Jamcracker

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Jamcracker

• Andrea Christ
• Joe Miller
• Stephanie Nowak

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Agenda

• Background
• Jamcrackers Vision
• Challenge and Change
• Recommendations
• Outcome

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The Players

• K. B. Chandrasekhar (aka Chandra) (CEO)
• Was born and raised in Chennai, India
• He obtained degrees in Physics and Engineering
  from Madras University
• Accepted position with Wipro in 1983, a computer
  company with 50 employees
• Moved to California in 1990, to setup operations
  for the Indian Company Rolta
• Once the Rolta project was completed in 1992, he
  remained in the US at the request of his friend
  B.V. Jagadeesh to begin new projects
• Over the next few years he executed his
  entrepreneurial spirit, by founding several
  companies

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The Players

• Herald Chen (CFO) and Mark Terbeek (Corporate
  Development Senior VP)
• Stanford graduates and long time friends
• First showed interest in Exodus while Terbeek was
  working for First Analysis, a company that was
  funding Exodus
• Chen and Terbeek later worked on a project
  sponsored by Chandra, which would develop into
  the company known today as Jamcracker

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Application Service Providers

• ASPs are used to acquire software services via
  the internet as opposed to on-site
• Applications are stored on an off-site network
  and are implemented from the customers on-site
  location
• Allows for 6 different main benefits
• Speedy implementation
• Cost reduction
• Favorable cash flow profile
• Support for 24/7 business operation
• Deals with the shortage of skilled IT workers
• Support for mobile work force

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ASP Aggregators

• Companies that sell customized IT products, which
  are purchased from ASPs, to retailers
• Companies
• Jamcracker
• Ingram Micro

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Retailers

• Companies that buy customized IT products from
  aggregators and sell to businesses and consumers
• Companies
• Accenture
• CSC
• EDS
• IBM Global Services

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What is a Jamcracker?

• Jamcracker, (jam/krak/er) n.
• An expert river driver who is stationed at a
  point where a log jam is feared.
• One who breaks up log jams.
• The leading provider of web-based application
  solutions.

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Jamcracker

• Is an IT intermediary
• Main competition is any application service
  provider (ASP) aggregator
• Customizes IT packages for customers
• Alleviates having the customer deal with several
  different ASPs

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Chronology

• 1990
• Chandra and his family immigrate to the United
  States
• Jagadeesh, his friend, convinces him to stay in
  US after project is finished

• 1994
• Mosaic, an early web browser, is developed and
  sparks the two mens attention that a growing
  market would soon arise from this type of
  technology

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Chronology

• 1995
• Chandra and Jagadeesh found Exodus Communications
• Exodus is funded by angel investors and a
  corporation, First Analysis

• 1998
• Chandra steps down as CEO of Exodus
  communications
• Herald Chen and Mark Terbeek finish their first
  year at Stanford
• Terbeek, working at First Analysis, shows
  interest in Exodus
• Leads to independent study project funded by
  Chandra

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Chronology

• July 1999
• Chen, Terbeek, and Chandra form VitalTone
• Chandra is CEO
• Chen is CFO
• Terbeek is Corporate Development Senior VP

• February 2000
• VitalTone is renamed Jamcracker
• The company begins to publicly sell their first
  four services to customers

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Chronology

• June 2000
• Jamcracker was operating with 10 customers and
  140 employees
• Fortune magazine profiles them as a cool
  company
• Red Herring declared it as one of the 100 most
  important companies in the world

• June 2001
• Jamcracker was operating with more than 100
  customers, 250 employees and offered more than 35
  different services
• Survived the meltdown of the dot-com companies by
  the continued support of their past investors

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Chronology Recap

• Jamcracker Growth
• Chandra utilizes his knowledge and relationships
  established within the IT industry
• Used core values to run an employee supportive
  company
• Built relationships across different levels of
  business
• Diverse backgrounds of three co-founders built
  the foundation of what Jamcracker is today

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Business Model

• ASP Cafeteria model allowed an escape from
  common problems experienced by typical ASPs
• High customer acquisition costs
• ASP offerings vs. scale economies
• Data sharing

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Business Model

• Economics
• Primary revenue from fees
• Modest set up
• Per user per month for access to Jamcracker
  service infrastructure
• Additional per user per month for each
  application service used

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Business Model

• Jamcracker products are divided into three
  divisions
• Two of these are context services
• Business Services
• Enterprise-Wide Services
• The other is a core service
• Applications for billing, monitoring, and support
• Jamcracker Central
• Software program that allows IT managers to
  order, sample, and use multiple pre-tested ASPs
  from a variety of vendors

