Broadbase Software

Jun 19, 2013

www.broadbase.com  Company Description Broadbase develops and markets software that integrates and analyzescustomer information from Internet and traditional business channels, enablingbusinesses to improve their customer acquisition, retention and profitability.Broadbase EPM integrates information from numerous points of customerinteraction, or touch points, by pulling information from multiple data sourcesand transforming it into a standard format that can be analyzed. Broadbase EPMthen analyzes this reformatted information to provide a comprehensiveunderstanding of the customer lifecycle from initial identification throughacquisition and retention. Our products then allow businesses to translate thisanalysis into specific actions such as targeting profitable customers,personalizing customer interactions and identifying opportunities to sellcomplementary or higher-end products and services. By integrating, analyzing andacting on valuable customer information, our products enable businesses to buildlong-lasting and profitable customer relationships. Description of Business Broadbase develops and markets software that integrates and analyzescustomer information from Internet and traditional business channels, enablingbusinesses to improve their customer acquisition, retention and profitability.Broadbase EPM integrates information from numerous points of customerinteraction, or touch points, by pulling information from multiple data sourcesand transforming it into a standard format that can be analyzed. Broadbase EPMthen analyzes this reformatted information to provide a comprehensiveunderstanding of the customer lifecycle from initial identification throughacquisition and retention. Our products then allow businesses to translate thisanalysis into specific actions such as targeting profitable customers,personalizing customer interactions and identifying opportunities to sellcomplementary or higher-end products and services. By integrating, analyzing andacting on valuable customer information, our products enable businesses to buildlong-lasting and profitable customer relationships. Broadbase EPM consists of a suite of applications that are built onEPM/Foundation, our software platform that provides comprehensive analyticcapabilities. Broadbase EPM integrates information that has traditionally beenisolated in separate systems designed to support specific types of customerinteractions, such as customer service and Internet-based sales. It providesdecision-makers in sales, marketing, customer service and e-commerce businessfunctions with a more comprehensive view of the customer. Each applicationprovides these decision-makers with analysis of customer information that isspecifically designed for their particular business function. Our solutions cangenerally be deployed in less than 30 days, allowing our customers to quicklycapture revenue opportunities and achieve rapid return on investment. To date,over 80 end user customers have licensed our products from us and ourdistributors and resellers. Traditional "bricks and mortar" customers includeADP, Boeing, Fidelity Investments, Hewlett-Packard, Inprise, Plymouth Rock,Rockwell, The Sharper Image and United Airlines, which represent all end usercustomers that have licensed products or purchased services totaling at least$150,000. In addition, we have licensed our new e-business applications to twoInternet-only companies, InsWeb and Mercata.INDUSTRY BACKGROUND The recent emergence and acceptance of the Internet as a medium forcommerce is fundamentally changing the way companies communicate, obtaininformation, purchase goods and transact business with their customers. TheInternet offers a number of compelling benefits that are causing increasingnumbers of companies to transact business online, including opportunities toincrease revenue, reduce operating costs and improve customer retention. As aresult, the Internet has become an important new channel for both traditional"bricks and mortar" and Internet-only businesses to interact with and market andsell to customers. Both types of companies are adapting many of their businessactivities for the Internet, defining a new category of enterprise called thee-business. Forrester Research estimates that the number of U.S. companies with5,000 or more employees using the Internet as a channel for e-commerce willincrease from 20% in 1998 to 92% in 2002. Across companies of all sizes,Forrester Research estimates that online business-to-business andbusiness-to-consumer transactions will grow from $127 billion in 1999 to over$1.4 trillion in 2003. This rise of the Internet as a primary business channel has created ahighly competitive environment with low barriers to entry for new competitorsand insignificant switching costs for customers. Because customers have agrowing number of easily accessible choices both on and off the Internet,e-businesses face a constant battle for customer loyalty. For example,travelers,once limited to traditional travel agents, can now also choose among numerousonline providers at the click of a mouse. In this rapid paced Internetenvironment, existing enterprise applications that automate processes and reducecosts are no longer sufficient to build long lasting and profitable