00285
1	UNITED STATES DISTRICT COURT
2	FOR THE NORTHERN DISTRICT OF CALIFORNIA
3	SAN FRANCISCO DIVISION
4	--------------x
5	UNITED STATES OF AMERICA, :
6	et al., :
7	Plaintiffs, :
8	v. :CASE NO. C-04-00807 (VRW)
9	ORACLE CORP., :
10	Defendant. :
11	--------------x
12	SOME PORTIONS DESIGNATED HIGHLY CONFIDENTIAL
13
14
15	Deposition of DAVID L. DORTENZO
16	Volume II
17	Washington, D.C.
18	Tuesday, May 18,2004
19	9:30 a.m.

00290
2	DAVID L. DORTENZO
3	having been duly sworn, testified as follows:
13	Q During Mr. Brown's analysis, examination, I
14	believe you testified that in many implementations
15	localizations are required?
16	A Yes, I did.
17	Q What are localizations?
18	A Localizations have to do with regulatory or
19	financial reporting requirements that are necessary by
20	local jurisdictions, whether they be governmental or
21	whether they be agencies in different countries.
22	Localizations usually require tailoring of
23	the software to manipulate data that can be made
24	available for reporting purposes for the regulatory
25	and federal agencies.

00291
1	Q And how is the -- the software tailored, as
2	you say?
3	A There are two ways the software might be
4	tailored. We might take data from the database and
5	create a specialized report that would report that
6	data and that information for the purposes.
7	In some cases, depending on the business
8	requirements associated with that localization, it may
9	require custom reporting. So, it might require some
10	actual customization, software customization in
11	certain cases, or reporting customization, so that the
12	requirements can be met.
13	Q What is software customization?
14	A Software customization is the process
15	whereby a technologist will go into the source code
16	and they change to the source code so that the means
17	of manipulating the data would be different than what
18	was originally shipped with the software package.
19	Q And is that something Deloitte does?
20	A We, on rare occasion, will do that. It's
21	not a core part of our business.
22	Q Does Deloitte perform localizations for
23	clients?
24	A We do do perform -- sorry -- we do perform
25	localizations for our clients. We may do that -- we

00292
1	may do the requirements and hand off the technical
2	development to either one of our subcontractors or a
3	third party. Again, we do that on our own basis.
4	Q But Deloitte would hire a subcontractor to
5	do that?
6	A That's right.
7	Q Are localizations required for Oracle,
8	PeopleSoft, SAP and Lawson software?
9	A Yes, they're required. They're usually,
10	independent of the software, they're required by the
11	local governing bodies.
12	Q I've seen in the -- in some of the
13	documents produced by Deloitte reference to, I think,
14	it's a fit-gap analysis?
15	A Yes.
16	Q Are you familiar with that?
17	A Yes, I am.
18	Q What is a fit-gap analysis?
19	A Fit-gap analysis is a part of our system
20	development life cycle methodology, it has to do with
21	business requirements. And typically what we will do
22	is we'll go into a client environment, and we'll
23	understand their business requirements, understand
24	what their intended business process work flow would
25	be, what data is required to support that work flow,

00293
1	and what reporting or information management might be
2	required to support that business process.
3	Typically that constitutes a requirement
4	specification. We take the requirement specification,
5	in some cases -- well, in all cases, I guess -- and we
6	will map that software or that specification to the
7	software to understand how the business software will
8	support those business process requirements, the data
9	requirements for the information management
10	requirements.
11	The result of which ends up as a gap
12	analysis or a fit analysis. So if the software
13	inherently fits the business process, at all, then
14	there's a fit. And if there is a lack of fit or the
15	fit is not quite as expected by the client
16	organization then that would result in a gap and we
17	would call it, obviously, a gap.
18	So it's a fit-gap analysis that would
19	correspond to the business requirements that would
20	identify where there might be fits or gaps.
21	Q And if there's a gap you call that out for
22	the client?
23	A We will do that, yes.
24	Q And what will you -- will you make any
25	suggestions to the client in terms of what can be done

