Microsoft SQL Server 2008 R2Partner Solution Case Study

Customers Achieve Recurring Profits Through Intelligence and Execution in Pricing

OverviewCountry or Region: United StatesIndustry: Software engineering

Partner ProfilePROS provides business-to-business pricing and margin optimization software, specializing in price analytics, execution, and optimization. Based in Houston, Texas, PROS has 350 employees.

Business SituationPROS wanted to help manufacturers and distributors improve profitability by making smarter pricing decisions using a solution with an attractive user interface and impressive cost/performance ratio.

SolutionPROS worked with Microsoft to integrate PROS Pricing Solution Suite with Microsoft SQL Server 2008 R2, Windows Server 2008 R2, and other widely used Microsoft products.

Benefits Recurring profits Smarter pricing decisions Reduced risks High user adoption rates Outstanding cost/performance ratios

“When we performed a benchmark study using PROS Scientific Analytics in a real customer scenario, SQL Server 2008 R2 showed an average of 57 percent better user response time than Oracle.”

John Salch, Director of Product Development, PROS

Companies must address complex pricing issues, involving increasingly sophisticated trading partners, to improve profitability in business-to-business (B2B) transactions. Successful pricing software needs to deliver meaningful business intelligence to front-line sellers in real time, integrate with existing tools and business processes, and achieve high user adoption rates. To address these challenges PROS integrated its pricing optimization software with Microsoft SQL Server 2008 R2, Windows Server 2008 R2, Microsoft Office SharePoint Server 2007, and the Microsoft Office 2007 suites. Using the integrated solution, customers make more-informed, less-risky pricing decisions, with high user adoption and outstanding software cost/performance ratios. The result: higher, recurring profits—in one case, as high as 280 basis points (2.8%).

SituationPROS offers pricing and margin optimization software solutions that use advanced pricing technology, including price analytics, price optimization, and price and deal execution. Founded in 1985 and headquartered in Houston, Texas, PROS employs 350 people at locations around the globe. In 2009 the company had revenues of U.S.$69 million, from more than 300 systems implemented across 45 countries at more than 100 customer companies.

“Many manufacturers and distributors operate on very narrow margins across hundreds of thousands of transactions,” says Andres Reiner, Executive Vice President for Product and Marketing at PROS. “And too often they don’t have the information they need to make smart and confident pricing decisions that impact margins. That’s where PROS comes in”

Problems faced by PROS customers can include a lack of knowledge about prices and competitors, pressure to lower prices in a recessionary environment, rapidly changing costs of inputs, and disparate data systems that fail to provide an accurate view of profitability. These problems result in lost revenues and eroding margins due to the lack of actionable insights into exactly how to correct pricing practices.

Many sellers set prices based on internal costs using specialized or improvised processes that are often predicated on spreadsheets. “Pricing excellence is all about setting the right price for the right customer on every transaction, and doing so consistently across the company. This is

nearly impossible to do with spreadsheets and manual processes,” says John Salch, Director of Product Development at PROS.

One result is that pricing activities end up encompassing a series of risks. For example, some companies have made headlines by unintentionally posting incorrect prices on their websites, thus generating huge losses, as well as risking lawsuits or governmental interference. Others have lost money because they lacked the visibility to understand that their intended price was in fact lower than their production cost.

But the less obvious risks are equally important. Some companies set too high a price and lose important customers. Others set too low a price and, although they do meet production costs, they fail to garner as much profit as they could. Many companies fail to sufficiently segment their customer base. And with the increasing compliance burden of regulatory requirements such as the Sarbanes-Oxley financial reporting legislation, some companies also face the risk of not keeping track of who changed prices and why.

Although PROS has long developed software to address such concerns, the company is always on the lookout for opportunities to increase adoption rates and lower total cost of ownership to ensure that customers always get the best return on their investments. PROS noted, for example, that a customer running PROS software on Oracle databases would also need to buy a reporting engine and integrate that reporting engine into PROS. Between licensing fees and IT staff time, costs added up.

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PROS knew that many enterprises want software that can streamline processes to help them make informed pricing decisions and increase profitability. The company sought to provide such an application with an intuitive user interface and a low cost of ownership.SolutionIn 2007 PROS started talking with Microsoft about integrating the PROS Pricing Solution Suite (PPSS) with Microsoft data management software and operating systems. In January 2010, PROS became a Microsoft Gold Certified Partner.

