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