Software Republishing: Republish Or Be Damned

When Ronald Reagan was US president, cartoonist Steve Bell drew a strip in the Guardian in which Reagan gave an impassioned speech about his concerns for Yrop. But none of the president?s advisers had the faintest idea what Yrop was. When they asked him, he shouted: ?Yrop, boys! Yrop! That bit between the Atlantic and Asia.?

The loose grip of Americans on world geography is a common source of amusement for Europeans, which means US companies are presented with a considerable challenge when it comes to selling in Europe, particularly if they are small startups that can?t afford a European office.

For a US company to maintain a single member of staff in Britain costs about $300,000 a year. Although two or more don?t cost $300,000 each, a small UK office can quickly run up a bill of $1.5 million a year ? which is a severe dent in income if the company only turns over $20 million a year.

The cheapest option for a US company is to ignore Europe altogether and concentrate solely on the domestic market. For a startup, European sales are rarely going to contribute more than seven to 10 per cent of domestic sales, but Europe can account for 20 to 60 per cent of revenue for an established software house. Ignoring Europe limits growth.

Companies can appoint an international distributor, and many do, but then their product is one of 10,000 lines. European sales may plateau at five per cent of domestic.

The alternative is to choose republishing, which need not be more expensive than distribution but is better for the supplier, its European customers and the channel.

Republishers take product from suppliers, localise it and often turn it out under their own label. Most republishers do more than this, though, which is why republishing appears in many shades.

Repping, where the agent handles trade sales for the supplier, is where the supplier provides the marketing money and the agent handles all the contact with the channel. Often, the supplier already has a UK office to handle corporate sales; the rep mops up the rest.

Then there?s market-making, where the agent builds the brand for a supplier which may or may not be physically present in the country.

Up until recently, Corel has operated this way through CMM. To customers, CMM is transparent; Corel is the brand.

David Larkin and Nicholas Brown left Britain?s most successful republisher, Roderick Manhattan Group (RMG), to set up Cross Atlantic, pitching themselves as ?a three-tier virtual subsidiary?. As a republisher, Cross Atlantic manufactures under licence, which is cost-effective for products which can sell through 5,000 to 10,000 units a month.

?We get code and turn the product and manuals into a UK product. But for some products that sort of volume is a year?s supply,? says Brown, who is marketing director.

Kieran Sheahan, a director of Partners In Europe (PIE), says success usually means 2,000 units per country per month.

Cross Atlantic also operates as a master distributor: the supplier ships in flatpack boxes, manuals and disks for assembly in the UK (although Brown still insists on UK registration cards). It also reps for Inso, which has a corporate sales office; Cross Atlantic provides access to retail and mail order.

Commission levels vary: six to 10 per cent is normal. Sheahan expects supplier and republisher to share the risk and favours profit-sharing deals.

The latest buzz phrase among highly geared North American startups is ?virtual subsidiary?. Switched-on US software houses are looking for partners who know the local market.

?The companies with experienced staff are OK, but young start-ups are the worst,? says Mike Holman, sales director of republisher Guildsoft. ?They often look upon Europe as another state and forget the language and cultural differences. They also grossly underestimate or overestimate the potential of the market and usually underestimate the effort required to address it.?

Guildsoft has built up a portfolio of educational multimedia titles from importers over the past few years. For Holman it has been an educational exercise to have US companies appreciate there is more to localisation than spelling the word ?colour? correctly.

?Cultural differences extend beyond language. For example, with British educational software it is not the done thing to greet a child?s correct answer to the sum 2 + 2 with rapturous applause and a ticker-tape parade down Mainstreet.?

The mistakes US companies make when they approach Europe are caused by ignorance as much as arrogance, according to Roger Barratt, RMG founder.

?We?ve been asked to meet clients at the European airport,? says Barratt. ?And we get asked: ?Why can?t the French pay in dollars? Everyone uses dollars.? Or a whole direct sales strategy is built around credit card payments. So then it?s: ?What do you mean they don?t have credit cards in Germany? How do they live?? And so on.?

US companies that try to go it alone in Europe don?t just risk making social faux pas but risk losing money, says Sheahan. ?Announcing a product in the States and then waiting six months to go to Europe allows the grey market to flourish and cause problems with pricing at a later stage,? he says.

Localisation is the main advantage of republishing. It works for the channel as well as for the supplier. Packages with English spelling and local registration cards and support numbers are going to be reassuring to customers, and therefore easier to sell than products which look like they arrived in someone?s suitcase from a holiday in Miami.

US product is a wind-up for Europeans. Have you ever used the US spell-checker in Word? If you think that US product sells without a hitch in the UK, ask yourself why Microsoft, a company not known for its altruistic gestures, spent so much effort developing a UK edition of Encarta.

Of course, some products need more work than others to make them suitable for the local market. Guildsoft sells a small business accounts package called MYOB (Mind Your Own Business). The original has a customer address database with fields for state and zip code, the spreadsheet is set up to calculate sales tax and the date is written month first. But the underlying business rules are sound.

?The changes were cosmetic, mostly to the user interface,? says Holman. ?The code underneath applies universally.?

Some products, particularly utilities, require fewer changes. Packaging, registration cards and manuals need anglicising, but disks can be duplicated with few tweaks.

Software utilities are a favourite category of republishers. Inevitably, they come from small North American startups which have a dangerous but symbiotic relationship with the big software houses.

