Gareth Noyes Director, Corporate Operations Wind River Systems, Inc. Next Generation Pricing Strategies Vision, Challenges and Best Practices

What We Do: Device Software Optimization Wind River enables companies to develop and run device software faster, better, at lower cost and more reliably.

Customer Momentum NetworkingIndustrial & AutomotiveAerospace & DefenseDigital Consumer Alcatel Cisco EMC Ericsson Fujitsu Hitachi Hewlett-Packard Huawei Intel Juniper LG Electronics Lucent Marconi Motorola NEC Nokia Nortel Siemens ABB Agilent Bosch Fanuc GE Hitachi Honeywell Mitsubishi National Instruments Omron Rockwell Automation Samsung Schneider Siemens Tektronix Tokyo Electron Yokogawa BAE Systems Boeing EADS European Space Agency General Dynamics Harris Honeywell IAI KHI LG Innotek Lockheed Martin L3 NASA NEC Northrop Grumman Raytheon Thales Smiths Aerospace Alcatel BMW Canon Ericsson Fujitsu Hewlett-Packard Hitachi Honda Konica Minolta LG Electronics Matsushita Motorola Philips Pioneer Samsung Seiko Epson Sony Thomson Toshiba 300 Million devices worldwide use Wind River technology 37%20%24%19%

Wind River Offering Circa 2002

Challenges for Growth  PRODUCTS –“Chinese Menu”  commoditise value  SALES –Transactional, project-based approach  BUSINESS MODEL –Rigid: perpetual, project-based –Unpredictable, difficult to forecast  OPERATIONS –Transactional Horizontal, “One-size- fits-all”

Our Response  Market-specific product offering  Focus on Enterprise-level standardisation  Expanded business model, licensing options –Subscription business model –Unique-User licensing option  Operational focus on ease of doing business –Assist customers with compliance –Entitlement varies over time

Today: Wind River Business Model Choices Business Model License Management Options Production License Options Subscription Perpetual Node-Locked Floating Unique User * PL-FREE Quarterly in Arrears Block Purchase Per Unit Node-Locked Floating * Utility pricing, requires reporting

Business Model Adoption  Launched November 2003  FY05 revenue of $235.4 million –Revenue growth of 15% year-over-year –Record subscription revenue of $49 million— 156% growth year-over-year  Deferred revenue balance of $77.1 million –Increase of 97% vs. ending FY 2004 balance

Insights / Lessons Learned  Treat business model & licensing options as you would a product line –Roadmap, transitions, migration paths  Align pricing / licensing with value  Understand the implications –Revenue –Company-wide commitment –Change Management –Reporting trepidation  Operationalise business model: process integration –Many more licensing touch-points

New Challenges: New Opportunities  A new business era –Compliance & controls  Open Source –Changes vendor value proposition –Community licensing terms  Innovation vs. standardisation  Accelerating software commoditisation –Open source & standards

Operational best practice Overview of Wind River operations

Licensing / Packaging Tenets  Installation / use to match business model  Make licensing transparent to developer  Restrict  enable & control  Make compliance easy  Self-service licensing cycle

Product Installation Paradigm Developer System Administrator Server Wind River License Servers Developer Desktop 1 INSTALL & DEVELOP Select either temporary or permanent Enter installation code (LAC) & user details Receive automatic 30-day license Up & Running 2 COMPLETE SETUP Migrate to license server when read Issued new license file: 3 UPDATE Download patches, updates 1 LICENSE SETUP Receives entitlement certificate w/ shipment Use PAWS to generate license files Communicate availability to installed developers 2 ENTITLEMENT Redeploy licenses Manage renewals, upgrades 3 COMPLIANCE Report usage ESD Media Kit

Developer: Installer Options

Activate your products View software entitlement

Customer Benefits  Reduction in licensing administration  Improved time to productivity for developers  Greater visibility / control over software deployment –Track and manage licenses –Measure compliance

Insights / Lessons Learned  Standard ERP & CRM packages do poor job of managing intangibles –Entitlement = tangible x licensing  Customer role segmentation –OOB lifecycle analysis post shipment  Customer self-serve when they can  Gain greater insight into software deployment habits

Next Generation Pricing Strategies Vision, Challenges and Best Practices