Making Profits Through Software

And the audience, which consisted of the cream of Mumbai’s channel community, was convinced that the moolah lay in software.

Sparks of insights flew at the panel discussion on, "Making profits

through software" held as a part of DQCI’s third anniversary

celebrations.

For the channel partners the discussions came at the right juncture because

industry performance figures indicated that software grew 16 percent during

2001-02, while hardware declined by 11 percent. The expert panelists provided

them some clues on the advantages of entering software and the possible

obstacles on the way.

The power panel comprised of Anirudha Joshi, VP-Sales, Redington India;

Sushank Pandya, Director, Laurence Software; Pravir Arora, Head-Channels and

Strategic Alliances, India and SAARC, Computer Associates; G Balakrishnan,

Director, On-track Solutions and Rajesh Kothari, Director, Blue Chip Computers.

The session was moderated by Shyam Malhotra, Editor- in-Chief, Cyber Media India

Ltd. 

GOING THE SOFTWARE WAY



Software reselling could mean selling packaged software with or without

customization. In addition to this the partner could easily get into offering

implementation and after-sales services as well as maintenance contracts. Rajesh

Kothari said, "Infosys and Wipro are showing the way to profitability in

exports, which underlines the fact that there is money to be made

software."

The discussion began with the fundamental question of whether there was

profit in software reselling. And the panel’s answer to this was an unanimous

yes. Even with a decrease in software piracy in last 10 years, the rate of

piracy in India is around 63 percent according to BSA.

Another question raised was whether profits involved in software reselling

enough to sustain business operations. Balakrishnan was positive that the

profits were definitely there. Affirming this he said, "The money lies in

offering solutions, not just packages. While there are single-digit margins in

sales, services will sustain the business." He suggested selling a

judicious mix of hardware with software like firewall, office suites, OS and

anti-virus with PCs and networking products.

But this does not mean that reselling packaged software does not have any

value. In fact over 3,18,000 MS Office packages were sold last year, which is 16

percent of all PCs sold. 80 percent of this revenue came from retail while the

rest from OEM PC vendors.

For profitability in packaged software business, Sushank advised large

volumes. This could also help the dealer to branch into services because most

high-end packages require implementation.

GETTING INTO RESELLING



While software reselling does offer good profits, Sushank underlined that it was
imperative that partners take a close look at what value-add they can offer to

customers before they jump into the fray. "A partner has to have a clear

idea about the kind of software he wants to sell," he said.

The traditional way to begin is to get into providing infrastruc-tural

software like storage and network and then build skill-sets to sell business

applications.

Pravir of CA noted that it is essential that a software reseller recognizes

changes in the stature of his clients and grows with them. Said he, "A

successful reseller is one who understands his customer’s needs well and

provides the solution that best suits those needs."

He added that the characteristic of this business was to think the solution

way to provide better return on investment to the customer. And for this, it is

essential that the reseller and his employees themselves are well adept in the

technologies they sell.

Pravir remarked, "It is not just the implementation that

counts. You have to provide adequate after-sales support to your customers

too."

TRAINING IN THE FACE OF ATTRITION



The high attrition rate of employees in software organizations can deal a

big blow to the business. Often dealers train their employees in expensive

technical skills and once these employees are adept at their skills, they quit

the organization for better prospects. One dealer trained only his family

members as they were the only ones he could trust not to leave his company!

Another solution provider trained a person to become a certified Novell engineer

and then made him a "director" with a stake in the company, to ensure

that he did not leave!

While all the panelists agreed that the attrition rate is

very high, one of them remarked that the reseller should give his employees a

conducive working environment to make sure that they do not entertain thoughts

of leaving.

Sushank noted that just developing and implementing a

software project for customers is not enough; it is necessary to maintain it as

well. And this is where technical calibre makes all the difference. "Train

yourself and your people for the right skills, even if they are high-value

investment. Because it will definitely pay off," he added.

GETTING FUNDAMENTALS RIGHT



In this age of value-added business, there is not much that sets the

software reseller apart from his hardware peers. But the most important thing

that a software reseller has to work on is his strategy for business. Said

Anirudha, "You must have dedicated focus and an understanding of customer

needs before profits can start coming in."

Pravir added that any software reselling organization needed

clear demarcation between value and volume business. "Value business is

slow, but if you have good products, then the implementation will give good

returns." But one should not expect profits to start pouring from day one.

Like in hardware business, the obsolescence rate is very high

in software too. So Balakrishnan advocated that partners should judiciously

decide on how much to stock and have an idea as to how fast they can sell.

"Partners should learn the tricks of selling licenses, where margins are

thin and then balance it with value sales," he added.

Partners should look at high-growth areas like storage and

security to keep their bottomlines healthy. Said Pravir, "Customers across

all verticals are buying software. You have to be at the right place at the

right time with the right product."

Sushank pointed out that messaging solutions and PDA-based

applications are gaining ground. He suggested bundling of application with

servers for resellers to gain good margins.

Anirudha felt that knowledge-based applications too have lot

of business potential. Similarly he was rooting for intrusion detection

software, especially in the face of the defacement and hacking of several web

sites.

VINITA BHATIA in Mumbai