Pandesic CEO Bryan Plug is relinquishing his post as the Intel-SAP joint venture start-up refocuses itself almost entirely on the U.S. market.
The Sunnyvale, CA-based company has not yet succeeded in transforming its strong pedigree and roster of powerful partners into major sales. Observers
suspect it has been handicapped by an unusual pricing strategy, in which
Pandesic offered a fairly low starting price of $5,000 and free upgrades
but sought a 1% to 6% cut of Web businesses’ gross transactions.
New CEO Harold Hughes, who had served solely as board chairman, said he had
been a primary architect of the pricing approach and defended its merit. If
Pandesic charged customers for continuous upgrades at the pace he intends
to deliver them, he said, it would cost too much and stymie improvement
“If we can roll-out functionality this quickly, how could we agree on a
single price?” Hughes said in a phone interview on Friday. “That’s not
tenable. We thought, ‘Maybe we should look at growing with them.'”
Hughes declined to indicate how far Pandesic has grown with customers in
its target market of small- to mid-sized businesses thus far. The company
has announced just a handful of customers, and he would characterize the
length of that roster only as “a goodly and growing number.”
“I think we’ll hit our sales play in this quarter,” he said. “We started a
little slower than we would have liked to.”
Vernon Keenan, an Internet commerce analyst at Zona Research, was less
charitable: “Their customer references have been disappointing.” Customers
identified by Pandesic include Sun Fruit and the San Jose Symphony.
Keenan said the stated intention to refocus domestically probably indicates
a decision to emphasize smaller businesses as well, whose budgets are less
likely to support major upfront outlays on software–and who are more likely
to be willing to share a cut of the gross to cut their risk.
One of the problems, Hughes said, was that in aggressively pursuing the
international market, Pandesic was multiplying the difficulty of its task.
The company’s solution includes fulfillment, shipping and accounting
modules as part of the commerce system that ships on its dedicated servers.
Hughes said that dealing with the complexities of international commerce
within each package sale was taking too much time.
Hughes added that Pandesic deals with an international component will hover below 10% this year, and may reach one quarter to one third of the company business in 1999. Keenan said Pandesic now has another chance to prove itself.
“Another key thing to realize is when you have a big startup venture with
all this money behind it, it can afford to fail once or twice,” Keeenan
said. “This is their first mea culpa.”