00294
1	to fill the gap?
2	A We do do that. It's not automatic that we
3	would do that. Sometimes the clients are looking for
4	a degree of fit with a particular software vendor.
5	Sometimes they're looking for the actual solution of
6	how to get around that.
7	There could be different ways to resolve
8	that particular issue, some of which involve changing
9	the client's business processes. If they are --
10	sometimes they're anti customization. They don't
11	really want to pay for or they're concerned with the
12	risk of customization in terms of maintenance and
13	reliability, so sometimes they won't even go that far
14	in terms of identifying the resolution of a particular
15	gap. They may change their business process.
16	On the other hand, we do understand what
17	the gap might entail, and different ways to work
18	around that gap or different ways to resolve that gap,
19	sometimes, which would result in the customization
20	which would require specification of design and build,
21	etcetera.
22	Q When you say some clients are anti
23	customization, what do you mean?
24	A There's -- basically when the software is
25	shipped -- when the software is sold, I should say --

00295
1	all the clients that I've ever dealt with have bought
2	these software vendors' maintenance that goes along
3	with that software package.
4	The software is updated by the software
5	vendors on a periodic basis, and the basis can vary by
6	particular vendor. Customization may entail the fact
7	that that source code, as I mentioned earlier, could
8	be changed.
9	If that source code, if it's the case that
10	the source code is changed, and the software vendor
11	comes out with a subsequent release of the software or
12	an updated version of the software, or a patch of the
13	software, that software update, patch or release might
14	interfere in the event that a customization had been
15	made to the software. And, therefore, the client
16	would not be able to maintain its course very easily
17	on the maintenance program that the vendor has set up.
18	Therefore, if clients have a concern that
19	they're not going to be able to be enabled by the
20	release process, and that a customization might,
21	perhaps, interfere with that release process, they may
22	be hesitant to customize or hesitant to -- to follow
23	that course of action.
24	Q And they're hesitant because they're
25	worried that they will have to spend additional

00296
1	dollars down the road when new releases or patches or
2	upgrades come out to do further customization?
3	A That is correct. Depending on the degree
4	of customization they might be worried that they fall
5	completely off of that vendor's migration strategy for
6	a longer period of time.
7	So if the degree of customization is high
8	or longer in the front end, and it becomes difficult
9	to maintain the software product based on the vendor's
10	release strategy, then they would have to spend time
11	or dollars or schedule interruptions or maybe business
12	interruptions, depending on the degree of
13	customization, and if the magnitude of that process
14	grows to a point where it's unmanageable from a cost
15	or business perspective then the clients would not
16	want to be on that path, typically.
17	Q Could you give me some examples of clients
18	that you're aware of, of Deloitte, that are anti
19	customization?
20	A Well, I would say by and large the going in
21	position of clients, nowadays, is to be anti
22	customization. So, I would say in most cases,
23	generally speaking, our clients will be anti
24	customization.
25	When we do the fit-gap analysis, and we

00297
1	talk about solutions in the event that a client is
2	unwilling to change their business processes, then if
3	a customization is even feasible what we generally do
4	is go back with a client and go through a business
5	case analysis that says if they're going to spend "X"
6	amount of dollars to make this customization then why
7	should they do that, this is generally a question we
8	usually ask our clients to ask themselves internally,
9	in that process we encourage senior managements in our
10	client organizations to go back and investigate what
11	good business rationale might exist for them to
12	undertake that customization process.
13	In some cases, not all cases, our clients
14	will proceed with customizations. In the event they
15	proceed with customizations, and there are some
16	examples of clients who have declined and denied those
17	customizations and tried to stay pure vanilla, or some
18	of the clients who have actually gone on and done
19	customizations. So, there's examples on both sides of
20	the equation, Chris.
21	Q Is it fair to say that part of your
22	practice at Deloitte is advising clients on how to
23	change their business practices in order to, in the
24	sense, fit the software?
25	A That-- that is the case.

00298
1	Q And could you explain that, please?
2	A Well, yes, the vendor software that's on
3	the marketplace today is very flexible from the
4	standpoint of there are multiple means of configuring
5	that software to satisfy business requirements.
6	It's our job to try to make those
7	implementations go as smoothly as possible. And one
8	of the best practices in making it go smoothly is to
9	try to avoid the customization path.
10	What we will do is understand that
11	flexibility that's associated with the software
12	product. And we will try to explain different
13	methods, i.e. that flexibility to our clients, so that
14	they understand the various alternatives in setting up
15	that software to meet their business processes.
16	If it's the case, again, that that software
17	doesn't exactly meet their requirement, we might talk
18	about customization, in which case, again, we try to
19	weigh the pros and the cons, whether it be costs or
20	whether it be maintainability, at some point, and then
21	try to make the best decision for the client
22	situations in that case.
23	If we decide against the customization then
24	it almost always requires a client to go back and
25	adjust its business processes so that they can avoid

