The perception about shrink-wrapped (i.e. boxed) software products is that they provide no value to the end-user, and can be bought anywhere on a commodity basis, making it increasingly difficult for the channel to make good profit margins and to compete with the large IT retailers. Workgroup MD, Doug Woolley, and Softline Pastel?s business development manager, Lara Nahon, talk about shrink-wrapped software and the opportunities for the channel. Both believe the packaged software market can still mean business for the channel, if resellers are prepared to do some of the ground work.

Is there a future in software, or should the channel leave it to the box-droppers?

LN: Due to the mission-critical nature of certain software, customers require much more than the ?box? (i.e. the software). In many cases they require on-site assistance with installation, training, support and third party development expertise. Thus, the channel is an integral component of any accounting software vendors? business model. However, to build a successful and sustainable business, the channel partner must add real value to the vendor?s customer base.

DW: Software is probably more geared to not serving the box-droppers, as the complexity of the solutions on offer is way past what a company without skills could deliver. Today, software covers a whole spectrum of solutions that have their own complexities and value offerings to customers.

Unskilled resellers would probably never be able to provide or think up the solution or deliver on it. It is the one aspect that is definitely robbing local end-users of decent world-class systems and real business benefits. Most resellers today, even the educated and skilled resellers, still sell the same solutions without increasing their scope and value offerings. If I look at some security product sets like Symantec, McAfee, or CA, the same AV solutions are sold by the majority of resellers. All these vendors have moved their offerings to a new level, yet the channel still seems to stay in the same time warp. I could repeat this for storage, server consolidation, virtualisation, enterprise management etc. A few select specialists seem to know what they are doing, but today most resellers still make most of their money by selling tin and break/fix services.

If customised software and OSS (for example) offer so much flexibility, why should businesses invest in shrink-wrapped products? Why re-engineer business processes to fit the software and not vice versa?

LN: The primary benefit of shrink-wrapped software solutions is for the SME market. Through these applications, SMEs have access to technology that they would otherwise not be able to afford. SME businesses can rely on the software vendor to cater for more than 90% of their needs and benefit from the extensive experience, expertise and R&D that vendors have invested in the product.

DW: Most shrink-wrapped software today, probably in a worst case scenario, has about a 60-70% fit, i.e. a customer would thus be able to be up and in production about 60-70% quicker than if they developed the application from scratch. As a famous advert put it, time is money. Then there is the issue around support, what happens when your developer leaves the project?

It is also possible to over-customise the project, and see it take half your lifetime before it is up and running. We know what happens when you have a whole lot of users together with developers - we build the next space shuttle.

NL: Software development is a complex process, and, by purchasing shrink-wrapped applications, SMEs are able to focus on their core business, as they do not need to get involved in specifying and defining the scope of the project, managing the project, timelines and budget. We are aware of many customised projects that never take off, due to challenges with issues such as project management, timelines and budget.

Further, SMEs are able to take advantage of the support infrastructure provided by established vendors, and immediately utilise feature-rich, powerful and stable applications.

Adding value adds to cost. How do you add value and keep it affordable to smaller companies?

DW: There are only two ways to add value, you save your customer money or you help him make money. The days when the definition of value-add was simply adding discounts are gone.

LN: Some vendors have been able to add value and keep software affordable by leveraging economies of scale across a large customer base. In developing their programs and solution offerings, most have completed in-depth analysis and research to ascertain their customer?s value and what the key pricing points are.

Companies need to add value in order to enhance customer retention over the long term and they need to be creative in doing so. The key is to ensure that one adds value in areas that will truly benefit the customer.

What about creating revenue that stays in SA? Does buying international products rob SA of revenue and jobs?

DW: Not necessarily true, but it would be great to have some local home-grown product we could use and sell internationally. Unfortunately there is reality, unless we have the money to assist companies to do more product development, it will always stay a pipe dream. The revenue story is great marketing hype, and probably wins you a few tenders when you run with that angle, but more jobs are created with international product sets than we could ever create building a local industry.

Take the Microsoft example, we have nearly 5 000 companies developing, supporting, implementing, and selling the product sets, employing people and making money. We missed the big boat, let us face it, and move on.

Rather find niche opportunities where we can become world leaders, and create revenue opportunities off those opportunities. I thought we had managed to escape from the laager mentality of doing it all ourselves.