Tesco checks out own brand software

Supermarket supremo Tesco has teamed up with Formjet to take on the likes of Microsoft by selling own-brand budget software

Tesco's decision to sell its own-brand budget software, including dabbling with security products, has been met with caution by other industry players.

The supermarket giant has teamed up with white-label specialist Formjet to sell a range of packages for under £20, both online and in store, starting this month.

As part of the deal, Formjet will provide Tesco with two security/antivirus products; a personal finance tool; a complete office suite; a CD/DVD burning tool; and a photo editing tool, in addition to delivering technical and customer support and managing the new TescoSoftware.com website.

"Customers can now access a wide range of good quality computer hardware at amazing prices but when it comes to software there is little choice and prices are high," said Daniel Cook, Tesco's buyer.

"With more people working from home and schools encouraging greater use of IT, the demand for home computing equipment is bigger than ever."

Tesco's foray into software, in which it hopes to earmark a share of the UK's £8.8 billion market, will see it go head to head with Redmond giant Microsoft in addition to some of the key security vendors like Kaspersky, McAfee and Symantec.

David Emm, a senior technology consultant at Kaspersky Lab, said that the way customer support is handled will be a critical success factor as users need to be confident that any questions or issues they have with regards to security products will be resolved quickly and easily.

He added: "I suspect that although some people will go for the cheaper, low-end option a lot more will be more comfortable by going with a brand that they are aware of and recognise.

"Some 20 years ago it would have seemed strange to think of supermarkets selling newspapers or DVDs. But now nearly all of them sell those products as well as cosmetics and other household goods that haven't traditionally been associated with supermarkets. It is entirely possible that, if successful, other companies will try and get a slice of [this business]."

The software's price tag may not be as much of a hook as the supermarket thinks, according to analysts who believe that software providers no longer compete on price alone, as the prevalence of free offerings demonstrates.

Ovum believes that marketing is the critical success factor as far as software is concerned, citing Microsoft's current market dominance as being attributable to its slick marketing machine as well as quality and innovation.

"Partnering with a category minnow demonstrates one of two things," said David Mitchell practice leader of Ovum's software division.

"Either that Tesco is confident that its marketing engine is robust enough to develop their brand and the business behind it, or that it has not properly understood the dynamics of the market it is entering.

"If the Tesco products do not see this transition to SaaS [software as a service] as relevant (and embrace it), then the retailer might just produce a damp squib. Potentially competitive products, brilliantly promoted, might end up sitting on the shelves of a highly effective distribution channel, keenly priced but staying put, while SaaS offerings metaphorically fly off the shelves."

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