SOFTWARE BUSINESS: Coming Of Age

The software solutions business holds good prospects for partners who want to focus on niche segments. But it requires intensive groundwork to get the right business model in place. And it is important to ensure that this model offers good after-sales support, to make it a success.

The entire software solutions business has under gone a great transformation over the past decade. Back then, getting into this business did not offer the numerous options that partners can avail of today.

There were only three choices for the few partners who ventured into this domain. They could enter the business by selling hardware or Microsoft software or anti-virus solutions.

Most players preferred the latter route and there were not many players in anti-virus field. This move is reminiscent of one of the ’22 Immutable laws of Marketing’ propagated by Al Ries who said “Create your own niche and try to become No 1 in that field”.

CHOOSE A NICHE AREA

A very important factor in the software solutions business is choosing a niche area. Partners must try and concentrate on a particular business line, in order to stay successful. It is better to be a master of one business, than a jack of all trades.

After selecting a particular client profile, offer a variety of products for this segment. This ensures that there is ample room for competition as well as growth. With solutions for CAD/CAM, multimedia, anti-virus, security, storage and backup, network management, business software; it is easy to get mired in competition, if a partner decides to deal in all these segments.

At the same time, it is best not to limit oneself to sell only one brand in a chosen field. It would be suicidal.

The Dr Solomon anti-virus brand is one such instance. The brand was well-renowned, but soon another anti-virus company, Network Associates, bought it over and later merged it in their product stream. Gradually, the brand ceased to exit.

Now imagine, if a partner had put all his bets on Dr Solomon and did not sell anything else. After the brand’s takeover and obsolescence, he would be out of business.

To avoid such disasters, partners could start selling multiple brands in one category. This strategy should serve as an insurance for the dealer’s survival.

MANAGING VENDOR EFFECTIVELY

Selling multiple brands will automatically result in resellers getting swarmed by vendors. And this will be followed by several incentives and offers–sell a certain amount and take home a TV, or a trip to a foreign location.

While these schemes are enticing enough, it is necessary to approach them with common sense. Keep a check on the inventory purchased, ensuring that your topline and bottomline are not eroded. Getting more stocks to qualify for a promotion will probably eat away more money than the cost of freebie.

Often, reaching a certain target will also pose a problem. Next quarter, the partner’s target will be increased by at least 30%.

As a result, they will end up being slaves of that vendor as they are now grooved into the vendor’s system and cannot come out of it.

To reach these inflated targets, partners resort to giving discounts on products and make losses.

Another interesting observation is that over the years, partners will get an impression that their 24-hour effort has helped only the vendor´s sales manager. Also, the manager’s successor would not be aware of the partner’s contribution to his company in the previous quarter/year. There is no credit for what the dealer did earlier, and the business strategy of the new manager could be different.

MY CUSTOMER, MY GOD

Put yourself in your buyer’s shoes and try to understand what kind of solutions would you require if you were in his place.

MAKING SOFTWARE SOLUTIONS BUSINESS A SUCCESS Choose a niche area Don’t limit yourself to one brand or product Offer multiple brands in the same product category Don’t over-stock to qualify for incentives schemes Take time to understand the customer’s needs and then devise the most appropriate solution for it Appoint qualified personnel to manage accounts and monitor working capital requirements

This attitude will help you offer a solution to suit customer’s needs. Partners should not be a box pusher, but a solution provider. Give your buyers advice, install their solutions, support it and this value-added service will help keep your customer and consequently, you, happy.

Dealers often believe that his customer is his alone and nobody else can claim him. This is a wrong notion. Customers these days are smart and tuned into the market happenings. They will purchase products from anyplace that offers them a good deal.

The only way to have a hold on to a customer probably is by offering a good solution to their problems, combined with strong after-sales support. This will definitely result in getting a repeat order, which might not be the case with a discounted offer.

TAKING RISKS AND MANAGING IT

Business of any kind involves risks, and customer management also requires expertise to manage the associated difficulties.

Risks of payment, version change, stocking, and product expectation are associated with the channel business. These things are not given a serious thought and are overlooked to make quick sale.

Among these perils, non-payment by customers can make or break a channel partner’s business. Partners and vendors should work towards a mutually beneficial business model to ensure that the dealer is not unduly burdened.

MANAGING WORKING CAPITAL

One hears of dealers going bust as they were unable to recover debts and repay creditors. Resellers borrow money at a high-interest rates to pay creditors, while they face difficulties in collecting debts from their customers.

It would be a good idea to get qualified accountants or have a MIS in place to keep a track of accounts or get alerts on a weekly basis.

Make sure that the weekly collections should be more than the weekly payments to creditors. If there is a mismatch, it will result in further borrowing. Don´t stretch yourself. This is the best advice a partner can ever get.

In conclusion, let me quote an old adage. The measure of success is not how much money you have in the bank, but rather how much much money the bank will lend you.

M Prabhakar Kini is MD,
Kinfotech