00299
1	that customization.
2	Q And when you're talking about degree of fit
3	in terms of software from Oracle, PeopleSoft or SAP,
4	are you talking about the fact that those software
5	packages will not necessarily meet all of a client's
6	needs?
7	A Let me try and understand your question.
8	If we're talking about those four products when we go
9	through fit-gap analysis probably in all cases those
10	softwares won't meet a hundred percent of the
11	requirements, but the concept is that the -- those
12	software products will meet a great degree of those
13	requirements. And a great degree could mean anything,
14	at least in my mind, from probably 75 to 85, 90
15	percent.
16	In all cases none of these software
17	products, to my knowledge, have all the report
18	requirements configured. So, there is, in each and
19	every implementation that I've ever been involved
20	with, in all the different vendors that I've worked
21	with, there's always tailoring in the software that
22	has do with that flexibility and different options;
23	there is reporting required that is I like to call it
24	personal or more related to a particular company's
25	needs; and the vendors can't have everything available

00300
1	for all those companies.
2	So when we talk about 75 or 85 percent a
3	lot of the difference has to do with the fact that the
4	tailoring the software and doing some of the
5	reporting, and in some case that customization will
6	also be part of that.
7	Q And part of -- part of Deloitte's role is
8	to -- is to take the software from meeting 75 percent,
9	let's say, of the client's needs, and providing
10	bolt-ons and whatever else the client might need in
11	order to try to achieve the client's business
12	objectives?
16	Q I'm talking about software from SAP,
17	Oracle?
18	A It is our job to try to take that software,
19	as delivered from the vendor, and make it, through our
20	business transformation approach, tailor it as close
21	to the client's business needs as we possibly can.
22	Q And part of that might be with what I think
23	you testified last time are called blot-on products?
24	A There could be bolt-on products involved.
25	I think the example we talked about, one example, was

00301
1	Vertex, which might be specific tax functionality
2	sales and use tax functionality.
3	So, we might take another piece of software
4	from another vendor and interface that into the
5	applications architecture or the solution that we're
6	driving for that particular client, and that might be
7	part of the solution set that we use to meet the
8	client's requirements.
9	Q Are you aware of any sort of standard
10	formula that estimates the amount of implementation
11	costs as a multiple of software license fees?
12	A Formula might be a more formal term than I
13	would use. There are some rules of thumb, if you
14	will.
15	Q Sure.
16	A Those rules of thumbs vary depending on the
17	company's complexity and its architecture and the
18	nature of its operation.
19	I have heard rules of thumb, over the past
20	ten years, that have changed, that have reduced as the
21	market's become more competitive.
22	Initially those rules of thumb were
23	probably three to five times the magnitude of the
24	software cost, today I would say the range is probably
25	closer to one to three times, three being pretty much

00302
1	on the high end.
2	Q And-
3	A But, again, it depends, it goes back to the
4	company's operations complexity and requirements.
5	Q Sure. The more complex the company the
6	more --
7	A Higher --
8	Q The higher the multiple?
9	A That's right.
10	Q And when you say that the rule of thumb has
11	come down from approximately three to five times
12	software license fees to one to three times, you
13	referred to competition, is that competition from
14	BearingPoint, people like that?
15	A I think it's competition on two levels.
16	The software products continue to sophisticate and
17	enhance their functionality, so over time, and this
18	period that I talk about is probably the last 10 or 15
19	years, the software vendors have sophisticated their
20	products so they are more readily developed to meet
21	the company's needs.
22	The second aspect of the multiplier, the
23	change in the multiplier, is the fact that there are a
24	lot of integrators who are trying to develop
25	pre-defined solutions that are trying to compete using

00303
1	offshore technologies, and things like that, that have
2	driven the costs of the implementations lower and
3	therefore the multipliers are coming down, the
4	competition has increased.
5	So we're all looking for ways to implement
6	these products on a more rapid basis with less
7	customizations, if possible, and with reduced
8	schedule.
9	Q You used the word integrators in your last
10	answer, what are integrators?
11	A When I saw integrators I refer primarily to
12	company's like Deloitte, also the BearingPoints that
13	you mentioned, could also be IBM, could also be some
14	of the implementation boutiques or their companies,
15	such as EDS, who have Oracle implementation or SAP
16	implementation practices, companies like that.
17	So when I say integrators there's usually a
18	role for a particular external service provider that
19	has to do with trying to take their Legacy
20	environment, manage the introduction of new software
21	products, or any of the bolt-ons and trying to tie
22	that all together, which is the integration job,
23	therefore, system integrators.
24	Q Are you familiar with a company called CSC?
25	A I am, yes.

