PrimeContract Goes Live….and the World According to Joel Koppelman

November 30, 2000

By Judy Schriener

After a year and a half of warming up, Primavera Systems Inc. has finally connected and is hoping for a home run with its PrimeContract online system for collaboration and progress payment processing. The name is the same as 18 months ago, but that's about all. New partners, different features than anticipated (which is entirely appropriate-it was a different world online then that almost looks arcane now), different orientation. And this is just the beginning. Now that it's real at http://www.primecontract.com/, in typical software-developer fashion, Primavera President Joel Koppelman talks about PrimeContract like it's a work in progress rather than a fait accompli. He has a lot to say about what the industry wants and what it all means to Primavera.

Koppleman photo by Judy Schriener

Q. How many customers are you starting out with?

A. It's really a small number. We have collaboration up and running on PrimeContract, but very small numbers of people are using it as yet. We just launched it-it's just now available for people to sign up for. Intel is using it on a couple of different fabs, so that's a pretty good start. TXU (Texas Utilities) is using the progress pay function. We give people a 30-day free look so they can dabble w/ the data. But I have no interest in having a free service, so we tell people up front they have to pay for it.

Q. What is your pricing structure?

A. It's pretty simple. For the collaboration piece, it's a monthly charge, a subscription, if you will, based on the size of the project. A $10-million project will cost $2,000 per month. The range runs from $1,000 to as high as $15,000 per month. We're trying to keep people away from this silliness of charging by how many gigabytes of storage space they use. I think people want to know the price going in. They don't want to constantly be at risk that their bill's going to keep going up. On the progress payment portion, we charge for each pay app that's created and negotiated. So if you have a payout every month for 10 months, at $100 for each app, it's $1,000 for that. With 20 contractors, it's 20x12x$100. We charge $100 per progress payment, with no minimums, no maximums. We have them, we store them, we aggregate them, we take care of the security. It's a pretty good measure of activity on the projects, how many contracts you have and how much work is getting done.

Q. Why did you focus on progress payment function in your initial rollout of PrimeContract?

A. I talked with a big pharmaceutical company this week and some others. They said they have trouble finding people to do work. This big firm said they tell subs they will pay them faster instead of being stretched out--they'll pay in 10 days. That way they're able to get better quality people. The progress payment facility online is what they think will change this business. Some of the big owners say not only do they want to negotiate that payment, they also want to be able to trace that payment to the subcontractor. They don't need to have the books open, but they want to trace where the money goes so they need a financial settlement function (through our partnership with i2 and their TradeMatrix), so they'll know that the transfers were made. What is it that brings people into the new world? It's not always the obvious. It's what makes their business run effectively. People, including some of them on my payroll, said, "What are you doing-this is crazy" when I wanted to build this. I say follow the money-that's what the business is all about.

Q. What are you doing about integration between expedition between PrimeContract and your software products and others' products?

A. We've already got integration between (Primavera's) Expedition and Timberline Gold, and between P3 and Estimator. My customers are buyers; they're putting up the money, so they rarely use J.D. Edwards or Timberline. [Competitor Meridian Project Systems is integrating its online service with J.D. Edwards and Timberline's products.] They use SAP and Oracle, so we'll be working on that.

Q. What are your projections for your first year with PrimeContract, and how does it fit in with the rest of Primavera's products? Do you expect cannibalization of your other products from PrimeContract?

A. I'm actually in the process of redoing my forecast for next year. In 2001 we will be at breakeven. I don't think I can be profitable but I can be at breakeven. As for cannibalization, I don't see it for another year and a half to two years from now, primarily because I don't think we're offering enough on PrimeContract to replace our products. People will mostly use them in parallel. We're doing some collaboration in Expedition, and it's much more orderly on Expedition. We do more in Expedition from a process standpoint, but it's more rigid. We're more flexible on PrimeContract but there are fewer features there. We have a progress payment function in Expedition but you don't negotiate online in expedition.

The next 18 months down the road we will provide more functionality in PrimeContract. It's better for interacting with other companies, whereas our applications are built for a company to use within their own four walls. On the Web, when it's done right, it's about interacting with a huge number of other parties. It's about relationships. PrimeContract is going after that network effect; the other products are focused on behind-the-firewall situations and issues. Eighteen months down the road we will have that kind of functionality. And by that time, I'll have figured out what's the right solution. Is it cannibalization or migration? I see it as migration. Let's calmly move over.

I have Expedition and PrimeContract in one division now, with 85 people plus about 45 outside developers. We have a new ASP version of Expedition that we're announcing in a couple of weeks. Expedition mobile is coming out, Expedition 8 we're working on. Some of it is functionality it needs to have itself and some makes it work with PrimeContract. Two years ago, customers said help us with purchasing problems, tracking bids and the responses. If we'd done that, it would have been a waste of time. We're doing it in PrimeContract because it's an online function, but we can store some of that in Expedition. That division with Expedition and PrimeContract this year is about 20% of our total business, and obviously that's all Expedition since we're just rolling out PrimeContract, so that's zero. Next year I think I'd say about 25% of our revenues would come from Expedition and PrimeContract. The other side of the business is growing like wildfire. We did $53 million last year, this year, in 2000, we should do $80 million. It's going very well.