SOFTWARE SOLUTIONS: Sustain Financial Investments

Identifying a customer segment is critical to succeed in software solutions
selling. The next step is to formulate a plan to counter the challenges faced in
these segments. It is also important to have the financial power to sustain the
business till the investment starts paying.

Alot has been said and written about how soft ware resellers should upscale
to solutions providing rather than box-pushing. This has led people to wonder
what sets a software solution partner apart from any other software reseller in
the market. After all, don’t they all address the same customer segment with
the same bunch of products?

But there is a differentiator. A solution provider is conscious about
targeting the right customer. There are two distinct markets that he addresses.
The issues and challenges faced in both these segments are different and the
treatment for these issues are also different.

The first market is the enterprise space, which characteristically has over
1,000 machines. The second segment is the small and medium business space, which
can be categorized as having over 50 machines.

CHALLENGES IN ENTERPRISE BUSINESS

Most large software vendors like Microsoft, Oracle, IBM, Computer Associates
and Veritas have realized the potential of the enterprise business buyers and
approach these users directly. However, most of these vendors do not bill
directly and follow a partner model.

In retrospect, the partner’s margins in this space are going down,
especially since he is merely doing demand fulfillment. While this cannot be
avoided, a partner should look beyond these limitations to see how he can
provide more value-addition.

This can be in the form of implementation of software licenses or post-sales
services. Customers these days are aware of the importance of these services and
are ready to pay for it.

Principals too are ready to give better margins if the partner is ready to
take care of all the post-implementation issues. This is because they can then
concentrate on brand-building exercises and demand creation.

CUSTOMIZE AND IMPLEMENT

Many big enterprise customers have data centers, which require data to be
protected from outside and inside threats. They have some backup and security
solution already in place and are looking out to upgrade their existing systems
to keep up with the time.

This is where partners focusing on specific technologies like backup and
security come into the picture. They can offer customized solutions for
messaging, hosting, web publishing, infrastructure management. This can be
addition to the core ERP software that the company must have implemented.

There are a couple of challenges for partners who want to offer specialized
solutions and services. The first is to compete with big players like Wipro, HP
or IBM Global who offer complete solution including hardware, software,
infrastructure management and helpdesk.

RETAINING EXPERTS

The next challenge is to retain the technical staff. Often qualified and
certified personnel from the partner’s organization take up jobs with the
principals and even bigger solutions provider.

This means that the partner has to invest once more in training and
certifying another employee, which is a time and resource-intensive exercise.
And also, a partner needs to have a minimum number of certified personnel to bag
an order. In short, he cannot afford, not to train and certify his team. After
all, good technical and implementation skills are the key to get into an
account.

DO NOT OVER-COMMIT

Tardiness is another pitfall that partners should avoid. Partners tend to
over-commit and take up projects without having the right resources in place. It
pays to say no if one can’t keep his commitment. A partner needs to do a good
job in executing the first project on time. If he fails to do a good job, he
will not only lose the client, but his reputation as a solutions provider as
well.

FOCUSING ON SMB

The SMB market is opening up with growing awareness about IT and its
cost-effective deployment. These customers typically have fewer resources, but
look for best.

Most principals do not have the reach to address this market directly and
need partners to sell their products and technologies and support them.

The biggest challenge in this space is to develop and implement specific
offerings which will improve productivity of a particular industry, like
pharmaceutical, banking or courier, in a cost-effective manner. Some software
partners have a good solution for this segment, but do not have the reach and
the marketing muscle. Others have the reach but do not have good
product/solution to sell.

Very few partners have managed to have a good mix of salable products and
good market reach. Some successful partners may join hands with other solution
providers, rather than striving to make it on their individual strengths.

However, several things have to be kept in mind while adopting this strategy.
Each of the partners should have a different core competency to avoid clashes.
Also the revenue-sharing and service model should be well established.

COMMON PROBLEMS

One common issue faced in India, specifically in the SMB space, is that
people are unwilling to pay for software services, unless they are very sure of
the returns. The best way to circumvent this problem is to get customer
references from the same industry. This will convince them about the product and
how it can help them in their business.

Collection of outstanding dues in the SMB is another big challenge. Normally,
the payment cycle for software licenses is 30 days, which invariably gets
delayed. The software partners have to use a mix of persuasion and pressure in
order to avoid losing the customer and ensure that there is no bad debt either.

When it comes to services and implementation, a major part of the payment
comes after satisfactory completion of the project. ‘Satisfactory’ is a
relative term and the software partner needs to define the deliverables well in
advance in his contract.

IN A NUTSHELL

The software partner has to first decide which space to address. Then have a
plan to counter the challenges faced in either of the space and also have the
financial power to sustain the business till the investment starts paying.
Efficiency in operational tasks is important to ensure that profits keep on
increasing. One thing is sure, if you have a good plan in place and confidence
to back it up, there are many financial institutions ready to offer finance.

Ujwal Andhari is Director,
Softcell Technologies