They mostly make their living running in front of the steamroller which is Microsoft, finding niche technologies which Microsoft hasn?t yet squashed into the surface of Windows. They have to run at least a year ahead of the steamroller and keep running, or become a smudge in the annals of computer industry history.

Then there are the new areas of technology, such as voice recognition, photo imaging and the internet.

?Every time there?s a new version of Microsoft XYZ, we get offered a product that improves on it,? says Holman. ?People are writing clever software for digital cameras, for example. It?s not the big software companies but the small startups which lack the financial muscle to launch their products worldwide.?

Not all suppliers come from North America. Startups from Israel, Australia and South Africa are all represented in the UK. Britain also has its share of software geniuses who require republishing clout. In theory, there should be a lot of smart utilities coming from eastern Europe ? after all, during the Cold War years when Cocom was rigidly enforced, they had to write tight code which would run on old computers. But all their clever developers seemed to be sucked up by Silicon Valley as soon as the Iron Curtain fell.

For these software minnows, signing up with a republisher is their only chance of getting their product to market. If a developer approaches dealers, retailers or even a distributor with one product, no matter how clever it is, he stands no chance of getting it stocked. But a republisher can collect a number of such products into its own label and present a range to the channel.

Cheshire-based Europress is past-master at this, publishing software in the same way that Penguin publishes books. Who says you have to employ an army of developers to be a software publisher?

Config Safe, from the unknown Boston-based DP Software Corp, saves the factory setting operating system files in a PC so that when a user feeds in something unsavoury like Active X, which can give Windows 95 appalling indigestion, the user can reinstate the uncorrupted operating system without having to reinstall Windows.

?I knew I wasn?t going to sell any with that name on it,? says Barratt. Thus Config Safe became Rescue Me, published under RMG?s Kiss label. It sits on retailers? shelves in a big red box, with a comforting blue lifebelt radiating reassurance to between 3,000 and 4,000 worried users a month. Soon the product will be pre-installed by PC manufacturers.

?There?s more margin in master distributor and republisher status and it gives us greater control,? says Brown. ?The channel likes republishing better than repping because it knows where the buck stops. You have to put more effort into technical and customer services.?

But what about European distribution? Cross Atlantic, Guildsoft and even RMG look to similar outfits in each of the countries their suppliers want to sell into. PIE is the exception in that it boasts pan-European presence, including fulfilment, marketing, technical support, stocking, distribution and telesales. It operates a support and call centre in Shannon and has offices in Germany, the UK, France, Benelux, Spain and Scandinavia. ?We can give a client seven offices in 48 hours and sales within 20 working days,? says Sheahan.

Brown says Cross Atlantic offers a good service to supplier and UK channel alike because the number of brands it carries is small enough for the company to focus on customer and channel support.

?A distributor has thousands of product lines, we have six and will add maybe two more, and then that?s it.?

Yet RMG keeps on growing, having established a track record of turning US imports in hit UK products. For example, RMG took Visio from nowhere in 1992 to top-selling graphics product in the UK within 18 months of launch. Visio now has its own European office. RMG worked similar magic for First Aid for Windows in 1994. And Barratt?s reputation has attracted heavyweights such as Borland founder Philippe Kahn: RMG set up the UK subsidiary of Kahn?s Starfish in 1995.

In 1994, RMG set up its PlanIt label. Although there was an early legal hurdle to clear with Jian over the naming of the business plan package, PlanIt has swollen to include many aspects of small business operations and another 20 or so titles are planned. But it is no longer about peddling software. A PlanIt title contains plenty of textual advice as well as forms and database templates.

?The biggest negative is that they are software titles,? says Barratt. ?We are not just selling software but the ability to do things. We?re selling help to make British businesses run better, but software may not be the best medium.?

In this way, republishing has taken RMG beyond software and into book publishing with Kogan Page. A business help Web site will probably come next, where contract templates and standard legal letters and the like can be downloaded for a fee. TV and video are also on the agenda.

But it is said that to get the true measure of a man you should take into account his failures as well as his successes.

In 1995, RMG launched SoftRam in the UK, a product which claimed to double a PC?s memory using software compression. The product sold in quantity and became a top-seller within six weeks of launch, mainly because of the higher memory requirements of Windows 95, but also because DRam prices were still high after worldwide demand outstripped supply in 1994.

SoftRam worked with Windows 3.x but not with Windows 95, the main reason most people were buying it. Finding that the Windows 95 version did not work, RMG recalled all stock and offered users their money back. Barratt sourced an alternative, Hurricane 95, and offered customers a free upgrade.

If it had been Microsoft, the press would have roasted a part of the product manager?s anatomy over an open fire, but RMG received praise from all quarters for the excellence of its customer service. SoftRam wasn?t a failure and disaster was turned to success.

Who can forget SoftRam? But who can remember Multimedia Cats & Dogs? There?s probably still a cupboard full of copies of this lame pet-lovers? interactive encyclopedia in RMG?s offices.

?We took it on against my better judgement,? says Barratt. ?The argument ran something like: a lot of PC owners have pets, so there must be a market for it. Not a chance.?

But to be fair to Barratt, the air around ?infotainment? CD-Roms is pungent with the smell of burning fingers. Multimedia produced a lot of dogs. At least Barratt didn?t waste time developing it.