customerrelationships. In order to create these relationships, e-businesses must target,convert and retain customers by differentiating their products and services tomeet each customer's individual requirements. PROLIFERATION OF CUSTOMER TOUCH POINTS As a result of this competitive environment, enterprises need to developcustomer-focused business models founded on a comprehensive understanding ofindividual customer relationships. Traditionally, businesses have managed theserelationships by functional departments, such as marketing, sales and customersupport, and customer information has been isolated within these departments. Incontrast, e-businesses must integrate customer information across functionaldepartments to maximize the value of the entire customer lifecycle, from initialidentification through acquisition and retention. E-businesses need to analyzeand act on customer information gathered from all sources, including directsales organizations, storefronts, catalogs and websites. By using real time andhistoric customer intelligence to personalize business relationships, successfule-businesses can maximize loyalty and profitability throughout the customerlifecycle. With the emergence of the Internet as a primary business channel, thenumber of points of customer interaction, or touch points, has increaseddramatically. Internet sales systems, online customer service solutions, websitelogs and e-mail management systems have multiplied the massive amounts ofcustomer interaction data already generated by conventional front office systemssuch as sales force automation systems, telesales and customer support callcenters, marketing automation systems, and customer and field serviceapplications. In addition, traditional back office systems such as billing,manufacturing and human resource systems, capture large volumes of importantcustomer and operational data. This increase in data sources makes the challengeof integrating and analyzing the information generated throughout the customerlifecycle more difficult. The sheer volume and variety of customer data createsa competitive opportunity for businesses that can effectively integrate, analyzeand act on this information. NEED FOR COMPREHENSIVE E-BUSINESS ANALYTIC SOLUTIONS Traditionally, businesses tried to analyze this valuable data by piecingtogether generic technologies -- point tools -- that address narrow and discreteanalytical needs. These point tools include data extraction tools to accessdata, online analytical processing tools to analyze and model data, data miningtechnologies to identify patterns in data, and report generators to present theinformation. Piecing together these point tools to create a patchwork systemtypically requires significant custom programming and takes a long time tocomplete. In addition, these patchwork systems are very difficult and costly tomaintain. Because patchwork systems are inflexible and costly to maintain, theyare poorly suited to the rapidly changing business and technology requirementsof e-businesses. Moreover, patchwork systems and point tools cannot provide e-businesseswith a comprehensive understanding of the entire customer lifecycle. Instead,they generally offer limited analysis based on a single element of a customer'sinteraction with a business, focusing on a single channel, customer touch pointor period of time. For example, today's website monitoring tools completelyignore historical customer activity across other channels, such as call centersor traditional storefronts. As a result, these tools would not indicate that acustomer used the Internet to gather information about a product, purchased theproduct at a physical store and later contacted customer support. Finally, patchwork systems and point tools do not enable e-businesses toact quickly on data generated by customer interactions. These tools were notdesigned for specific functions such as e-commerce or customer service, or theirunique underlying business processes. Because the data and reports generated bypoint tools cannot be quickly translated into concrete actions, they cannotunleash one of the most powerful potentials of e-business -- the ability topersonalize customer interactions and differentiate product offerings in realtime. Both multi-channel "bricks and mortar" and Internet-only businesses requiresolutions that integrate, analyze and act on information from all customer touchpoints. These analytic solutions must create a comprehensive view of thecustomer lifecycle by integrating information from e-commerce and Internet-basedsystems, front office systems, back office applications and external informationsources. They also must provide business users in different functional areaswith packaged applications that analyze this information using industrybenchmarks, business logic and guided decision-making capabilities. Finally,e-businesses require solutions that enable them to move quickly from analysis toaction, enhancing customer relationships both online and offline.OUR SOLUTION Our Broadbase EPM -- E-Business Performance Management -- solution consistsof two components: the EPM/Foundation software platform and the Broadbase EPMsuite of analytic applications. EPM/Foundation is a robust and extensiblesoftware platform that integrates and analyzes customer