“PROS is clearly the leader in this field,” says Larry Levy, Global Alliance Manager, Enterprise Partner Group at Microsoft. “At Microsoft we are committed to working with partners such as PROS to deliver Tier 1 applications for the enterprise on the Microsoft application platform.”

PROS was attracted to Microsoft because of the familiarity of its user interface and the quality of its platform. “To embed our technology in tools that most users are already familiar with was an easy decision for us,” says Reiner. “We also were impressed with the investments that Microsoft has made to address the requirements of Tier 1 enterprise customers. Furthermore, we’ve found that many of our enterprise customers have licensed Microsoft technologies that haven't been fully deployed. Our software can change that, helping customers realize greater return on their Microsoft investments.”

PROS applications run on the Windows Server 2008 R2 Enterprise operating system

and are integrated with Microsoft SQL Server 2008 R2 Enterprise data management software. “This is more than merely running queries against a database,” says Salch. “PROS is natively integrated with many of the deep business intelligence capabilities that Microsoft has built into SQL Server 2008 R2.” PROS also interoperates with Microsoft SQL Server 2008 R2 Analysis Services and Microsoft SQL Server 2008 R2 Reporting Services, with capabilities available to the customer right out of the box. For example, Microsoft SQL Server PowerPivot for Microsoft Excel—an in-memory technology with which employees can analyze data using the familiar Microsoft Excel 2010 spreadsheet software interface—works directly on PROS data.

Furthermore, PROS also works well with other Microsoft products. “The database and the operating system are enabling technologies, ones that we rely on,” says Salch. “PROS can also interoperate with software such as the Microsoft Office 2007 or Office 2010 suites and Microsoft Office SharePoint Server 2007 or SharePoint Server 2010, which many employees use to get work done.” Thus, for example, they can access pricing information using the familiar interface of the Microsoft Office Outlook 2007 or Outlook 2010 messaging and collaboration client or be directed to PROS activities at the relevant step of a SharePoint workflow.

A customer implementation of PROS typically begins by deploying PROS Scientific Analytics, which helps identify opportunities to increase profits across business segments, product lines, and customers in a number of ways—for

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example, by pinpointing transactions that generate losses. This application is often up and generating results within 30 days. Customers then deploy the PROS Price Optimizer, which streamlines the pricing process and enables rapid list-price setting. They also deploy the PROS Deal Optimizer, which provides recommended prices and product bundles to sales representatives on a transaction-by-transaction basis, taking into account the unique buying history of the target customer. The software can run on many different types of hardware or can be hosted by PROS. Many large companies roll out PROS division by division, using demonstrated return on investment in one division as a proof point for others.

BenefitsPROS uses Microsoft SQL Server 2008 R2 to help its customers improve profitability by making smarter pricing decisions with reduced risks. With SQL Server 2008 R2 and Windows Server 2008 R2, the PROS Pricing Solution Suite achieves high user adoption and outstanding cost/performance ratios.

Recurring ProfitsWith PROS software built on Microsoft technologies, companies gain higher profits not just once but year after year—because the improved margin opportunities are embedded in the company’s systems. “The value proposition is huge: PROS software integrated with SQL Server 2008 R2 delivers actionable pricing insight that can and does result in the recurring realization of tens of millions of dollars annually,” says Salch.

For example, one Fortune 500 firm identified $21 million in revenue improvements in just 25 days. A petrochemical company realized $350

million in annual revenue growth. A large auto parts manufacturer recouped its entire PROS software investment in less than 30 days. And a Fortune 200 global distributor increased gross profits by 280 basis points.

Reiner adds, “PROS is different from most enterprise software because the benefits are real, hard-dollar margin and revenue improvements in the tens of millions of dollars. This is far more than process efficiency. According to McKinsey & Company, on average, a 1 percent improvement in price translates to a 9 percent increase in profitability. In other words, pricing is mission-critical because it is the single most powerful profit lever that companies can pull.”

Smarter Pricing DecisionsImproved profitability results in large part from more-informed pricing decisions made by employees using PROS. “PROS and SQL Server 2008 R2 bring rigor and science to critical pricing decisions that can have a significant impact on financial performance and customer satisfaction,” says Reiner.

