Office politics

There is more to office software than meets the eye. Yes, Microsoft continues to be the dominant force in the world of office software but that has not prevented plucky contenders from nipping at its heels. With the adoption of Linux, office software remains a dynamic market

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By  Alex Malouf Published  November 29, 2004

Channel revolution|~|BasharIBM.gif|~|Bashar Kilani, manager of IBM Software Group, Middle East, Egypt and Pakistan|~|Think office software, think Microsoft, but with Linux hitting the desktop space a quiet revolution may be brewing. The coming months will witness a host of alternatives arriving on the market from vendors attempting to challenge the dominance of Microsoft. Smart channel players are already weighing up the competitive landscape and forming partnerships for the long-term. Old issues such as piracy still burn in the background but the market is about to heat up as vendors do battle Chances are that PC on your desk has an office suite installed, just like millions of others out there in the region. With the latest packages costing upwards of US$200 office software is a tasty and lucrative business for the channel. The one vendor who looms large over the industry is Microsoft. IDC’s numbercrunchers estimate that the vendor dominates the region’s office software market with the vast majority of sales. Microsoft claims one of the reasons for its success is its channel-to-market approach, which has been perfected over the last few years. “Microsoft sells indirectly and through our channel we have the reach to sell to all customer segments,” explains Mazen Shehadeh, product marketing manager, Microsoft South Gulf. “Part of our channel approach is to target different customer segments with different office packages — tailored for enterprises, educational use and consumers. It is a value-add strategy designed to provide each customer group with the applications they need at the optimum value rather than simply sell the same product to everybody. We get feedback that a customer needs this and doesn’t need that, and we listen and react to what they need because at the end of the day we want to sell Office.” The market landscape may be on the verge of major revolution according to rival vendors making a move into office software. Red Hat launched an office suite this year as part of its desktop operating system; Sun is currently running a pilot in South Africa and will introduce its own commercial applications in early 2005, and Novell will also bring an offering to market in the coming months. “The desktop and office software is going to be the next big thing now for vendors and the channel,” explains Martin Smith, director of operations Eastern Europe and Middle East at Novell. “For years every time you switched on your computer you’d sit there and see a 45 second advert for Microsoft while Windows loads up. If desktop offerings such as office software take off in the region the way I believe is possible — owing to such factors as cost benefits and security reasons — then people are not going to be looking at Microsoft. This development could fundamentally change the IT landscape globally and also notably in the Middle East.” Product cost is one factor driving both customer and channel change. Vendors are pitching their wares at prices significantly lower than the standard cost for office software packages. Graham Porter, marketing manager at Sun Microsystems MENA, explains: “[One of] the issues we are selling on is price and our application software is 60% cheaper than that of Microsoft’s. Office packages are very expensive when you consider that every two to three years customers are being asked to upgrade and they are increasingly asking themselves why should they buy the latest offering. What we are promoting today is a solution-in-a-box that you can get on Amazon.com for US$70 — a considerable saving for both corporates and governments alike.” Smart customers realise that upfront costs form only part of the total cost of ownership (TCO) and the TCO argument is becoming more central to the software sell. “Corporates who measure costs savings take into account factors such as security. The business community is very concerned about the hidden costs of the virus,” adds Porter. “What happens in your office if half of your terminals are down and you lose your data because of a virus? What is the cost? Simply put, huge. If you go for the Linux based option, such as our own Star Office, then you are going to get rid of your virus issues today.” The use and development of Linux has brought about revolutionary change in the channel and enabled vendors to move into the office software space and challenge Microsoft. “You will see in the next two to three years a huge change in the Middle East as people have begun to realise the worth of value propositions developed around open source Linux technology,” surmises Bashar Kilani, manager of IBM Software Group, Middle East, Egypt and Pakistan. ||**||Channel potential|~|Tewfik-Zitouni-Opennet.gif|~|Tewfik Zitouni, managing director of Red Hat’s Middle East distributor Opennet MEA|~|The growing stable of vendors brings with it a greater number of opportunities for channel players to broaden their offerings and cater to customer demand. “You will find lots of companies that are interested but due to the nature of the product you have to understand what open source is about and what Linux is about to be able to really sustain business based on that,” admits Tewfik Zitouni, managing director of Red Hat’s Middle East distributor Opennet MEA. “There are lots of box movers that are interested in doing business with us and we do business with them. But these are not the ideal partners. We need partners that understand that there must be some shift of philosophy, a different way of doing business when it comes to open source software.” The channel has been playing second fiddle to customers when it comes to adoption of new offerings, claims Zitouni. “Most channel partners are used to a certain way of doing business with a select number of brands and they will not show an interest in new products unless their own customers are interested. Their customers, be it from the media, have heard about Linux and they want to give it a try or to take advantage of the benefits. So they tell their channel partner, ‘we are interested in this and can you provide us with the technology.’ So this is when you see the players in the market trying to include Red Hat in their portfolio. They’re playing catch-up to the few key players who have been market pioneers. They’ve been educating the market but there is need for more.” But the signs appear promising for new vendors as the channel appears to grasp the significance of increasing market competition. “We signed 28 new partners during Gitex who actually came on the stand and signed on the day, including some very significant players,” adds Smith. “What is interesting is that we were not going out there to sell to these people. They came to us and said, ‘we want to re-engage with you around Linux.’ Many of them were close partners with Novell during the days of Netware and they followed the trend by turning to Microsoft solutions. But now they claim they have no choice but to come back to us, as their customers are now demanding Linux solutions. They know Linux is really going to be a mass-market product, just like Microsoft is today, and they want to support that now.” But don’t expect Microsoft to rest on its laurels. Besides such aces as international OEM agreements, the software giant is also working closely with local system builders to keep sales soaring. “We identify local assemblers and co-operate with them to provide their customers with value-adds through bundling hardware and software. The hot issue of the moment is security and we are working on a campaign to provide Computer Associate's anti-virus software with Office. Through these offers we want to make it more attractive for customers to go out and purchase genuine articles of our software rather than buy a pirated copy.” ||**||Customer concerns|~|MartinSmithNovell.gif|~|Martin Smith, director of operations Eastern Europe and Middle East at Novell|~|The perennial problem of piracy continues to worry Microsoft and also indirectly affects its competitors in the office space. Across the Middle East and Africa region, 55% of all software purchased last year was pirated, according to a survey conducted by research firm IDC, commissioned by the Business Software Alliance. In the Middle East, software piracy cost vendors nearly US$900 million in 2003 alone but Microsoft claims that the problem is lessening. “Piracy is becoming less of an issue across the region and the numbers of illegal copies are reducing as witnessed in countries like the UAE,” explains Microsoft’s Shehadeh. “This is especially the case for our office software where corporates recognise the importance of proper support from us.” Open source vendors face issues with customers demanding Linux software and then adding pirated Microsoft products. “I see a lot of organizations introducing Linux against Microsoft due to cost savings of up to 20% on the cost of a PC,” explains Mokbel Fayyad, CEO at Egyptian assembler Centra. “The problem is that people aren’t used to using Linux and many who buy Linux will put a copy of Microsoft on top.” There is a recognition of this issue among vendors and many of the software suites on offer have a familiar feel to them. “Going back in history there was a time when using Linux was frightening,” comments Zitouni. “There was a black screen with green light on it, like in the Matrix. Now it is very different and the application tools found in Windows are also found in our offerings. The programmes have different names and will be using different buttons but the similarities are there. Half a day is all it takes for end users to learn the features on our software and they are up and running. Linux software is developed by enthusiast users themselves so the features you will find there are really the key features the users need and want. Open source software is really made by the users for the users.” Moving into the niche territory of creative software, vendors Adobe and Quark are also ringing the changes and ramping up their activities. “We are literally putting plans in place now to enable us to further support our channel partners and get involved in more joint marketing activities with distributors like Layout to support them in the market,” explains Gavin Drake, UK marketing director at Quark. Andrew Lindstrom, regional manager Middle East, Africa and Indian Ocean Islands at Adobe Systems Europe says: “We will be definitely putting feet on the ground and appointing a regional manager for the Middle East and continue with more education, more workshops and more end-user activities to showcase the value that we can provide in countries where we haven’t been much before like Egypt and Lebanon.” The message to the channel is simple — there is now competition in the market. Vendors are fighting for the hearts and minds of the end-user and IT players should look to the future as well as the present. “Linux is promoting probably the most fundamental shift we have seen in the IT industry since Windows was invented,” adds Smith. “The rate of adoption is outgrowing all expectations. Who knows how fast it will grow.” ||**||

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