Aspen Technology, Inc: Currency Hedging Review HBS
Introduction:
Aspen is a software company which was established in 1982. The company mainly provides simulation solutions to process manufacturing companies. The main industry which the company focuses on is chemical processing. The entire idea began with the project of Advanced System for Process Engineering in MIT in 1976. This project was than acquired by Lawrence Evans whom founded Aspen. In a very short amount of time Aspen became a major player in the simulation part of the software industry. The company started off as a privately owned firm but in 1995 turned into a publicly traded company with a capitalization of 200 million dollars. The leading product of Aspen is Aspen Plus; we have to note that 48 % of sales were stemming from this product in 1995.
The company gives great significance to R&D as the customers commitment depends on the development of Aspen’s current products. In 1995, 11.4 million dollars was dedicated to R&D. There is a factor of foreign currency expense as 20% of the total R&D expense was denominated in British pounds; the rest was in U.S dollars. Aspen enjoys a collection of committed and loyal customers; we can come to this from the increase of the licensing fees between the periods of 1988 and 1995. There were three increases in those periods at the rates of 10 percent. It is also crucial to note that 90 % of Aspen’s customers renewed their licensing agreements. Aspen attained 34 % of revenues from license renewals. An additional 34 percent was gathered from providing further services to current customers. The company has sales offices in UK, Hong Kong, Japan and Brussels. There is a joint venture operation with China’s national petroleum and petrochemical company. Aspens European operation headquarters is located in Belgium. Aspen’s general sale policy is built upon non-cancelable contracts which last three to five years. The annual cost of a license for a single US user is between $10,000 to $25,000 dollars. The company’s policy
Aspen is a software company which was established in 1982. The company mainly provides simulation solutions to process manufacturing companies. The main industry which the company focuses on is chemical processing. The entire idea began with the project of Advanced System for Process Engineering in MIT in 1976. This project was than acquired by Lawrence Evans whom founded Aspen. In a very short amount of time Aspen became a major player in the simulation part of the software industry. The company started off as a privately owned firm but in 1995 turned into a publicly traded company with a capitalization of 200 million dollars. The leading product of Aspen is Aspen Plus; we have to note that 48 % of sales were stemming from this product in 1995.
The company gives great significance to R&D as the customers commitment depends on the development of Aspen’s current products. In 1995, 11.4 million dollars was dedicated to R&D. There is a factor of foreign currency expense as 20% of the total R&D expense was denominated in British pounds; the rest was in U.S dollars. Aspen enjoys a collection of committed and loyal customers; we can come to this from the increase of the licensing fees between the periods of 1988 and 1995. There were three increases in those periods at the rates of 10 percent. It is also crucial to note that 90 % of Aspen’s customers renewed their licensing agreements. Aspen attained 34 % of revenues from license renewals. An additional 34 percent was gathered from providing further services to current customers. The company has sales offices in UK, Hong Kong, Japan and Brussels. There is a joint venture operation with China’s national petroleum and petrochemical company. Aspens European operation headquarters is located in Belgium. Aspen’s general sale policy is built upon non-cancelable contracts which last three to five years. The annual cost of a license for a single US user is between $10,000 to $25,000 dollars. The company’s policy