSIERRA

Technology Purchasing Process

Maintain new technology

Select vendor anddeploy technology

Create “short” list(3 - 5 Vendors)

Research and identify technology and vendor options

New Technology needed by organization