Stepping up to own the software

Hard-working resellers often feel like sleep is something they can only grudgingly afford. Between work, play, work, family and a bit more work, the idea of several luxuriant nights of long, deep sleep can seem an unattainable fantasy.

To get more sleep, many therefore realise that once you have come up with a solution to a problem for one customer you can solve the same problem faster for your next customer.

In IT, that often means resellers develop tools that help them solve the same problem over and over again. And after a few jobs – or a few years – those tools can become very sophisticated. So sophisticated, in fact, that you may even wonder if your solution is better than anything else currently on the market.

The natural next thought is to ask yourself if your tools could become a product that you could sell far and wide, instead of just deploying for your own customers.

Craig Doyle from the Sutherland Shire Hub for Economic Development (SSHED), a business accelerator set up in Loftus by the Sutherland Shire Council in partnership with the University of Wollongong and TAFE NSW, says this scenario is more than possible.

And what’s more, it is a good idea that can help you sleep better.
“As a service provider there is a ceiling on how many hours you can bill – there are only so many hours in the day. But if you can ‘productise’ your service, as the old saying goes, you can make money while you sleep,” Doyle says.

Chris Frith, a business consultant with AUS Presence, agrees that turning services into products can be a real path to success, which can increase revenues and deepen the relationship resellers have with their current customers.

No quick sales
However, turning your expertise into products is not a quick way to make mountains of cash.

“The flip side is that the development and marketing effort can be a sink hole for cash,” Frith says. “The problem is that the piece of software may have grown organically or been customised for a particular purpose. Unless there is a hard kernel of a real product underneath and clear boundaries around what the product offers, the product development process can be a real nightmare.”
Both Doyle and Frith agree that a first step for any reseller wishing to expand their business from services to products is to sit down and do some serious business analysis.

“The first question I would ask is: ‘What are you doing in your service industry that customers like – what makes you unique?’” Doyle advises.
With that question answered, Doyle says there are two main ways to move from a service to a product. You can either work out exactly what it is about your service that works and franchise it or you can take the service and turn it into a product in its own right, such as a software application.

When it comes to software applications, Frith advises digging down to the heart of the product offered. He suggests asking yourself: “‘How has this piece of software been developed? If it has grown organically, does it have the functionality to get itself off the shelf?’ Strip away the embroidery until you come to the kernel of what the product offers.” He also advises careful consideration of the product’s versatility, lest you design it for a market so small that commercialisation is not viable.

Once you have identified exactly what it will take to make the product attractive, assess where you sit in the market. Doyle suggests using the tried and true business tool of the SWOT analysis: strengths, weaknesses, opportunities and threats.

Get some perspective
When you reach the point of SWOT analysis, working with professional business development agencies can be a more than useful step to help you get the perspective needed to understand your prospects.

The SSHED is a prime example of a business incubation service where professionals can help you understand these issues and many others. “Basically we offer ‘Business 101’ to a wide range of companies,” Doyle says.

Frith suggests a similar process of ‘stepping back’ from your idea and looking at your business as a whole. “Why are you trying to sell this product? Is it a new source of revenue, a diversification of the business or are you planning to move away from reselling?”

Finding answers to these questions will help you to focus on how you want to take your product to market.

Whether you plan to sell it over the Internet as a sideline or box it
up and sell it off the shelves at Harvey Norman, you need to give serious consideration to the pros and cons of each sales channel. If
this really is a sideline to your reselling business, Frith suggests there may be a third way: “For some businesses it may be better to license the product to a third party, someone who has experience in sending products to market.”

Sydney company GetData went through this process in 2001 when business partners Grahame Henley, John Hunter and Brett Hunter left the forensics team at PricewaterhouseCoopers where they provided forensics services and gained valuable experience investigating the likes of HIH and One.Tel.

That experience in a services organisation led the trio to believe the tools and techniques available in the marketplace for data recovery left a gap they believed they could fill. They left to pursue the new business.

At first their focus was on building a software product that would speed up the process for other data recovery companies – aiming the product at people like themselves. But it soon became apparent that the horizon should be broadened. “We realised that if we could produce a product useful to the big end of town, it could also be used by the person sitting at home in front of their PC,” Henley recalls.

From that analysis, the company’s signature product Recover My Files was born. The GetData team now acknowledges the importance of that insight to the current success their business enjoys.

Get help with support
Another important step in GetData’s success was finding a way to
support their product – a step that both Doyle and Frith warn is a significant issue for launching a software product.

Having boxes of software walking off the shelves is all well and good but if your profits are being eaten up by the cost of 24x7 support, particularly if you sell overseas, you are not achieving your objectives. You will need to consider who is going to provide that support. “Do you want to be having to divert your sales people towards supporting a software product?” Frith asks.

GetData tackled this issue with a mixture of luck and hard work.
“Support is a nightmare, really,” says Henley.

“If someone has a problem with data recovery software they need a response right away or they are going to go off and find another solution. Good support is absolutely essential. I can guarantee that for every person who calls us and alerts us to a problem, there are 15 more who haven’t bothered to
call – they’ve gone off to find a solution elsewhere.”

The directors therefore spent an enormous amount of time supporting the software in the initial years, finding the problems and fixing the bugs, until they came up with a product they considered to be stable. “I think we have fixed 90 percent of the problems. Of course it’s the other 10 percent which take up 80 percent of our time.”

From that point GetData took the innovative step of forming a strategic alliance with a US company that now supports all their software.

