Distribution Channel Plan

Distribution Channel Plan

Table of Contents

Tab

Executive Summary 1

State of the Market 2

Attractive Candidate Positioning 3

Next Steps 4

Candidate Information 5

Company ProfilesA-Z

Executive Summary

This document represents Operon Partners assessment of:

• The markets served by SpaceWorks products.
• The types of companies likely to be interested in a strategic investment in SpaceWorks.
• Specific companies, by market segment which would likely have an interest in investing in SpaceWorks.
• The next steps Operon and SpaceWorks must take to further the process of gaining equity investors.

The document is divided into five sections:

• 1.0 Executive Summary, which describes the contents of this document
• 2.0 State of the Market, which explores the state of the key markets where SpaceWorks plays and how SpaceWorks fits within those markets.
• 3.0 Attractive Candidate Positioning, which describes the types of companies by market segment that would be a good match with SpaceWorks and why an alliance with SpaceWorks would be attractive.
• 4.0 Next Steps, which describes what Operon and SpaceWorks need to do to move the strategic alliance process forward.
• 5.0 Candidate Information, which contains 2 to 3 page summaries, arranged alphabetically, of the backgrounds of possible alliance partners.

Conclusions – While SpaceWorks is a small company potentially competing with many strong technology companies, it has some major, attractive advantages. Most importantly, with its OrderManager product, SpaceWorks sits at the nexus of three of the hottest markets in any industry: electronic commerce (both traditional and Internet-based), supply chain management, and sales force automation. OrderManager enables companies to:

• Generate additional revenues through new electronic selling channels.
• Re-engineer relationships with existing customers to increase top- and bottom-line performance.
• Create new productive selling tools for distributor-based sales forces, which have been under-served by the current set of sales force automation vendors.

Because of these advantages, SpaceWorks will be an attractive investment candidate to companies in many IT segments: hardware, packaged software, electronic commerce services and software, telecommunications and network services, supply chain management, and systems integration and consulting.

2.0 State of the Market

Operon believes that three related markets are rapidly converging to produce tremendous revenue and productivity gains for leading-edge adopters; the markets are: electronic commerce services and software (both traditional and Internet-based); supply chain management, and sales force automation. This section discusses the condition of each market and then summarizes SpaceWorks’ market position in relation to these markets.

2.1 Electronic Commerce Services and Software

The Electronic Commerce market can be divided into four categories:

• Traditional Transaction Services, such as EDI and EFT, and associated translation software
• Enterprise-wide and Inter-Company Electronic Mail
• Enhanced Fax Services
• The emerging market for Internet-based Electronic Commerce

The following charts show market revenues by segment worldwide between the years 1995 and 2000:

Market Size Of Electronic Commerce Market Segments

Segment199519961997199819992000

EDI VAN and SW47058872891111501439

E-Mail7398401031126415741992

E-Fax307345382417461503

Source: IDC (in millions of dollars)

Note: US-based carriers worldwide traffic

2.1.1 EDI Growth Drivers

EDI revenue growth is driven by the following factors:

• The number of companies engaged in EDI transactions. IDC estimates that, between 1995 and the year 2000, the number of companies performing EDI transactions will expand by a multiple of five from 125,000 in 1995 to over 700,000 companies worldwide in the year 2000.
• Hub to trading partner ratios will widen. In 1995, for every hub performing EDI, there were five spokes connected. By the year 2000, that ratio will grow to 1 hub per 12 spokes, indicating a deepening commitment to EDI among companies of all sizes.
• Both hubs and trading partners will perform more EDI transactions. Hub and trading partner traffic are expected to grow by 25 percent between the years 1995 and 2000.
• The average cost per transaction is expected to drop only modestly between the years 1995 and 2000: at 2.6% per year for hubs and 6% per year for trading partners.
• As companies trade more often, annual spending will continue to rise – particularly for trading partners. IDC predicts that trading partners will spend 39 percent more per year between the years 1995 and 2000 on EDI transactions.

2.1.2 E-Mail Services Growth Drivers

Growth in the E-Mail market is driven by several factors:

• Increased traffic connecting geographically dispersed company sites.
• Expansion in the use of E-Mail globally. Europe and Asia together are expected to increase their share of total E-Mail revenues from 29.4 percent in 1995 to 41 percent in the year 2000.
• Greatly increased traffic between trading partners, using Internet E-Mail connections. It is expected that, between 1995 and 2000, revenues for messages traveling through third party gateways will grow at 30 percent per year – from $488 million in 1995 to $1.78 billion in the year 2000.

Companies using gateways increasingly will work with trading partners to exchange mission critical business documents, to manage relationships with their customers, and to function more effectively in the global marketplace.

2.1.3 Enhanced Fax Growth Drivers

While a smaller piece of the electronic commerce pie than EDI and E-Mail, Enhanced Fax will continue to grow for specific niche applications, such as direct response and delivery of critical information to a broad but technically unsophisticated audience. An example is spot oil pricing, which is needed by independent operators on a daily basis.

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• JV Structuring Tips and Must Do's
• JV Structure Considerations
• Alliance Strategy Before Structure
• Establishing International JVs
• JV Formation Steps (No Preview)
• Institutionalizing Strategic Alliance Skills
• Joint Venture Methods

• Broad Joint Venture
• Product Distribution
• Product Licensing
• Technology Development

• Presenting the Joint Venture

Market and Candidate Assessment

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