Salion, Inc.: A Software Product Line Case Study

2 Background

2.1 About the Company

Salion, Inc. is an enterprise software company dedicated to helping suppliers optimize their revenue acquisition process. Salion's initial focus is on suppliers who sell complex products via proposals. Its goals are to give those suppliers the power to target the best business, win new business, and deliver increased customer satisfaction.

Privately held, Salion was founded by McKinsey & Company and AV Labs (an early-stage venture fund) based on research conducted on how best to serve suppliers.

Salion entered its market knowing that the ability to deliver customized products quickly was going to be a prerequisite to its survival. In fact, its business model was based on the presumed ability to do this, even before the technical capability for achieving it was in place. Salion also knew that if it managed the products separately, the complexity would quickly overwhelm it and far outstrip the ability of its small staff to cope with the combinatorics of separately evolving systems. It realized that it needed to treat its products as separate versions of the same thing--in other words, as a software product line. Salion thus joined the small but growing body of companies that have adopted the software product line approach from the outset.

2.2 Salion's Market

Salion's customers are suppliers, manufacturers of fairly complex custom or semi-custom products. An example of a Salion customer is a Tier 1 automotive supplier that manufactures automotive interior assemblies or drive trains.¹ These products are designed and priced by the suppliers only after the product requirements are worked out with their customers (e.g., a major auto manufacturer). The suppliers do not typically sell off-the-shelf inventory built ahead of time.

Contracts between suppliers and their customers come about as a result of a negotiation protocol involving a request for a quote (RFQ) and a quote (or bid) in response. The bid is the result of a collaboration within the supplier's organization that works out details of requirements, design, and pricing. The bid is the result of three factors:

the supplier's desire to go after the business represented in the RFQ

a design that satisfies the specifications

pricing that is high enough to allow the supplier to make money on the deal, should it receive the contract, and low enough to make its bid attractive

Figure 1 illustrates the two ways Salion delivers its software to its customers: hosted and installed. The hosted model removes the burden of maintenance from information technology (IT) departments while providing a secure and scalable environment. The installed model allows IT departments to incorporate Salion's software into their own IT infrastructure.

Figure 1: Salion, Its Customers, and Its Customers' Customers

Salion markets a suite of software tools for Revenue Acquisition Management (RAM)--those activities associated with identifying valuable customer prospects, conducting sales efforts, and creating and delivering winning proposals. Suppliers succeed by winning proposals. However, the process of submitting proposals has traditionally been labor intensive and problematic. Producing a proposal takes time and considerable coordination. A late proposal will bar effective consideration, if not disqualify the company outright.

Typical problems in the traditional RAM processes include the inability to analyze bid requests to select the most promising opportunities, difficulty in keeping track of specification changes, no access to related organizational history, poor proposal tracking, inconsistent costing and pricing, and inefficiencies caused by manual document handling.

Salion's marketing literature includes some telling quotes that characterize the need and identify the resulting business opportunity:

"It should take us one day or less to turn a quote around. For some reason, it takes five weeks. This process is out of control."
--Director of Engineering, Tier 1 automotive supplier
"We recently rushed a late quote out the door that we thought we had priced with a 'nice margin'. In reality, the quote was for a part that we had been selling at twice the price we quoted. Luckily, our customer only asked for one year of retroactive rebates."
--Director of Sales, Tier 1 automotive supplier
"We just spent $100,000 on an opportunity that we had no chance of winning. We bid on the same business two years ago and our price was 50% too high. We have no way to capture or analyze our historical sales and bidding performance, so we make the same mistakes over and over."
--Tier 2 automotive supplier
"We spent $600,000 in overnight shipping costs last year."
--Tier 1 automotive supplier

2.3 Salion's Product Line

Salion's solution is a set of three software applications known collectively as the RAM Platform:

Salion Revenue Process Manager^TM--This tool helps suppliers manage opportunities. It contains a workflow engine and Web-based communication tools to help a supplier organization manage the collaboration of design and pricing. It keeps track of a proposal's status and assists in the assembly of the final document.

Salion Knowledge Manager^TM--This tool helps triage and analyze requests for proposals (RFPs), with decision support capabilities and analysis of bid performance, win/loss rates, and pricing. The idea here is to help a supplier analyze all available information to, among other things, choose the best candidates from among all the available opportunities. The Knowledge Manager uses historical information to prioritize opportunities and help the organization improve its response rates.

Salion Business Link^TM--This tool extends collaboration between the supplier and the customer, and between the supplier and subsuppliers.

Each application is itself a suite of products. For example, Revenue Process Manager includes an opportunity manager, a proposal manager, and a change-order manager. Knowledge Manager includes a performance analysis manager, a triage analysis manager, and a resource analysis manager.

Salion is targeting large custom and semi-custom manufacturing organizations that rely on bids or proposals to win business that typically must deal with large numbers of engineering change orders in the course of doing business. The company's initial focus is on the automotive market, but other industries will also be targeted in the future. Estimates put the size of the automotive market at 19,000 suppliers representing an initial market opportunity of several billion dollars.

Because of the high stakes involved in proposal management, hosted and application service provider (ASP) customers demand the utmost confidentiality. As a result, security is one of the most important software quality attributes, in addition to performance and availability.

2.4 Variabilities

Salion products must work under a variety of contexts, compelling them to be variable with respect to the following:

A single installation of the tool suite can have virtually any combination of the products described in Section 2.3.

The software can run on the customer's hardware at the customer's site (i.e., installed), on Salion's hardware at Salion's site (i.e., hosted), or in combination with other customers' systems. This last model, called the ASP model, is discussed in Section 3.4.

All customers will have a unique workflow, a unique set of input screens and other user-interface concerns, and a unique set of reports they want to generate.

Each customer will have unique "bulk load" requirements, involving the transformation of existing data and databases into forms compatible with Salion's products.

An automotive industry trade group (Open Applications Group [OAG]) has defined a business-to-business transaction framework encompassing some 120 standard objects to be used to transfer information from organization to organization. Because not every customer will need to use all 120 objects, this framework represents another up-front point of variation.

In addition to these predicted variations reflected in its architecture and business plan, Salion must also react to variations that it cannot foresee. For example, one customer may want the system to include a mobile phone interface.

1	In fact, Tier 1 automotive suppliers became Salion's first targeted market sector.
TM	Salion Revenue Process Manager is a trademark of Salion, Inc.
TM	Salion Knowledge Manager and Salion Business Link are trademarks of Salion, Inc.

[Title Page] [Abstract] [Acknowledgments] [1 Introduction] [2 Background] [3 How Salion Builds Its Software Product Line] [4 Payoffs and Benefits] [5 Conclusions and Lessons Learned] [6 Conclusions] [7 For Further Reading] [References] [DTIC Page] [PDF file]