City Software cleans up ISW

Melbourne reseller City Software has doubled in size and made a move into the NSW market with the purchase of the intellectual property and fixed assets of International Software Warehouse (ISW).

As reported in ARN [March 28, Page 1], the UK parent of ISW pulled the plug on the Web and catalogue-based reseller last month. City Software will keep the business under the ISW brand, running its Web site, fielding calls and employing several former ISW staff.

Lorenzo Coppa, managing director of City Software, said he has purchased all customer lists, databases, the ISW Web site and its brand name, which is basically the entire company with the exception of its debts. He said the two companies were of similar size, meaning the combined entity poses formidable competition to rivals like Harris Technology and Adelong. The acquisition will also extend City Software's strength beyond Melbourne and into ISW's strongest region, New South Wales.

Coppa said the company has endeavoured to maintain as many positions as possible from ISW, approaching key staff to come on board at City Software. He believes the acquisition was a "solid investment", and expects the new ISW business to generate the same revenues it did before it was placed into administration (approximately $20 million per annum).

"We really understand this kind of business," he said. "We are experienced in how to make this model profitable in Australia. We've been profitable from our first year."

But, according to Richard Weadon, marketing manager at competitor Adelong, the combined businesses of City Software and ISW are still not enough to put the heat on its competitors.

"I don't rate them as a threat at the moment," he said. "They've got a problem. They rely heavily on software sales, but software sales are still in a post-GST lull. There are no hot apps for people to upgrade to, at least not until Office XP comes out. But hardware sales on the other hand are on the up."

Coppa disagrees. Gaining a larger hardware portfolio was one of the reasons he purchased ISW.

"Our businesses were very similar," he said. "We don't have any new software partners, but many new hardware partners. We have taken their purchasing manager on board to help out in that department."

Coppa also disagrees with Harris Technologies MD Ron Harris' opinion [ARN, March 28, Page 1] that the reason ISW was struggling was because the business was too late in developing a Web strategy.

"I think a lot of this Web stuff is marketing hype," he said. "Customers are still more likely to order by picking up the phone. It takes about three minutes to order over the Web and half that on the phone. The real reason ISW went down was because of high overheads. We are efficient enough to manage it effectively."

Coppa was unable to say how much he paid for the ISW acquisition, but said the administrators were "very happy with the price they got".