00304
1	Q Is that an integrator?
2	A It is an integrator.
3	Q While you've been at Deloitte have you been
4	involved in any implementations of software where the
5	client has used someone other than a Deloitte or
6	BearingPoint, and Accenture, one of the big five
7	consulting firms, to do basically to conduct the
8	software evaluation?
9	A Let me -- restate that for me, Chris. I
10	want to make sure I understand.
11	Q Sure. I want to figure out when you
12	conduct an implementation at Deloitte if you've become
13	aware that a client has used someone other than a big
14	five consulting firm to help it in the software
15	evaluation, maybe it's a Gartner, maybe it's a CSC, or
16	whomever it might be?
17	A We do have situations like that. We have
18	situations, for example, in the public sector, where
19	the firm that might be involved in the selection
20	activity is precluded from doing the implementation
21	starting a little bit on those implementations.
22	Our clients do, it's a growing trend, make
23	more and more use of Gartner and the Meta group, and
24	other firms like that, who are third-party evaluators
25	of the software products that try to understand its

00305
1	capability and its reach in a particular market, how
2	well it might fit in a particular market. And, yes,
3	we have been involved in a situation where those
4	companies have advised our clients.
5	Q And have you spoken with any of those
6	clients about why they've chosen to use Gartner over
7	Meta Group or some other entity in the evaluation
8	process?
9	A Gartner is the firm that is top of mind,
10	and probably most respected from the research firms
11	vantage point within the software industry. So
12	Gartner becomes the top of the pile, if you will.
13	Some of the other companies have imitated
14	what Gartner has done or they've tried to create niche
15	practices around research that may deal in certain
16	topics, like advanced planning and scheduling, and
17	they may try to exploit a particular business area in
18	an effort to throw their competitive position against
19	the Gartner, but Gartner appears to be or is the known
20	commodity in the business.
21	Q Are you familiar with an SAP product called
22	NetWeaver?
23	A I'm not familiar with it, I've heard of it,
24	but I don't know anything about the product.
25	Q What about Hyperion, are you familiar with

00306
1	that product?
2	A I am familiar with that product, it's
3	H-y-p-e-r-i-o-n.
4	Q What is Hyperion?
5	A Hyperion is a software product that is
6	utilized for financial reporting or consolidation
7	purposes. It is -- it is also used as a data
8	warehousing or a data management tool set in that when
9	you install Hyperion inside your application
10	architecture, and within your software environment,
11	you would extract data through the Hyperion product,
12	manipulate that data, and use that particular tool to
13	format the different reports and information that's
14	required from the systems, from the Legacy systems or
15	the new software products.
16	Q Is Hyperion sometimes used by corporations
17	that have acquired divisions or subsidiaries that have
18	existing Legacy systems that may not be the same as
19	the system that the -- that the headquarters is using?
20	A That is.
21	MR. BROWN: Vague. Objection, vague.
22	BY MR. YATES:
23	Q You may answer.
24	A That is the case. I've seen it used a
25	number of times in that capacity.

00307
1	Q How is it used in that capacity?
2	A Company officers are interested in making
3	sure that they report their financial results,
4	particularly when they're governed by the SEC. And,
5	as such, when merger acquisition activities takes
6	place, consolidation activities take place, those
7	financial officers, in particular, are interested in
8	making sure that they have a certain amount of
9	reliability on both their business systems and their
10	business processes so that they can report on those
11	requirements and those regulatory requirements
12	appropriately.
13	A lot of times a Hyperion product will be
14	installed into that particular type of situation.
15	And, as I explained earlier, that data will be input
16	or extracted from Legacy systems into Hyperion and
17	then utilized for reporting purposes.
18	A lot of times that can be -- if I can
19	think of the term -- can be an interim, an interim
20	strategy that CFO's do deploy in these particular
21	situations.
22	So that until a company can either decide
23	what its capital spend will be on these systems or can
24	decide what its information strategy will be the
25	Hyperion solution will maintain the plan for reporting

