Telemedia advises: Go for margin

You may make the greatest software in the world but you need to sell it at the highest possible margin, advises Telemedia Networks boss Chris Jones.

You may make the greatest software in the world, but you need to sell it at the highest possible margin, advises Telemedia Networks boss Chris Jones.

Drawing on his experiences at last week’s monthly Software Association dinner, Jones, now a multimillionaire, said margins were important because technology changes daily – and your product must change too.

“I wouldn’t want to be selling PCs – there’s no margin. But in the software industry you have got to have those margins to afford to keep up with the changes. For me, [one change] was a half-a-million dollar decision.”

Telemedia, which started in Auckland and subsequently listed on the Australian Stock Exchange, builds mobile, telephony, messaging and billing platforms for telecommunications companies.

Its products were first built on SCO Unix, Informix and HP-UX. But support for the first two began to let him down, he says, and Hewlett-Packard started to bring its servers out for NT. Telemedia moved to Sun's Solaris and to an Oracle database and today uses a lot of Sun and Compaq hardware, he says.

“The smartest move I ever made was to change and run on the big guys,” says Jones, who now lives in Australia.

“You can have the greatest software, but if you don’t have the support, customers will ditch you.”

Money also needs to be invested in new products, he says. Telemedia is today working on short messaging and voice recognition technologies. New prepay mobile platforms have proved a huge market for Telemedia in developing countries such as Romania and Uzbekistan.

Another piece of advice: research your target market and the need there for your products, Jones says. He recalls many years ago travelling around China’s countryside, much of which didn’t have telephone lines, trying to sell voicemail systems. He soon realised the only market was in hotels, providing services for ex-pats. Jones says once a need is identified, hire well-known local staff (in Japan, he headhunted Lucent’s entire sales team); go out of your way to fit in with the culture of the locals even if you don’t speak their language; and make sure your reference sites are perfect.

Telemedia’s share price on the ASX has slumped from a high of $A7.53 ($NZ9.20) last year to around $A0.30c today, but Jones doesn’t regret going public or using venture capital. However, he advises software developers and small IT companies looking for investments to consider carefully similar moves.

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