A few years ago Softchoice Corp. was one of the preeminent software resellers in Canada. Through acquisition it reinvented itself into a North American reselling force with not only software, but hardware as well. The company now has its sights set on Europe through a strategic partnership with IT
solution provider PC-Ware Information Technologies AG of Leipzig, Germany.
Softchoice’s growth has been spearheaded by David MacDonald, the company’s president and CEO. Computer Dealer News visited MacDonald at his Toronto headquarters to talk about its future plans.
CDN: What is your forecast or plan for growth in 2004?
David MacDonald: 2002 was an interesting year for us because we did a lot of business with Microsoft licensing and a lot of customers accelerated decisions and got themselves current. So 2003 we did not have customers who were not in the market place, so Microsoft business is down. But in both the U.S. and Canada we are seeing strong double digit growth for non-Microsoft vendors. In fact, in the U.S. on a year-to-date basis we have grown our non-Microsoft business by 35 per cent. The hardware business is growing leaps and bounds and in November it was more than 15 per cent of our revenue. If you look at what we do for our customers it has translated well in the hardware space.
CDN: How has Softchoice been able to gain margins in the hardware business, when most other resellers find no margin in hardware anymore?
D.M.: It is important to understand that our goal is to take the thousands of customers who do business with Softchoice and start selling them hardware. If you can imagine when someone starts talking about Windows Server 2003 and to meet their needs they might ask us about an upgrade path, and it leads to a discussion about what server to run it on. It means two things: We are dealing with the same customer and we are dealing with the same infrastructure by providing them hardware. So we are not adding a lot of infrastructure to add hardware. Our costs are not going up and we found that we have increased our satisfaction with them. We have found that the mix provides good margins. If you are competing with everybody on desktops with the same customer you are going to have a variable margin transactions. If you look at a customer’s total needs — the desktop, the monitors, the keyboard, the cables, the mice, the notebook, the bags and the software — there is an opportunity to receive reasonable margins.
CDN: As you know, CDW acquired selected assets of Microwarehouse. CDW will be a player in Canada starting 2004. A lot of resellers I have spoken too are worried about it. Are you?
D.M.: CDW is a worthy competitor and we think their entry into the Canadian market place was inevitable, frankly. We have been prepared for them to come for a long time, similar to other retailers who waited for Wal-Mart to come into Canada. We are prepared and we have a cost effective customer strategy and loyal customers. We did a benchmark of our pricing and our catalogue pricing is lower than CDW. We are happy to say that, and with the loyalty of our customers and our preparation will not only allow us to maintain our customer base but grow it.
CDN: To compete and succeed especially in the U.S. does Softchoice have to alter its profile in the market away from being a Canadian company? Several other IT firms have done this over the years such as Nortel, Cognos, Corel, and Globelle. Some have had moderate success, while most have failed.
D.M.: We consider ourselves a North American-based company. The fact that we are based in Toronto is because Toronto is a world class city. It is well accepted by business leaders in the U.S. as a great place to do business. You know, when you travel to the U.S. the American’s speak glowingly about Toronto. So we view ourselves as a North American company based out of Toronto. We do have two call centres in the U.S. and 27 branches, so we think we have a North American profile. We are proud of our Canadian roots, but it is important to maintain a North American focus.
CDN: Do you think we will get a killer app sometime in the future or has software reached its limit?
D.M.: I have a lot of optimism about the industry. Even if you look at what has happened in the economy the last couple of years the economy has still be driven fundamentally by IT.
A lot of nay-sayers would like to disagree but I think the productivity and the technology continues to drive overall growth in the GNP. Even U.S. Federal Reserve Chairman, Alan Greenspan said this.
Do I think we will have a killer app? I am not counting on it. But, I think we will continue to grow and I think there will be a lot of opportunities in the front and back end applications.