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Business Model

• Technology Platform

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Disintermediation

• Typical business model before utilizing
  Jamcracker services

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Intermediation
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Outsourcing

• Why should a company outsource?
• Manage the shortage of skilled IT workers
• Reduced time to market
• The shift to 24 x 7 operations
• Favorable cash flow profiles
• Cost reduction in IT service chains
• Globally accessible applications

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Market Environment

• Drivers
• The ASP market is growing by leaps and bounds
• Current ASP partners may become competitors
• Proactive decision-making is vital to maintain
  Jamcracker profitability

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Market Environment

• Decisions
• How should Jamcracker tell their story to
  prospective customers?
• Jamcracker currently uses a slider bar approach
  to differentiate the different services that they
  offer

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Market Environment

• Decisions
• What business-software development, service
  delivery, consulting, etc should Jamcracker be
  in?
• Jamcracker currently has interests in many
  different aspects of the ASP market
• What companies should Jamcracker target to become
  customers?
• Current targets include the unfortunate 5,000
• Future targets to include larger companies,
  through partnerships through retailers such as
  Accenture

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Market Environment

• Why change?
• Through the years since its inception Jamcracker
  has grown rapidly
• This rapid growth can be attributed to the
  increasing use of IT in business
• Jamcracker must react to its fast changing market
  environment
• Intentions
• Attempt to find the niche in the market in which
  they can continue to operate successfully
• Maximize their capabilities
• Maintain profitability

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Market Environment

• Environment
• Fast-growing ASP market as IT becomes cheaper and
  more efficient
• More Jamcracker's will begin to surface as the
  need for this type of service increases
• Higher survival rate for companies that
  differentiate into a set, specific niche over
  those with broader set of services and products

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Stakes

• In the future, companies will no longer desire
  running applications from on-site
• The ASP business will continue to grow and become
  more profitable as more companies outsource their
  software application needs
• In this growing market, where does Jamcracker
  belong?
• They already have a good lead on the competition
  with the current customer and technology base
• But what do they do with it to continue into the
  future

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Competition

• New Entrants Cause New Decisions
• Few barriers to entry
• Chandras dedication to quality services
• Potential long-term threats from established
  technology companies
• Questions become
• What part of the market do they fit into?
• What kind of support and services should be
  provided?

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Business Model Evolution
BEGIN new line of business or create new
business model
By taking a look at their existing services,
Jamcracker would in essence, cut off the fat.
They would continue to serve their existing
customers but offer the right services
Exactly what area should Jamcracker focus on?
Should they choose a specific area in the ASP
business to pool their customers and suppliers
through? Should they partner with another large
outsourcing vendor like Accenture?
ADD functionality and features or improve
performance
ADD new products and services or ENTER
new markets
Should Jamcracker continue to service the
Unfortunate 5,000 or find their way into the
Fortune 500 companies?
LEAVE business or market or drop offering
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Recommendations

• What would you recommend that Jamcracker do?
• Enhance?
• Extend?
• Expend?
• Exit?

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Recommendations
By taking a look at their existing services,
Jamcracker would in essence, cut off the fat.
They would continue to serve their existing
customers but offer the right services

• Grow organically, or make their existing
  customers more profitable
• Develop stronger relationships with their current
  customers
• Enhance their products to better suit the needs
  of their customers
• Maintain their current customer base
• Keep serving the unfortunate 5000

ADD functionality and features or improve
performance
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Outcome
BEGIN new line of business or create new
business model
Exactly what area should Jamcracker focus on?
Should they choose a specific area in the ASP
business to pool their customers and suppliers
through? Should they partner with another large
outsourcing vendor, like Accenture?
ADD new products and services or ENTER
new markets

• What really happened?

Should Jamcracker continue to service the
Unfortunate 5,000 or find their way into the
Fortune 500 companies?
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Outcome

• Extended
• Partnered with Accenture
• Sold the Jamcracker platform to the larger
  firms
• Jamcracker was paid up front from the larger
  firms as opposed to a monthly service fee from
  the smaller firms
• Expanded
• Expand to larger firms
• One profitable firm could make just as much if
  not more revenue than ten smaller firms

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What Happened?

• Changes in the ASP market influenced the change
  in Jamcrackers direction
• Left the unfortunate 5,000 behind in search of
  securing larger firms as customers
• The three men that had a great idea went their
  separate ways
• Deviated from original idea as Accenture began
  selling the Jamcracker name and platform to its
  customers as part of their own packages

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Where are They Now?

• Chandra is still spearheading Jamcracker
• Harold Chen and Mark Terbeek have since left
  Jamcracker for other endeavors
• Both have returned to their roots in the venture
  capital market
• Their mission is to support smaller upstart
  companies

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Questions??