PROS and the business intelligence capabilities of SQL Server 2008 R2 provide information on what other customers are paying for products, what the products cost to manufacture, and what are acceptable—and ideal—profit margins. PROS does not dictate what prices must be, but instead provides science-based pricing guidance that empowers salespeople to make the best deal they can. “Gaining visibility into the relative profitability of customers with PROS helped us understand [the] competition[’s] prices,” said the vice president of pricing at a Fortune 500

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“PROS and SQL Server 2008 R2 bring rigor and science to critical pricing decisions that can have a significant impact on financial performance and customer satisfaction.”

Andres Reiner, Executive Vice President for Product and Marketing, PROS

distributor. “Capturing knowledge in [the PROS] pricing tool was critical.”

Reduced RisksBecause PROS brings rigor and accountability to pricing, it provides governance that minimizes the risks inherent in the complex pricing process. Every price point can be documented and supported. And if needed, every change can be tracked to the appropriate authorities.

“PROS provides a single source of truth, thus eliminating the risks associated with varied pricing processes and data sources,” Salch says. “It’s a low-risk solution to a very complex problem.”

High User Adoption RatesPROS relies on familiar Microsoft interfaces, which makes it easy to use. “Instead of users having to learn a new interface, they can continue to use tools such as Microsoft Office Excel 2007 and Outlook 2007 or Excel 2010 and Outlook 2010, which they already work with regularly,” says Salch. “But now the PROS pricing capabilities are embedded into those tools.”

Reiner adds, “Microsoft makes investments in user interfaces that are second to none. Because of those investments, Microsoft products are easy to use, which means that employees quickly and enthusiastically adopt them.”

“Our users love PROS,” says the vice president of pricing at a Fortune 100 industrial manufacturer. At another company, a Fortune 100 petroleum manufacturer, a pricing program manager says, “I can't keep up with the demand for

PROS inside my company. We didn't expect to put PROS in prior to our big enterprise resource planning system, but business demanded it.”

Outstanding Cost/Performance RatiosBecause it is based on SQL Server 2008 R2 and Windows Server 2008 R2, PROS can meet the needs of enterprise customers at a reasonable price. “SQL Server 2008 R2 is better, cheaper, and faster than competing databases. We encourage companies to look at it. For example, when we performed a benchmark study using PROS Scientific Analytics in a real customer scenario, SQL Server 2008 R2 showed an average of 57 percent better user-response time than Oracle,” says Salch.

He continues, “Furthermore, the scalability of SQL Server 2008 R2 is now on par with or better than an equivalently sized Oracle database.” Additionally, a SQL Server 2008 R2 license includes SQL Server 2008 R2 Analysis Services and SQL Server 2008 R2 Reporting Services, which eliminates the need to buy and integrate an external reporting engine. Summing up the various costs, Salch concludes, “When you compare Oracle and SQL Server 2008 R2, the difference in cost/performance ratio is significant.”

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“PROS software integrated with SQL Server 2008 R2 delivers actionable pricing insight that can and does result in the recurring realization of tens of millions of dollars annually.”

John Salch, Director of Product Development, PROS

Microsoft SQL Server 2008 R2Microsoft SQL Server 2008 R2 delivers higher scalability for mission-critical environments, more efficient IT, and expanded reporting and analytics through self-service business intelligence.

For more information about Microsoft SQL Server 2008 R2, go to: www.microsoft.com/sqlserver/2008/en/us/R2-editions.aspx

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For More InformationFor more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:www.microsoft.com

For more information about PROS products and services, call (713) 335-5151 or visit the website at: www.prospricing.com

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Document published August 2010

Software and Services Microsoft Server Product Portfolio− Windows Server 2008 R2 Enterprise− Microsoft SharePoint Server 2010− Microsoft SQL Server 2008 R2

Enterprise Microsoft Office− Microsoft Excel 2010− Microsoft Office Excel 2007− Microsoft Office Outlook 2007− Microsoft Office SharePoint Server

2007− Microsoft Outlook 2010

Technologies− Microsoft SQL Server 2008 R2 Analysis

Services− Microsoft SQL Server 2008 R2

Reporting Services− Microsoft SQL Server PowerPivot for

Microsoft Excel

Partner PROS