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Baker: Nothing to gain from the channel

Baker: Nothing to gain from the channel

With Powerlan's exit from the IT services space and its reinvention as a software vendor, CEO Theo Baker sees the local IT channel as being "irrelevant" to the future of his company.

Through a series of divestments and controversial manoeuvres, Powerlan has ruffled quite a few feathers among the distributor and vendor community. But Baker suggests that any negative sentiment in the IT channel that relates to Powerlan is likely to be based on misinformation.

"People need to know the facts before they conclude what we have done and haven't done," he said. "No doubt there's a certain amount of misinformation about us in the general IT services and commodity space. But it will very quickly become yesterday's news. This is not the space we intend to participate in from now on."

Baker believes that the IT reseller and services game has just about had its day. He said there is no longer any "mystery" about IT products anymore, which have become increasingly commoditised, nor is there a lot of faith in the expertise of services companies. "You can no longer charge healthy margins for those kinds of products," he said. "What we have done is transition our business well away from that part of the market."

Now a software company, Powerlan is focused on three core product sets: the telecommunications software of re-acquired company Clarity; a suite of specialist banking and finance applications; and OfficeConverter, software that enables companies to update older Microsoft Office files to the latest versions of the software.

For the telecommunications and banking and finance software, Baker sees little market opportunity in Australia, let alone an opportunity to market the software through channel partners. "It's not as though we have hundreds of telcos or funds managers for that matter in Australia," he said.

Thus Baker sees no reason to maintain strong relationships in the local IT channel. "It's pretty much irrelevant from my perspective," he said. "Our opportunity is a global opportunity, not a local opportunity. Our products are not commodity-based products. We are not a vendor of mass products."

Powerlan takes its medicine

Powerlan has posted a massive $146.4 million after-tax loss for the 12 months to June 30, a sizeable plunge considering its $14.8 million profit the previous financial year.

This loss was based on revenues of $208.2 million, well down on the previous year's figure of $342.1 million.

In a statement to the Australian Stock Exchange, Powerlan blamed a difficult trading environment in the commodity products and IT services divisions, and falling demand in IT recruitment and training.

To cut down on costs, Powerlan has sold off several businesses such as XSI Technologies, the Australian IT Careers Institute, IT&T Careers, Australasian Technology Remarketing, and Business Infrastructure Queensland, NSW and Victoria. The company has also reduced its headcount from 1,000 to 400.

CEO Theo Baker attributed the loss to the "cleaning up of Powerlan's balance sheet", which involved a transition from commodity products and IT services to becoming a niche software vendor. Baker told ARN his only regret over the year was that he had not made this transition sooner.


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