Salary.com (SLRY)

Strategic Initiatives

Fiscal 2009 was a transformation year for us and during the year we made significant progress towards our long-term vision. We started the year as the on-demand leader in compensation management and an emerging leader in on-demand talent management. Through internal investment and acquisitions, we ended the year as a provider of a full range of HR solutions. In a single purchase, our customers can now acquire HR data and point solution tools for compensation and competency management, strategic talent management solutions for performance management, compensation and succession planning, and learning and development and transactional HR solutions for Payroll, Tax, benefits, HRMS and employee self service. We believe this expansion of our offerings will increase our long-term success, especially as we continue to integrate the applications we obtained in the Genesys acquisition and work to integrate our solutions into a single product suite.

From a market perspective, we continue to believe that the on-demand HR categories are high growth markets. We believe that on-demand software and data are superior to legacy software and services offerings. Given the lower up-front cost and total cost of ownership, we believe that more companies will switch to on-demand HR solutions, and that we are leading the way with the broadest on-demand HR offering. We are committed to an operating philosophy that is focused on generating cash flow from operations without sacrificing future growth. In line with this philosophy:

Our pipeline of sales opportunities, both into new customers and existing customers, continues to expand with more products, more bundled sales, and larger transactions and our product line strategy focuses on product excellence to take and command category leadership positions. We are continuing to invest in extending our own

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products, and re-coding products we acquire, to ensure we remain a provider of integrated best of breed solutions. We believe that in today’s challenging economic environment, these strategic initiatives will help us continue to grow our business, gain market acceptance for our bundled products and achieve positive cash flow. Prior to September 2008, we pursued a strategy of significantly increasing our investment in sales and marketing and expanding our sales and marketing teams. As a result of the recent financial crisis in the credit markets and difficulties in the financial services sector and continuing geopolitical uncertainties, the direction and relative strength of the U.S. and global economy have become increasingly uncertain. This uncertainty has caused our current and potential customers to reduce spending on new IT and HR solutions such as ours, which in turn slowed our historical growth levels. This slowdown resulted in less of a return on our increased investment in sales and marketing than we expect would have entered in a more robust economy. In order to meet this changing economic environment, we have refocused our strategy away from expanding marketing and sales and towards reducing our expenses, leveraging our current infrastructure and providing solutions that integrate compensation management, talent management and HRMS/payroll into a single purchase of products that are more efficient for our customers. During fiscal 2009, we reduced our workforce by 16% which is expected to reduce our future annual operating expenses by approximately $10 million. We expect to continue to seek alternatives to reduce expenses and achieve positive cash flow, while still supporting our customers and products, although we expect that any reductions in expenses in fiscal 2010 will be more moderate as compared to fiscal 2009. We also believe that our investments over the past year in these sales and marketing initiatives created critical infrastructure, which we believe will serve as a basis for future growth and allow us to continue to attract new customers and provide high level products and support, without significant additional short-term investments.

We have made five acquisitions of businesses since our initial public offering in February 2007. Through these acquisitions we have been able to expand our product offerings and make significant progress towards our long term vision we describe above. The expansion of our product offerings has expanded our addressable market and significantly contributed to our growth in revenue and our business volumes. Although, we expect to slow the number business acquisitions, future and historical acquisitions remain a significant component to our growth strategy for fiscal 2010 as we continue to integrate these acquisitions and execute of our strategy of integrating our solutions into a single product suite.

By pursuing these strategic initiatives, we believe that we can continue to take and extend product and market leadership in the niche categories in which we compete while building a strong competitive position for our on-demand Total HR Suite.

Strategic Initiatives

Fiscal 2009 was a
transformation year for us and during the year we made significant progress towards our long-term vision. We started the year as the on-demand leader in compensation management and an emerging leader in on-demand talent management. Through internal
investment and acquisitions, we ended the year as a provider of a full range of HR solutions. In a single purchase, our customers can now acquire HR data and point solution tools for compensation and competency management, strategic talent
management solutions for performance management, compensation and succession planning, and learning and development and transactional HR solutions for Payroll, Tax, benefits, HRMS and employee self service. We believe this expansion of our offerings
will increase our long-term success, especially as we continue to integrate the applications we obtained in the Genesys acquisition and work to integrate our solutions into a single product suite.

Strategic Initiatives

In May 2008, we announced new marketing and sales initiatives designed to accelerate growth and expand our leadership position in the compensation and employee performance management markets. Over the next two years, we plan to re-invest up to $10 million in marketing and hire up to 100 sales people to support new product offerings. The marketing investments are expected to extend our compensation brand globally and build awareness among a new set of buyers in organizational and leadership development. We plan to incrementally hire up to 100 sales people to build out our competency, international, small business and strategic sales teams to penetrate new buying groups and new geographic markets over the next two years. We expect to fund these initiatives with our operating cash flow.

We also have launched a series of next generation products that are designed to enable companies of all sizes to effectively and efficiently attract, retain and reward employees. New products that we have recently made available include expanded capabilities in compensation, performance management and competency services as follows:

During fiscal 2009, we will be launching additional product which will have similarly expanded capabilities. These products include:

The following information should be read in conjunction with the unaudited consolidated financial statements and notes thereto included in this quarterly report and the audited consolidated financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for the fiscal year ended March 31, 2008. We maintain a website where copies of our reports filed with SEC may be accessed, as well as other information concerning our business, products and news releases. The address of our website is www.salary.com. Our website is included as a textual reference only and the information on our website is not incorporated by reference into this Quarterly Report on Form 10-Q.

Strategic Initiatives

In May 2008, we announced new marketing and sales initiatives designed to accelerate growth and expand our leadership position in the compensation and employee performance management markets. Over the next two years, we plan to re-invest up to $10 million in marketing and hire up to 100 sales people to support new product offerings. The marketing investments are expected to extend our compensation brand globally and build awareness among a new set of buyers in organizational and leadership development. We plan to incrementally hire up to 100 sales people to build out our competency, international, small business and strategic sales teams to penetrate new buying groups and new geographic markets over the next two years. We expect to fund these initiatives with our operating cash flow.

We also are launching a wave of next generation products during fiscal 2009 that are designed to enable companies of all sizes to effectively and efficiently attract, retain and reward employees. New products that we have recently made available or that will come to market in the future include expanded capabilities in compensation, performance management and competency services as follows:

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