interactions andoperational data from multiple sources. Our Broadbase EPM applications providedecision-makers within various business functions with analysis of thisinformation to improve customer targeting, acquisition, conversion andretention. Broadbase EPM applications are designed for the specific and changinganalytic needs of decision makers in e-commerce, online publishing andadvertising, marketing, sales and customer service functions. Our solutions aredesigned to enable businesses to target customer segments, personalize marketingpromotions and campaigns, differentiate product and service offerings andleverage operational resources, resulting in more loyal and profitablecustomers. We believe our solutions represent an innovative and comprehensive approachto analyzing and optimizing e-business customer interactions by providing thefollowing benefits: UNDERSTAND THE ENTIRE CUSTOMER LIFECYCLE Our Broadbase EPM solution integrates information from multiple customertouch points to provide a comprehensive view of the entire customer lifecycle,from initial identification through acquisition and retention. EPM/Foundationtransforms, cleanses, loads and integrates large volumes of customer andoperational data, such as previous purchases, responses to promotions andservice requests. The Broadbase EPM applications then use this integratedinformation to deliver analysis that is designed to address the needs ofspecific business departments. IMPROVE CUSTOMER ACQUISITION, CONVERSION AND RETENTION RATES E-businesses that deploy our solutions use analysis of the entire customerlifecycle to target, personalize and differentiate all aspects of online andoffline customer interactions -- moving beyond the simple automation of customertransactions. For instance, businesses use our solutions to increase customeracquisition by targeting higher value customers, to improve conversion rates bypersonalizing web content and advertising, and to enhance customer retention bystreamlining customer service bottlenecks. In doing so, our solutions enablee-businesses to use both the Internet and traditional business channels to buildprofitable, long-lasting customer relationships. IDENTIFY AND TARGET MOST PROFITABLE CUSTOMERS Our Broadbase EPM solution enables e-businesses to identify their mostprofitable customers and to tailor promotions and marketing campaigns, salesefforts, product offerings and customer service based on individual buyinghabits and demographics. In doing so, it allows companies to maintain andenhance the value of their most profitable customers as well as to increase theprofitability of other customer segments. RESPOND RAPIDLY TO OPPORTUNITIES AND RISKS Our Broadbase EPM solution allows business decision makers to respondrapidly and effectively to new opportunities and risks by providing timelyinformation, measuring results against industry targets and suggesting actions.These capabilities help close the loop between a customer interaction and thebusiness response -- that is, they help the business react to informationgenerated from previous customer interactions. Examples of these capabilitiesinclude utilizing prior customer behavior to personalize web content oridentifying opportunities to sell complementary products, or "cross-sell," andto sell higher-end products, or "up-sell. " In addition, our solutionsincorporate business logic to monitor performance, identify exceptions and alertusers to key events such as ineffective promotions or service backlogs. ACHIEVE FAST RETURN ON INVESTMENT THROUGH RAPID IMPLEMENTATION Because our Broadbase EPM solution can generally be deployed in less than30 days, businesses can rapidly begin to realize the increased revenue resultingfrom personalized customer interactions, without suffering the delays associatedwith the creation of in-house patchwork systems and consulting services-basedapproaches. In addition, our packaged adapters for integration with Internet andenterprise systems, and our pre-built applications, support rapid implementationwith a lower investment than applications developed in-house. REDUCE TOTAL COST OF OWNERSHIP Our Broadbase EPM solution requires fewer resources than the developmentand implementation of alternatives such as in-house patchwork systems andconsulting services-based approaches. In addition, our applications arespecifically designed to be easily used by business decision makers, minimizingtraining and support costs. Finally, because we offer an open platform,businesses can easily adapt and extend our open modular solutions to meet theirchanging business and technical requirements with minimal additional investment.CASE STUDIES The following case studies illustrate the use of our Broadbase EPM solutionby an Internet-only company as well as a traditional "bricks and mortar"business. Mercata is one of the two Internet-only companies that have licensedour new e-business applications. Plymouth Rock is a traditional "bricks andmortar" company whose use of our products is representative of how manycompanies use our products to improve customer acquisition, retention andprofitability. The revenues we have derived from both Mercata and Plymouth Rocktogether represent less than 5% of our total revenues to date. We continue toprovide software upgrades and technical