00308
1	requirements, in the meantime.
15	Q And talking - let's talk a little bit
16	further about , as I understood your REDACTED
17	testimony had a full Oracle suite in REDACTED
18	place?
19	A They did in their Legacy software REDACTED
20	systems.
21	Q And the side had a full SAP system in REDACTED
22	place?
23	A That's correct.
24	Q And by full ERP I mean it had financial
25	management software, CRM's, supply chain, and human

00309
1	resource.
2	A ERP, to oil and gas, usually infers to back
3	office accounting functionality, it would include
4	human resource functionality, it would include the
5	downstream business operations, which I think they may
6	have mentioned last time is everything from the
7	refinery gate.
8	So, once the crew comes into the refineries
9	and starts to leave the gate as gas, however that be
10	shipped, whether it be freighter or pipeline,
11	etcetera, everything from the refinery gate through
12	the retail operations, not necessarily including the
13	retail operations, but through the front door of the
14	retail operations, some of the retail functionality
15	was targeted functionality for growth within the SAP
16	and the Oracle applications in those particular cases.
17	But primarily it was back office and
18	downstream operations, did not include upstream
19	operations, which is the refined or the research and
20	development and the exploration up to the final point.

00310
13	Q And I believe we established last time that
14	People Soft does not have functionality for the oil and
15	gas industry; is that correct?
16	A That is my understanding, yes.
17	Q Is it -- is it fair to say that the term
18	ERP can have a different meaning in oil and gas
19	industry, as opposed to discrete manufacturing?
20	A Yes.
21	Q And I believe you testified last time that
22	-- that Deloitte conducted an analysis for REDACTED
23	of whether should migrate REDACTED
24	its Legacy operations to a -- to an SAP REDACTED
25	application; is that correct?

00311
1	A The job that was referenced, the project
2	that was referenced, was an ERP strategy study. And
3	the ultimate question was because Legacy ran on REDACTED
4	Oracle, which I think we established last time was a
5	product that had developed and then sold to Oracle. REDACTED
6	Q Right?
7	A And that Legacy operations ran on REDACTED
8	SAP, the question in the CFO's mind, who was our
9	client, was it's going to cost a lot to put both of
10	these operations onto a single platform, because I
11	have two extremely large corporations that we're
12	pulling together.
13	So, my question, paraphrasing him, my
14	question as the CFO would be does it make sense for me
15	to have a single platform or not, does it make sense
16	for that platform to be either SAP or Oracle, and if
17	it doesn't make sense for me to consolidate onto that
18	platform then what would I do.
19	So, that was the purpose of the study. And
20	the result of the study was that over the longer term
21	it did make sense to consolidate onto a single
22	platform, that that would be a multi-year strategy.
23	The cost would be very large, in the hundred, hundred
24	to 200 million dollar range, and that on an interim
25	basis that they could absolutely pursue a strategy of

00312
1	utilizing, both of those products in a hybrid
2	environment, and that they could establish strategy
3	around middleware to consolidate some of the
4	information from those environments where they needed
5	to for consolidation or for operational reporting
6	processes.
7	Q Do you recall when Deloitte conducted that
8	study.
9	A That study was conducted July of 2000, it
10	began, maybe, in May of 2000, and it actually went on
11	for probably by way of our system accounting probably
12	about nine months.
13	There were a couple of phases to it. And
14	the first phase was about four to six months, and then
15	there was some subsequent activity involved around it.
16	Q So, it's fair to say that it was probably
17	over in the first quarter, first quarter of 2001?
18	A That's right. That's right.
23	Q Did you have an understanding of whether REDACTED
24	has migrated to an SAP platform or any full suite
25	platform?

00313
1	A It's my understanding that they have not
2	migrated their operations entirely onto SAP, at this
3	point in time.
4	Q And you mentioned they pursued of some
5	middleware strategy, instead. What do you mean by
6	middleware?
7	A Middleware is a technology that's
8	associated with the integration of different
9	technology, whether they be technology infrastructure
10	or software environments.
11	And middleware provides a technical means
12	of extracting data, manipulating that data and
13	reformatting that data so that it's able to be used
14	within a different environment.
15	So, it, in essence, ties together systems
16	and can be used to extend particular functionality in
17	those Legacy system architectures so that a company
18	could deploy a middleware strategy and further evolve
19	some of the functionality that it has as an
20	alternative to displacing softwares.
21	Q Is it-is it fair to say that , for REDACTED
22	capital expenditure reasons, elected to pursue the
23	middleware strategy at least for some period of time?
24	MR. BROWN: Objection. Nevermind, I
25	withdraw the objection.

