Businessmodel of Aspen Technology

Customer Segments

AspenTech has a niche market business model, with a specialized customer segment. Its customer base consists of firms in process industries such as chemicals, energy, construction, and engineering, as well as power, pulp and paper, metals and mining, biofuels, pharmaceuticals, and packaged goods.

Value Proposition

AspenTech offers five primary value propositions: accessibility, convenience, innovation, performance, and brand/status.

The company creates accessibility by offering a comprehensive solution. While most of its competitors provide solutions in one or two main business areas, it offers a set of software programs that address the manufacturing, engineering, and supply chain needs of process manufacturers. Moreover, its portfolio of applications tackles extremely complex and specific end-user and industry challenges, such as production scheduling for petroleum companies and feedstock selection.

The company creates convenience by offering the aspenONE licensing model. The model enables customers to their usage of numerous applications in a suite through the use of tokens (exchangeable units of measurement) licensed in amounts determined by the user. This flexibility allows the customer to use the applications whenever necessary and experiment with different ones to optimally solve their essential business problems. Software usage can also be easily increased.

The company has a history of embracing innovation. It claims that no other technology firm in the field of process manufacturing spends more on research on development as a percentage of revenue. This significant investment has enabled it to produce a number of industry firsts, such as:

• The first planning software for refineries
• The first commerically-available model predictive control software
• The first search algorithms for optimizing polymers scheduling

• The first Configured Application Product (CAP) in supply chain management The company has demonstrated strong performance. For some customers, first-year cost reductions following installation of AspenTech’s software have exceeded the solution’s total cost. Benefits experienced by specific clients include the following:

• Reliance Industries used Aspen Plus to increase production, resulting in $2.4 million in savings
• Campbell’s used the Aspen Capital Cost Estimator to reduce time for capital decisions by 30%
• Criterion used Aspen’s planning solutions to improve coverage of customer demand
• HGA used aspenOne Engineering to reduce time spent sizing relief valves by 50% The company has established a strong brand as a result of its performance. It bills itself as the top supplier of software that optimizes process manufacturing. It also indicates that it holds #1 or #2 market share positions across all manufacturing, engineering, and supply chain software categories. The company has over 2,100 customers, which include 19 of the 20 largest chemical companies, 20 of the largest petroleum companies, 17 of the top 20 engineering & construction companies, and 15 of the 20 largest pharmaceutical companies. Lastly, it has received many honors, including

two Pharmaceutical Manufacturing Magazine “Innovations 2012” Awards, Boston Strategies International’s Oil and Gas Award for Excellence in Process Optimization (2012), placement on Supply & Demand Chain Executive’s Supply & Demand Chain Executive 100 (2011), and Chemical Processing Magazine’s Readers’ Choice Award nine years in a row.

Channels

AspenTech’s main channel is its direct field sales organization. It also utilizes an inside sales team that focuses on clients in the small and medium businesses category, and maintains channel relationships with certain firms that help it reach non-core target markets. The company promotes its offerings through its website, social media pages, user group meetings, webinars, client relationship programs, and attendance of seminars and trade shows.

Customer Relationships

AspenTech’s customer relationship is primarily of a personal assistance nature. The company offers Premier Plus Support, a suite of customer service options featured in license subscription agreements that goes beyond regular Premier Support. It includes the following:

24x7 Customer Care Service – Customers receive around-the-clock access to assistance on non-technical issues, as well as escalation to the Technical Support department for technical issues

Technical Support Advocate Service – Customers receive dedicated Technical Support Advocates (TSAs) who have expertise in their specific installed products and conduct regular check-ins

Faster Response Time and Escalation Time – Quicker response and resolution times than provided through regular customer service (Premier Support); staff must meet these targets 80% of the time

AspenTech also offers the following training options for customers:

Instructor-Led Training – Traditional classroom training, virtual classroom training, and private on-site training (held at customer’s location)

Professional Services – Services that address clients‘ design and operational needs; they include:

• Solution Implementation – Helps clients derive more value from existing systems and assets
• Process Consulting – Advises on optimal changes to improve the design of assets
• Program and Project Management - Facilitates successful solution delivery while reducing risks Despite this orientation, there is a strong self-service component. The company’s website features a “Resource Library” that includes articles, brochures, data sheets, case studies, eBooks, short presentations, webinars, “getting started” guides, product version comparisons, white papers, and answers to frequently asked questions. There are also eLearning modules featuring videos.

Key Activities

AspenTech’s business model entails designing and developing its software for customers.

Key Partners

AspenTech maintains the following key partnerships:

Resellers - Sell the company’s offerings to their own customers after building expertise. Specific partners include Applied Control Engineering, Logexsoft, NovaTech, and Rolta.

Implementation Service Providers (ISPs) – Provide services such as upgrades, system integrations, and performance monitoring for AspenTech customers. Specific partners include Accenture, INEO Engineering & Systems, Genesis Oil & Gas, Hyperion Systems Engineering, and Ingenero.

Training Service Providers – Third-party firms that offer training on AspenTech products to customers in their focus territories. Specific partners include Equinox Software & Services, Helium Consulting Private, PTT ICT Solutions, and Wave Engineering.

AspenTech provides these partners with sales/technical training, sales management/business development support, access to technical enablement services, product support experts, and marketing resources (white papers, product collateral, and other marketing tools).

Lastly, AspenTech maintains a referral program through which it invites organizations to forward their clients to the company. If the lead results in a purchase, the organization receives a referral fee.

Key Resources

AspenTech’s main resource is its research and development team, which includes over 400 people, including more than 80 process modeling developers - 50% of who have PhDs. Many of them operate in one of its three R&D Centers of Excellence for Engineering, Manufacturing & Supply Chain, and Quality. The company also depends heavily on its technical sales employees, many of whom have chemical engineering degrees; product specialists, who have industry expertise; and training and consulting staff, who provide educational and advisory services to customers.

Cost Structure

AspenTech has a value-driven structure, aiming to provide a premium proposition through extensive personal service and frequent enhancements of its product. Its biggest cost driver is sales/marketing, a fixed cost. Other major drivers are in the areas of research and development and administration, also fixed expenses.

Revenue Streams

AspenTech has two revenue streams:

Subscription and Software – Revenue generated from the licensing of software products, which generally requires annual payments, and corresponding support services

Services and Other – Revenue generated from professional and training (on-site, web-based, and customized) services provided to customers