ARN: What motivated your recent acquisition of Software AG's distributor of 18 years in Australia - SPL?
Ken Burrows: It's all part of a major transition that Software AG has gone through, transforming itself from a fairly monolithic-type organisation to a something that's moving very, very quickly. We are far more in tune with the market place now, which was reflected in recent management changes and the speed at which we floated at the Frankfurt Stock Exchange last year. We've acquired five companies, indicating we are very much in the growth mode. The major reason for the acquisition of SPL's enterprise support division is to control our own destiny in North America, as well as to consolidate the Asia-Pacific territory. On the technology front, the company's completely changed again. We've been focusing on e-business technology; we developed some middleware, called EntireX, which enables you to connect to your back-end databases from your browser and link electronic business applications across the enterprise. We've also released a product called Bolero - which is a set of Java development tools and a product called Tamino - the first native XML information server.
What effect will this acquisition have on your operations in Australia?
We are the centre for Australia and New Zealand and we expect that our operations will change quite dramatically. We're bringing on a new direct sales team in Sydney, Melbourne and Canberra to address new e-business technology, but we'll also be implementing a new business alliance model in the region.
Your new business alliance program in Australia and New Zealand indicates a new-found trust in the ability of the channel to support your traditional sales model. What's behind the decision to go "indirect"?
Software AG has, over the last few years, been very much used to a direct sales model; certainly in Australia we've been selling directly to the end user. But given that the new product suite is a lot more decision-based and is going to require proliferation, we're introducing a business alliance model in Australia.
In fact, our model here is going to be a combination of direct and channel sales. There are actually three categories of people we'll be selling to. Most of our customers are fairly large corporate accounts and we're comfortable dealing with them. There's also a lot of small to mid-sized companies that we will also sell directly to. The third category is professional developers and software houses and they're the people we'll be addressing through the business alliance programme.
So, you are actually talking about partner, rather than reseller-type alliances?
There could be a combination of few things there. In Western Australia, we have an exclusive distributor for that region, a company that we have been dealing with for a number of years called Dynamic Business Resources. The second model would be where a company adopts our technologies in an OEM type arrangement and we have a partner called Tower Software, based in Canberra, that will be embedding Tamino with its own record management system. In this model, it will have opportunities to on-sell some of our other products, which means this type of alliance has a reseller potential. These are the two models we're going to be implementing initially, which will complement the already existing direct sales model. But that doesn't mean that we might not have a 100 per cent channel model in 12 months' time. It will all depend on our success building business alliances here.
Will you be looking to actively recruit a certain number of partners or distributors in Australia and New Zealand?
Hopefully, we'll have 10 to 12 people signed up by the end of this year. Software AG actually has a strategic directive that says that within the next 12 to 18 months 30 per cent of our revenue will come through the channel, leading up to 50 per cent by the year 2003. At the high end, we'll be looking at partnering with the big five to provide tools, solutions and services to big corporations. That's our global strategy. There's a question mark in my mind about New Zealand. I know the market reasonably well and I'm not sure if it is better to have a distributorship or a direct presence model there. We're still trying to work that out.
E-business is changing the face of business - small and large, as well as the face of value-add. What would be the key thing that you would identify as necessary for survival in this new business environment?
I think the biggest challenge nowadays is time to market. When I first got involved in software business, you could afford to make a mistake of going for two or three years with a poor sales person. You cannot afford to do that now. The other thing is partnering. You're either going to get bigger by partnering or you'll get swallowed up, that's the world we live in today.
What are Software AG's main business objectives for the new century?
The first one is growth by acquisition and that's global. We've got a directive to look for companies that would fit well in the Software AG model. Typically, they would be companies committed to XML application development that are using our technology to build those applications. The second thing is to become a leader in the e-business technology with a three-pronged product offering that I mentioned earlier. On a more general level, I believe our whole culture has changed through the recent restructure and we are now much more committed to keeping our promises to the market. The fact that our share price has gone up five to six times over the period of six months shows that analysts believe we're doing the right thing. But, the words that best describe our plans for the next few years are growth, growth, growth.