Most entrepreneurs begin by looking for a great idea. But David Hodges of software firm Smartpath started out by searching for something very different – he tried to find something that people hate doing.
“I came out of an IT services background, and asset auditing was the thing we did very badly. I had an idea around that business, and hired a developer to build some software around that.”
The business quickly transformed from a services company into a software vendor after Hodges saw a gap in the market for asset management software.
“For example, we go to hospitals and put barcodes on assets, collect that information, and provide it back in a database format,” he says.
The company also provides the same solutions via internet-based software-as-a-service, which Hodges says has set them apart from bigger competitors such as IBM.
“We feel there’s a gap in the market. There are large organisations like IBM offering high-end solutions at a high-end cost, and small organisations giving feature-poor solutions over the web, and we think we fit somewhere in the middle.”
The company mostly targets SMEs. It recorded a revenue level of $1.84 million in 2007-08, and expects $2.5 million for 2008-09, equating to roughly 35% growth.
Hodges says that while the company’s products are sharply priced, Smartpath struggles to compete with large, multinational corporations with recognised brands.
“We have a brand awareness issue,” he says. “We have a good solution to provide, but being recognised as a credible software vendor based in Australia is challenging.”
Hodges says the company must fight an uphill battle to convince clients Smartpath is a viable alternative, and that bigger isn’t always better.
“There have been scenarios where we put in contractual obligations to give the customer comfort. An example is putting source code into a safe area, so if our business were to go under, it gives them comfort that then the product would still survive,” he says.
“But we feel we can fit in between there as a second tier player which supplies most of the features that those large organisations do.”
Despite these brand recognition issues, Hodges says the company is surviving during the downturn – in fact, he says this is the company’s best year. But coping with the new economic environment has presented challenges.
“I think we saw a slowing of sales or sales activity late last year that picked up again early this year,” he says.
“Businesses now have slower decision-making timelines, so there are certainly more sign-off processes required, and people are paying slightly slower,” he says.
“Many were talking to us last year about capital budgets drying up and becoming more difficult to get. So we realised we had to change and implement new sales strategies.
“We look at the current downturn as an opportunity to consolidate our offering a little bit more in our space, while there are low capital budgets. If we don’t change our strategy we’re offering, or making tactical changes, we’re missing opportunities.”
“In some cases we’re offering leasing solutions to the companies which don’t have capital budgets to get the software in there and provide the financial benefit they’ll get out of that software.”
Hodges admits that the software vending effort of Smartpath has “missed a lot of opportunities”, but says the company’s key to surviving the changing economic environment is to simply change along with it.
“Roll with the market. You can’t live in an iron lung and make decisions without the market around you. I stay focused on your solution and ensure you believe in the product you’re delivering.”
But Hodges says nothing a business does will be useful unless a company monitors its revenue mix closely. “Pay attention…only pursue products and services that are worth the company’s time.”
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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