Software sector profit results have been weaving a twisted tale of late. We're still in the midst of a meltdown; it's just that the molten flows of woe detour around tough little nuggets.
I'm always speaking with industry execs who nearly all concede tough times. They rarely see signs of uptick. The notable exceptions tend to be smallish players such as homegrown IDS Enterprise Systems and niche vendors that claim to add value to current investments such as the Paris- and California-based BI vendor Business Objects. Surprisingly, in a big claim by Geoffrey Ross, security industry veteran and managing director of Sydney-based SecureNet, even in these slightly scary times not many of the security vendors worldwide are making any money.
Homegrown IDS is one of those surprises that's been around since 1982, of which nobody outside its tightly defined market in the automotive industry has ever heard. It's currently enjoying growth rates of 30 per cent, says CEO Gordon Towell. This supply chain specialist has bagged car and truck industry customers like Fiat, Holden, DaimlerChrysler (in the UK), MAN Trucks (in the Netherlands), and Isuzu and Mitsubishi Trucks locally.
So why is this relatively small developer of IDSe42 supply chain software (with 80 staff in a Northwest Sydney HQ) growing while other software builders struggle? Towell says, "People we talk to are just sick of being ripped off; [they] have spent millions and millions on software that just doesn't do the job."
IDS's recipe is to do one thing - software for manufacturers of durable goods and the associated distribution networks - and do it extremely well. It also claims to know the business issues of its vertical better than anybody. For instance, at a recent user group meeting of car industry warranty managers, Towell put a 30-year bottle of scotch on the table. The scotch was there for the taking by anybody who could ask a question of IDS's warranty specialist that she couldn't answer. It was still on the table at the end of the day. Still with an eye on its vertical, the company has spent the past two years working with Java/IBM WebSphere to extend its supply chain wares beyond the manufacturer and distributor and into dealer showrooms. This will be a hosted ASP offering.
So maybe that's the answer -- niche vendors that really do know their niches and deliver quality software they just don't have to oversell. Many big vendors will argue that they can deliver applications and templates to a wide range of verticals - with only reasonable rejigging required. If you want to make this argument and reject Towell's claims about millions being spent for stuff that doesn't do the job -- then please do! I'll reserve space on these pages.