SOFTWARE APPLICATIONS: Create Value In SI Business

With margins thinning out across all business lines, it is imperative that
SIs continuously come up with ideas to sustain and grow their profits. Offering
services is one way and today every SI worth his salt offers them. However, this
is no longer a differentiator while approaching a customer for business.

So, what really can differentiate an SI from the crowd? It is the expertise
to develop software applications. This is an opportunity which has been cashed
in on by very few SIs so far.

When a customer approaches an SI, he seeks a solution that combines hardware
as well as software. Customers want solutions not only to address their core
business needs, but also their peripheral requirements.

This is where solutions providers can add value by offering a bundle of
products consisting of hardware and software applications that are well-suited
to their customers’ needs. Since, not all the software products are available
off-the-shelf, an SI can add value here by developing applications.

SOFTWARE APPLICATIONS SUCCEED

An SI addressing a specific business vertical is well aware of the needs and
demands of that industry in general and the customer in particular. The SI can
assess for himself the kind of solutions these type of customers need and can
provide tailor-made solutions consisting of hardware and software as a package.
For instance, the customer may have automated the accounting system but not his
logistics or after-sales support.

In fact, the SI can go a step forward and have the framework of the software
application ready even before talks about providing a solution begin. The
benefit of having a framework is that it is easily customizable. Additions can
be made to this framework after taking into consideration the customer’s
specific business needs.

It also reduces the gestation period for the customer, since the application
can be deployed within a short duration. This, in turn, increases the customer’s
return on investment as his system is up and running quicker.

MAKING AN ENTRY

To develop applications, naturally, SIs need to have software teams in their
organizations. These teams have to constantly study and understand the business
needs of their customers in various industry verticals. This understanding and
capability to develop applications will prove beneficial to SIs gain a foothold
among various clients.

Once the application is installed at the site, the SI has to educate the user
to ensure he makes best out of the solution that is offered. An approval of the
application by the customer, paves the way to sell hardware as well. "This
is the chicken and the egg situation, which can be put to good use in
business," remarks Tarun Sheth of Microclinic. "Once the customer has
bought a software from the SI, then he will look towards this SI only to provide
the requisite hardware."

But to do all this, a SI should be well in tune with the dynamics of the
industry he is addressing. Only a SI who is well aware of the finest details of
his potential customer’s needs, business requirements and the available IT
infrastructure, can create an application that can work in tandem with his other
software and hardware.

"Compatibility between existing systems and to-be implemented solution
is very crucial," points out Atul Hemani of Omnitech Solutions. "No
customer will change his existing IT process just to adapt to a new application
that a partner is offering, even though this application might be beneficial to
his business." Thus, it is imperative that the SI studies the customer’s
requirements thoroughly, finding out the gaps in the IT infrastructure.

Also, once a particular application is implemented in a specific vertical,
the SI can use his learnings to improve the software for better use elsewhere.

DOING A CONSULTANT’S JOB

There are several SIs who have set up separate divisions to create software
applications. This model works fine, if you are willing to invest on building up
the infrastructure and manpower. And one has to be open to a gestation period of
two to three years before taking the application to the market.

Setting up one’s own software division can cost anywhere from Rs 5 lakh to
Rs 1 crore, depending on the nature of applications to be developed, the
manpower employed and the take-to-market time of the product.

"Usually the gestation period is very lengthy and this is why most
solution providers are wary of getting into software creation," notes V
Ananth Narayanan, Director, SBA Computer Services. "This business model is
also very parasitic in nature as its uses funds from the SI business for
sustenance."

Yet another fear is that by the time the solution provider is ready with a
particular application, it might very well become obsolete! This is a risk which
a solutions provider has to make provisions for.

Another way to develop software applications is through outsourcing. This
saves the SI the expenses of building the infrastructure and investing on
manpower.

 WHAT CAN I DISH OUT BEST

When it comes to developing applications, it is very important to determine
which aspect of a vertical business is being concentrated on. Creating an office
suite, when a strong player like Microsoft is well-accepted in the marketplace,
is downright suicidal.

A solutions provider should first do an analysis of the business segment he is
addressing. This is bound to throw up some gaps where an application is
required. "A solutions provider cannot provide each and every application.
Therefore, it is important to decide on the core competency and develop an
application accordingly," says Atul.

It is better to steer clear from coming out with shrink wrapped products, as
this calls for additional marketing investment. If at all a boxed product is
aimed at, it should be of such nature that it can be easily applied to any
business vertical. These products should be of the plug-and-play variety with
minimal customization. Also, unless volumes pick up for the product, the RoI
from this business may not happen at all.

It is a safe bet to focus on niche segments where there are not many players,
to begin with. Embedded software applications is one such segment, wherein
solution providers can devise solutions for business houses that export their
products to overseas market. These solutions can be embedded in the shipped
products to facilitate their tracking on the logistics system.

Yet another unexplored region is the open source market. Worldwide, there is
a growing momentum for companies going for open-source software for running
their backend servers. A solution provider can develop applications to make the
open source all-pervasive in other aspects of the business as well.

Solution providers can also develop multi-lingual printing and processing
market applications targeted at various customer segments. TVSE, for instance,
is already identifying solutions providers who can create such solutions across
several business segments.

EDUCATING USERS

The biggest hurdle for selling a home-grown software solution is the
perception that customers have about SIs. Today SIs are generally taken for
hardware resellers and fulfillment agents. So, clients may not be willing to try
out an application devised by a hardware specialist.

"This is one reason why very few SIs have ventured into creating their
own software applications," says Ananth. "There is always a fear that
after all the hard work and money spent, the customer will reject the product,
simply because it is provided by an SI or because it is not branded."

This is where perseverance pays. Educate your customer on why your
application is the ideal one for his business needs. Once he is confident that
you can provide a value-for-money solution, the absence of a branded product may
not deter him from going for your application.

This is especially true for the SMB segment. IT managers in multinationals
often have to adhere to some guidelines on buying software only from specific
brands. But SMBs are more concerned about productivity and getting value for
their investment and are not very brand-conscious as long as their needs are
met.

Once you have your fundamentals about the application business well in place,
what you need is conviction that this is the business that will yield good
returns and will complement the integration business as well.

VINITA BHATIA