Corporate: KarenSoft takes on Microsoft TheEdge, Sunday, December 19, 2004 A Malaysian company that dares to take on the world's largest software company — Microsoft — is a story worth telling. Microsoft, helmed by billionaire Bill Gates, controls over 90% of the US$10 billion (RM38 billion) office application suite market via Microsoft Office. Alternative suites such as StarOffice and WordPerfect Office have not been able to make a significant dent in Microsoft's dominance of the market. Against this backdrop, Penang-based KarenSoft Technology Bhd launched its own office application suite — ExecSuite — last month. Its executive chairman Chee Chong Hwa, a chartered accountant turned software writer, says ExecSuite has more than just office productivity tools such as word processor, spreadsheet, e-mail and Internet. It also offers administrative tools, customer relationship management (CRM) and human resource management (HRM) tools, as well as personal tools, depending on the edition. ExecSuite comes in three editions — Lite, Standard and Enterprise. The Lite edition is targeted at buyers of new personal computers (PCs), the Standard edition at existing PCs owners and the Enterprise edition at small and medium-sized enterprises (SMEs). Chee says KarenSoft has been using ExecSuite in its operations since 2000. The company decided to commercialise ExecSuite after outsiders saw its potential. One of them is a PC vendor who urged KarenSoft to refurbish ExecSuite with the latest interface. The vendor, who sells PCs overseas, intends to bundle ExecSuite instead of Microsoft Office, says Chee. The softening demand for enterprise resource planning (ERP) solutions among local SMEs is another factor that nudged KarenSoft into bring ExecSuite to the market, Chee says, adding that the weak IT spending among SMEs is a reflection of the state of the local economy. Since its inception in 1991, KarenSoft has been providing its ERP2 solution, which is an e-business solution comprising sales distribution, material requirements planning, procurement control system, planning and production, financial accounting and fixed assets, human resources information and CRM. KarenSoft's game plan When asked what the company's game plan was to tackle Microsoft's dominance in the office application suite market, Chee mentions several strategies, namely quality products, aggressive pricing, user-friendliness, high margin for dealers and user acceptance. In terms of features, Chee says ExecSuite has the edge over Microsoft Office because of its extra features such as an e-mail tool that can handle large amounts of mail, a built-in Adobe PDF writer, personal organiser tools, as well as CRM and HRM tools. What ExecSuite lacks is the ability to execute complex instructions for word processor and spreadsheets. "Only 10% of PC users use these complex instructions. We are targeting the 90% who are basic users of Microsoft Office," says Chee. In terms of pricing, ExecSuite Lite is RM399, which is 40% cheaper than the basic edition of Microsoft Office, which retails at RM680 and has tools such as Word, Excel and Publisher. ExecSuite Standard costs RM899 whereas the professional edition of Microsoft Office retails at RM1,550. As for ExecSuite Enterprise, Chee says there is no comparable product from Microsoft because it is a mini-ERP solution that also comes with an office suite. This version costs RM9,999 and is targeted at SMEs whose IT spending is less than RM20,000. Chee says ExecSuite is also user-friendly because it has a similar interface to Microsoft Office's. Thus, it should be easy for those familiar with the latter to use ExecSuite. "The basic problem is that other office suites do not have Microsoft Office's look and feel. But Microsoft Office users will be very comfortable with ExecSuite's word and spreadsheet," he says, comparing ExecSuite to StarOffice and WordPerfect Office. Chee also points out that ExecSuite allows seamless document exchange with other common office suites such as Microsoft Office's Word and Excel. Margins for PC dealers will also be generous. Chee believes dealers selling ExecSuite Lite will get a profit of about RM150 per copy, compared with RM20 to RM100 for selling the basic edition of Microsoft Office. For ExecSuite Standard, dealers are expected to make a profit of around RM260, compared with RM100 for selling the professional edition of Microsoft Office. KarenSoft, according to Chee, is making an effort to get sellers of generic PCs on board. So far, over 30 dealers nationwide have agreed to bundle ExecSuite in their products. "If the dealers use ExecSuite, they can lower the selling price and yet earn higher profits," he says. It's about branding Market observers say it takes more than just cheaper and user-friendly software to challenge Microsoft. Take StarOffice. Although it satisfies the two criteria, many consumers still stick with Microsoft. This is because the pervasiveness of Microsoft's operating system and applications has instilled fear among consumers and organisations of incompatibility with alternative office suites. This is something Chee is aware of. He knows the battle for consumers is fought in the mind. "It is about marketing, marketing and marketing," he says. Using media such as radio, newspapers and public bus wraparounds, Chee wants to get this message across to consumers: ExecSuite is compatible with Microsoft Office; it has more features; and it is much cheaper. The advertising campaign for ExecSuite started last month and will last six months. To fund the campaign and the company's plans to take the product overseas, the company is courting investors to subscribe for its new placement shares. Chee hopes to raise about RM6 million from the placement exercise. With a cash pile of just RM2.86 million, it is crucial for KarenSoft to win over the investors. Chee is targeting sales of RM12 million from ExecSuite next year. This means the product is expected to be the company's key earnings driver in the future. Currently, KarenSoft derives its revenue from sales of its ERP2 solution. For the nine months ended Sept 30, 2004, it posted a net profit of RM0.81 million on the back of RM4.60 million in revenue. Chee also aims to take ExecSuite beyond Malaysia next year. The company is in talks with PC vendors in such countries as Singapore, Thailand, China, Hong Kong, Kenya, Iran, Australia, Canada and the US. What if ExecSuite fails to gain traction in the market? Chee replies: "There is no question of failure with regard to ExecSuite. The question is whether we will be 10%, 50% or 100% successful." The research and development cost for ExecSuite has been written off over the past seven years. So the only cost comes from promoting the product, he says. Regardless of what happens to ExecSuite, Chee says it will be business as usual for the ERP2 division. Besides ERP2 and ExecSuite, KarenSoft is also developing a web-based government solution as part of its medium to long-term plans. On the home front, Chee says KarenSoft's ERP2 solution has beaten Microsoft before. He cites Malaysian Institute of Accountants' ERP job where KarenSoft's membership-based ERP solution was chosen over Microsoft's ERP solution. "This shows that not only can we take Microsoft on, but we can also win," says Chee. By Ng Kar Yean