00314
1	A pursued that strategy more so because of REDACTED
2	the scale of their operations and the need, based on
3	the consolidation of these two corporate entities, the
4	need for extended functionality and reporting.
5	The SAP implementation and strategy that
6	eventually was developed would be that the REDACTED
7	organization would migrate to SAP over a period of two
8	to three years.
9	So, the challenge for that CFO became what
10	do I do in the meantime, where I need to have
11	improvements made to my business or to my information
12	technology infrastructure, again, either software or
13	hardware.
14	So, he was not willing to necessarily stand
15	still. And there were a lot of Legacy applications
16	that had been developed in the environment that REDACTED
17	were very germane and very specific to the business
18	requirements that existed in the oil and gas sector,
19	because many of the software vendors had not evolved
20	their softwares along that capability.
21	So, there were some very unique and very
22	well developed software, in-house software, I should
23	say, that had high levels of utility and low degrees
24	of technical sophistication that were still very good
25	tools, from a business perspective.

00315
1	So to try to leverage those particular
2	tools, without having to traverse that whole two to
3	three year implementation timeframe, they might take
4	some of those Legacy applications that were highly
5	functional and then leverage them into that
6	environment by use of middleware, or by sending that
7	functionality through some of the development that
8	went along with the middleware.
9	Q Do you have an understanding of what sort
10	of internally developed in-house software was being
11	run at ? REDACTED
12	A I do have an understanding. One example
13	would be in their supply function. So, as they tried
14	to -- they tried to forecast their business
15	requirements around production, around what the supply
16	side of the business might require from the standpoint
17	of gasoline production into the different markets that
18	they served, they would certainly try to forecast
19	those production requirements and then manage
20	backwards into its inventory.
21	There were some, and then, of course,
22	supply then leads backwards into the distribution
23	function into the terminals back to the refinery and
24	back to the upstream operations.
25	So many of the operational business

00316
1	processes that they had were supported by some of
2	these home grown, in-house developed software tools,
3	and that's where a lot of the functionality existed,
4	mostly around the operations as opposed to some of the
5	back office functionality that we've talked about.
6	Q Shifting gears a little bit, while you've
7	been at Deloitte have you been involved in some
8	evaluations of software for clients?
9	A I'm pausing because I'm trying to think
10	back over the ten-year period and whether I've
11	actually ever done a selection project in my tenure at
12	Deloitte. And I can pretty assuredly tell you that I
13	have not.
14	Q Okay.
15	A It's, again, when I came into the firm the
16	policy was that we tried to avoid software selection
17	types of projects and that we focused on the
18	implementation based on the revenue stream associated
19	with that part of our business.
20	Q The implementations of a more attractive
21	business?
22	A That's correct. That's correct. And the
23	software vendor always gets upset when he did a
24	selection. So as we partner with software vendors in
25	certain cases it's a difficult balance to strike,

00317
1	sometimes, when they come head to head in competition.
2	Q And that's because Deloitte has alliances
3	with SAP and with Lawson and with Oracle and with
4	People Soft?
6	Q Are you aware of instances from your
7	implementation work or just your general experience in
8	which clients have decided to defer purchases of ERP
9	software because of budget reasons?
10	A Yes.
11	Q And can you give me some examples?
12	A A couple of different categories I think
13	that answer could fall into. Sometimes the company's
14	overall economics might fall upon hard times and they
15	may shift expense so an ERP system selection, or
16	system decision, I should say, becomes deferred.
17	Correspondingly, if the software's been --
18	in 's case this was part of the issues -- the REDACTED
19	software spend was significant so when a CFO tries to
20	understand how he's going to budget a hundred fifty or
21	200 million dollar project that requires some careful
22	planning, that requires some fiscal planning and is
23	material in terms of a company's business, so they
24	proceed very carefully and they may defer.
25	Sometimes our clients will become aware

