Remedy has built all of its products on its AR System, and has wisely taken the time to integrate each new acquired product with it. The payoff is that different products work well together and that cross-selling and repeat selling have a simple story to support them.
Remedy also has a massive installed base utilizing various components of the AR system. This gives a much lower cost of sale, as it can sell add on products very easily.
Remedy is also blessed with cash and earnings. It has been profitable since 1995, and the profits have essentially been increasing each year (with the exception that 1998's profits were smaller than those in 1997).
Finally, Remedy has a strong international presence. With customers in 70 countries, 34% of the company's revenues come from outside the United States. These sales are primarily through channel partners, and can therefore grow without substantial investment by Remedy in sales force or post-sales support.
Remedy has a very broad product line and, as yet, not much visibility as an "e" technology company. For example, while they are well known as a traditional help desk vendor, they have not yet made themselves well known in the eCRM area.
With its acquisition of Axitive, Remedy should have a good story to tell about personalization in its eCRM product and elsewhere. There are currently many vendors in that space, and the competition for mindshare is intense. Mindshare affects both future sales and future partnerships. (Not, perhaps, as much as an established customer base of 4800 customers does.)
Still, we know that Remedy is not relying solely on its established base for new product sales, and should not hide its bushel under a flower. If the Axitive product is the equal of other personalization products, then Remedy should be showing up at more than just the traditional CRM conventions. Membership in the Personalization Consortium would be a good step.
Also, while Remedy does have its share of dot-com customers, they are not primarily technology drivers. The current customers will help Remedy stay abreast of emerging business requirements, but the company should also court some companies using bleeding edge technologies. These companies are going to remain the drivers of technologies in many of Remedy's areas, because they have the clearest vision of what can be done on the Web and the greatest sense of urgency about making it happen. Remedy needs more experience playing in that sand box.
We prefer software companies to keep their focus on licenses. Looking at the balance between product and service revenues, as shown in Figure 5, we see that the ratio has been edging toward services. A different measure reinforces this: while total revenues grew at 45% from 1998 to 1999, support revenues grew at 55%.
If this were just a one-year movement it could be attributed to new products or to the Guaranteed@Remedy program. But the ratio has been moving slightly toward services for some time. We want to point out that the ratios are within the bounds of what financial analysts consider healthy, and that we don't necessarily expect the ratio to go beyond those bounds. We simply want to point out that Remedy needs to watch this. We're all in favor of good service and support, but Remedy can find other ways to deliver them to their customers.
Moving the mix toward partners is one possible way, and it should be explored. Likely to accelerate this trend is Remedy's new Guarantee@Remedy program, which guarantees installations of products in fixed time intervals ranging from 30 to 90 days, depending on the product. While the concept is a good one, both demonstrating the company's confidence and providing real value to customers, the downside is a need to increase and train installation service staff. Remedy says that it is beginning to build more service partners, which may help improve this ratio.