“Our partner in the US, a sister company really, had developed in a similar way to us and was selling complementary security software. They were already skilled in solving problems with hard drives. We formed a relationship with them that sees us cross-sell each other’s products and they provide the support for all the products. We settle up the [financial] differences at the end of the day.”

GetData regards this arrangement as ideal, as it has provided the company with professional support without the need to invest in its own support team.

Turning IP into products
Brian Cook has discovered that doing things backwards can be very beneficial. “To successfully turn IP [intellectual property] into products, you kind of have to work in reverse,” says the CEO of Melbourne company Nintex, a product-based spin-off from services company OBS.

“It helps us to think of the marketing and then work out what to build.”
Cook’s insights come from experiences that started in 1999, the year OBS opened for business providing collaboration tools for enterprises such as BHP, Santos and Ericsson. “We found ourselves building similar kinds of tools all the time,” Cook recalls. “In lunchtime conversations we all asked if we could package them and sell them.”

The company’s initial foray did not go well. “In 2002 we had a go. In retrospect it was technically a good idea but may not have met a market need. The product was hard to install and hard to trial.”

But in 2003 the company tried again, this time using a more easily identifiable market opportunity. “When Microsoft released SharePoint server 2003 we noticed some holes in the product and decided to fill them,” Cook says. A product called SmartLibrary and a workflow tool followed. “This time we made them very easy to install and trial,” Cook says.

OBS also created Nintex to help the new products grow. “We decided to create the Nintex brand in 2003 to be able to sell the technology to our services competitors,” Cook says. “We also wanted to create a different brand profile. The products are about ease of use, ease of installation. The services brand is about capability and complex thinking. Those are two very different propositions so there was a clear marketing need for the separate brand.”
But while the two brands are very separate, OBS’ and Nintex’s team are one and the same.

“Most of the coding for Nintex is done by people on rotation from the services business,” Cook explains. This adds welcome diversity to staff’s jobs and also Nintex has a pool of labour it can draw on as needed.

Nintex now accounts for 30 percent of OBS’ revenue, and Cook hopes this will increase to 50 percent over the next three to four years.

Adding that kind of revenue would not have been possible without creating the new brand. And Cook feels it benefits the business in other ways too. “One of unexpected bonuses is that innovation from the services side of the business inspires the products, and vice versa,” he says, adding that he feels other resellers can experience similar success with a few basic steps.

“Take a look at what you are good at, look at the IP you have and where customers might want to use it,” he advises. Then get into reverse gear:
Nintex has found it is a great way to go forward.

Use the industry
IT resellers should also remember that the industry they work in fosters ideas and helps business bring them to market.

Microsoft, for example, operates a network of “.Net clusters” that are specifically designed to help small software developers. “Microsoft wants to build a solutions portfolio so if someone has come up with a solution, we want to shine a light on it. Talk to us, get on the Microsoft radar and we can evangelise on your behalf,” says Frank Arrigo, Microsoft’s Developer Evangelist.

This route not only sounds good, but makes proven financial sense too. The .Net clusters include assistance from industry and state governments and have a proven track record of helping businesses to secure overseas sales.

Melbourne professional services firm Readify, for example, says its participation in the Victoria.Net cluster helped in finding and securing new customers including a $2.8 million global contract, while Cardanal Pty Ltd received a $790,000 grant to develop its software, which helps diagnose patients’ heart conditions, including early detection and predication of cardiovascular disease.

The industry also offers events such as The STIRR Network, a group that offers networking opportunities for technology entrepreneurs.

STIRR.net, for example, lists groups and events worldwide dedicated to helping technology companies bring their products to market. The group held a Sydney meeting late in 2006 and intends more get-togethers.

Products ... and products
If this kind of networking does not seem appropriate for you or your technology, do not fret. Another way to use the tools you have developed is to ‘productise’ without taking them to market as a standalone offering.
Sydney telephony reseller Lake Corporation, for example, has found that branding its expertise as a product has enhanced its credibility and selling power, even though it has not created a product that others resell.

The company’s sales manager, David Wyndham, explains that the company productised a tool it found had broad applicability for its clients.

“When you talk to a large contact centre, they’ll explain that integration between their various systems means contact centre agents often have to move through 15 or 16 screens just to perform a simple task such as updating a client’s phone number,” Wyndham says.

Lake developed software to ease this problem and, after finding that the proven ability to solve this kind of problem opened doors, branded the tools under the name Xcalibur.

“Making Xcalibur a product gives the clients something they can touch and hold,” Wyndham says.

“They don’t have to rely on us saying that we have the skills to solve their problems, they can see the product. It gives us a more rapid rate of acceptance and gives the client a level of comfort.”

Producing a product version of Lake’s services has also opened doors within large organisations, extending the scope beyond call centres.

“Xcalibur is applicable to other transaction processes so with a big client like a bank, for instance, it has allowed us to have spread our engagement beyond the contact centre and into other areas of the business.”

Press the (virtual) flesh There are of course other ways to promote your product.

SSHED’s Doyle suggests courting industry blogs by reading up on influential bloggers’ interests so you can understand how to get your product onto their radar.

“You can even find out which conferences they go to and introduce yourself,” Doyle says.

“A personal recommendation for one of the luminaries in the industry is gold.”
Microsoft’s Arrigo suggests going a step further and starting your own blog.

“Accidental discovery happens less and less these days. You have to be a self-promoter. All the search engine juice in the world is not going to help you if you aren’t out there letting people know,” Arrigo says.

Robert Bowen, the National director of COMET, says it can give businesses the free services of a business adviser as well as a generous subsidy of 80 percent of agreed expenditure to purchase.