00318
1	from a research and development perspective of what a
2	company is evolving their product towards, and
3	sometimes they will make a decision to either maintain
4	their Legacy environments or not migrate to a new
5	software product because they really believe that it
6	might be a better strategy to wait until that next
7	software release, because something new is coming, CRM
8	functionality might be coming, and why take another
9	brand in the situation when maybe I could stay on that
10	single vendor platform and it would make certain
11	things easier.
12	MR. BROWN: I'm going to object to the
13	answer and move to strike on the grounds that it's not
14	-- it's vague as to the reference as to ERP. We had a
15	discussion about CRM, for example.
16	BY MR. YATES:
17	Q In your -- in your answer, when you were
18	referring to ERP, what did you mean, sir?
19	A ERP, to me, is financial and back office,
20	as well as the operational and the supply chain
21	management. I'm sorry, operational is -- let me
22	restate -- financial and HR, from a back office
23	perspective, supply chain management as well as
24	customer relationship management is what I think of
25	when I think of ERP.

00319
1	Q And that's the way you were referring to
2	ERP in your answer?
3	A That's the way I was referring to it in my
4	answer.
5	Q Now, were you done with your answer before
6	there was an objection?
7	A I believe so, yes.
8	Q Okay. Is the -- is the decision to defer
9	purchase of ERP software is that -- is that sometimes
10	referred to as a - as a do nothing choice?
11	A Could be referred to as that, sure.
12	Q To your knowledge, if -- if a company is --
13	is evaluating new ERP software, or upgrading its ERP
14	software, will the -- will the company ever threaten
15	to do nothing in order to try to obtain a better price
16	from the software vendors?
17	MR. BROWN: Lack of foundation, vague.
18	A I don't know that I've seen that to be the
19	case. I guess I don't recall an executive ever having
20	a discussion with me in that particular situation
21	where they have tried to utilize that strategy to
22	reduce the software price or the implementation price.
23	Q Deloitte's clients are pretty much all
24	large organizations, correct, over 500 million dollars
25	a year in revenue I think you testified last time?

00320
1	A That's a fair statement. That's a fair
2	statement. We do have clients that are smaller than
3	that. We do have a strategy in place right now to
4	evaluate the smaller market segment to determine if a
5	client does not meet that threshold why would we go
6	after that particular -- why would we pursue that
7	client. We will pursue those clients if there's good
8	business rationale to do that.
9	Q And what are some of the factors that you
10	will consider when you look at clients under 500
11	million dollars a year, annually?
12	A We will look at where they're at in terms
13	of their gross strategy. We will look at where
14	they're at in terms of their market, it might be a new
15	entry to a new market to us.
16	We also look at whether or not it makes
17	sense to implement that particular implementation, and
18	if we can do something for our internal business, if
19	we can grow our business depth or our staff to have
20	greater skills in a certain particular area supply
21	chain in our HR, any of those types of things, those
22	are usually the reasons.
23	Q I realize you haven't been involved in the
24	software evaluation, but have you ever discussed with
25	any -- any clients or advised clients on how they

00321
1	might obtain the best price for ERP software?
2	A Yes.
3	Q Okay. And what do you tell clients?
4	A The biggest secret over trying to obtain
5	preferred pricing is to, if the timing is right, to
6	try to time your purchase towards that software
7	vendor's year end or quarter end, in that particular
8	order. That's -- that's really the primary leverage
9	point.
10	I guess the other -- the other leverage
11	points that we advise our clients on is depending on
12	how well established that particular software vendor
13	might be in a particular marketplace, then the clients
14	sometimes have leverage, or if the clients are in a
15	situation whereas we discussed before, the software
16	vendor might be evolving its product to a new set of
17	functionality, or a new solution, sometimes the
18	clients can obtain preferred pricing by being first or
19	by being an early adopter is probably a better
20	business term to use.
21	Q Any other advice that you can recall giving
22	to clients, other than I think the three or four
23	categories you've mentioned?
24	A The other thing that we might entertain is
25	sometimes we're aware of -- sometimes we're aware of

00322
1	what the discount structure has been for a particular
2	software products, and we may -- a client may say,
3	gee, I've got a discount of "X" percent, do you think
4	that's good or bad.
5	And sometimes we may offer an opinion that
6	in this industry we've seen it vary from Y to Z, but
7	generally speaking that's a pretty broad range, and
8	general information.
9	So, it's -- it comes down to the specific
10	client's application of that particular software
11	product, and some of the pricing factors, and as the
12	pricing methodologies change within the software
13	vendors, radically