support to both Mercata and PlymouthRock under maintenance agreements we have with these companies. MERCATA Mercata is a web-based retailer that offers an online group buying systemthrough which groups of buyers can exercise volume purchasing power and driveprices lower. As its e-commerce activity increases, Mercata must analyze andoptimize content, promotions and specific group purchases, as well as improvecustomer targeting. Mercata has licensed our Broadbase EPM solution to analyze the traffic andbuying habits of its users by integrating our product with BroadVision, which isMercata's e-commerce system. By analyzing their users' habits, Mercata candiscover trends and patterns, such as how often consumers make offers and howmuch they raise their offers. In addition, Broadbase EPM will analyze theoptimal product mix, price and length of each group purchase. Mercata can thenuse this information to customize and personalize its content to attract newusers and retain current ones. In addition, our Broadbase EPM solution willenable Mercata to understand and determine the growing purchasing leverage ofMercata's e-consumer community. Mercata also plans to use our Broadbase EPMsolution to integrate and analyze data from Mercata's customer service callcenter, its enterprise resource planning system and its e-mail managementsystem. PLYMOUTH ROCK The Plymouth Rock Company is a property, casualty and auto insurancecompany headquartered in New England. Since the state of Massachusetts setsautomobile insurance rates and prohibits insurers from denying coverage to anydriver, Plymouth faces the challenge of providing coverage to high risk driverswhile minimizing costs and claims. Plymouth selected Broadbase EPM to help it reduce insurance claim expenses.By generating an enterprise-wide, customer-focused view of Plymouth's lines ofbusiness, and by analyzing data about customers' insurance claims, Plymouth cantarget low risk customers. In addition, Plymouth is incorporating sales to lowrisk customers as a compensation criterion for its agents, and will automatethis process by integrating Broadbase EPM and its payroll applications.Broadbase EPM is currently used by more than 100 employees at Plymouth and over150 of its external insurance agents. Use of Proceeds The net proceeds to us from the sale of the 4,000,000 shares of commonstock offered by us will be approximately $51.0 million, at an initialpublic offering price of $14.00 per share and after deducting estimatedunderwriting discounts and commissions and offering expenses. If theunderwriters' over-allotment option is exercised in full, our net proceeds willbe $58.8 million. We intend to use the net proceeds from this offering primarilyfor general corporate purposes, including working capital. We may also use aportion of the net proceeds from this offering to acquire or invest inbusinesses, technologies or services that are complementary to our business. Wehave no present plans or commitments and are not engaged in any negotiationswith respect to any transactions of this type. We have not identified any specific uses for the net proceeds from thisoffering, and we will have discretion over their use and investment. Pending useof the net proceeds, we intend to invest the net proceeds from this offering inshort-term, interest-bearing, investment-grade securities. See "RiskFactors -- We have broad discretion to use the proceeds from this offering, andour investment of these proceeds may not yield a favorable return. "  Competition / Competitors Our competitors vary in company size, and in the scope and breadth of theirproducts and services. We have three primary sources of competition: - providers of consulting services-based analysis solutions, such as E.piphany; - vendors of point technologies that provide website analysis such as Accrue, Andromedia and Net Perceptions; and - in-house development efforts by potential customers using traditional and generic decision support tools. In addition, we face potential competition from vendors of other enterpriseapplications as they expand the functionality of their product offerings. Thesevendors may include Oracle, SAP, Siebel, other vendors of software designed fordecision support or management of customer relationships or of organizations'operational information. They also may include vendors of database applications.Principal competitive factors include: - quality, breadth and depth of application offerings; - product robustness and extensibility; - openness of technology architecture; - ease of deployment and maintenance; - quality of services and customer support; and - price. Although we believe that our solutions compete favorably with respect tothese factors, our market is new and rapidly evolving. We may not be able tomaintain our competitive position against current and potential competitors. See"Risk Factors -- We face intense competition which could make it difficult toacquire and retain customers. " We face the same sources of competition and the same competitors bothdomestically and internationally. However, we face additional challenges inselling our products and services internationally in that we must develop localversions of our products for foreign markets and must recruit and train aninternational staff. Deal Data