Is software success in store for Tesco?

High-street superstar Tesco is making another addition to its blue-and-white-striped product-filled shelves: its own brand of software that will be sold at budget prices and will see the grocery giant go head-to-head with Microsoft in the UK domestic software market (CRN, 9 October).

Tesco supermarkets across the UK and Ireland will offer six different packages, including office software, security systems, an image manipulation package and a CD/DVD burning tool. Each title will cost less than £20 – considerably less than packages such as Microsoft Office that can cost up to £299.

The UK software market is currently estimated to be worth about £8.5bn and Tesco will initially launch its range of software titles in 100 stores by the end of October, with a full rollout across the UK over the next 12 months.

The six software titles have been developed by Cambridge-based software distributor Formjet Innovation, part of the Formjet Group, a firm that specialises in acquiring territorial rights to alternative software products and then markets, distributes and supports these products on behalf of the vendor in the UK.

The company’s products include Ability Office, a software package that includes word processing, spreadsheet and photo-editing applications, and Panda anti-virus software.

Tesco has confirmed that its range of products will be compatible with other titles such as Microsoft Office, but no Mac-compatible versions are currently planned.

Graham O’Reilly, director at Formjet Innovations, told CRN: “We sat down with Tesco and looked at exactly what this software was required to do.

“It’s part of our strategy to let Tesco promote these items as their own brand of software. When the support comes in at our end, we will in essence, be working for Tesco.”

However, many of the tool palettes and workspace windows within these new titles bear more than a passing resemblance to those of other similar applications produced by somewhat larger software manufacturers based on the other side of the Atlantic.

O’Reilly explained: “Quite a lot of development has gone into producing this software for Tesco. When this kind of software, or in fact any application is developed, there are many universal icons and tools that can be used and are instantly recognisable for ease of use. For this reason different companies can develop packages without any copyright infringement.

“The software has been specifically developed for Tesco; the feature set and look and feel has been agreed based upon Tesco’s customer base. All of the products link through to a dedicated web site for Tesco software customers providing support and services, including a form allowing users to contact technical support.”

O’Reilly went on to state that the software is, in essence, being rebadged specifically for Tesco.

Tesco, it seems, with its prominent high street presence, has adopted the role of marketing department for Formjet Innovation’s new software.

Given just how much of the Microsoft machine is dedicated to an equally far-reaching marketing mission, does this new range of budget software actually pose any viable threat to the Seattle-based software behemoth?

Caroline Woffenden, Tesco representative, said: “Demand for home computing is bigger than ever, with more people working from home and schools encouraging greater use of IT. We’re offering our customers increased levels of choice, accessibility and unbeatable prices in the fast-growing computer software arena.

“Our range of software brings choice and value to a marketplace that has offered too little of either for too long.”

Bob Tarzey, service director at analyst Quocirca, said: “In essence this is a case of a small Cambridge vendor signing up a huge reseller. It will offer a good alternative to Microsoft’s product range, and about time too.

“I think it does pose a threat at the consumer level in the UK. Don’t under-estimate Tesco. It successfully moved into selling petrol and clothing, and it’s now beginning to move into all sorts of other things.

“Tesco already has an audience for this kind of product. Its disadvantage is that people don’t think of Tesco when buying a PC and they tend to buy software when they buy the hardware, so that is something that they need to address. But I’m pretty sure they will soon.”

Karl Noakes, director of partner development and marketing at Microsoft, said: “Microsoft welcomes competition in all its markets, because it drives innovation and keeps prices competitive – both of which benefit our customers and our resellers. Software has always been a competitive market, and customers have always chosen from a variety of alternatives. We welcome this because it is healthy for the industry as a whole.

“VARs benefit because they are able to increase their profitability by understanding their customers’ needs and delivering the most suitable technology solutions, based on a platform engineered to be easy-to-use, with an emphasis on security and reliability – all at a lower total cost of ownership.”

Tarzey said: “There will be a spike of real interest in the channel and a great deal of media coverage, especially when you consider that 15 per cent of all retail spending in the UK goes through Tesco.

“It will actually highlight the need to upgrade functionality and eventually the superstore will sell hardware. The channel won’t be too phased, but it will probably be just a little concerned to begin with just because of the sheer size of Tesco. It will be interesting to see what transpires.” C

>> Further reading:

Channel unconcerned by Tesco latest IT moves

Tesco software will be different to existing products

Contacts:

Formjet Innovations (0870) 760 7307

www.formjetplc.com

Microsoft (0870) 607 0700

www.microsoft.com

Quocirca (01753) 754 838

www.quocirca.com

Tesco (0845) 722 5533

www.tesco.com