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Milk, bread, office suite?

Clothing, consumer electronics and life insurance are just three of the things you can pick up on your weekly shop. Now Tesco is going one step further - it’s selling software.

This article appears in the December 06 issue of PC Advisor. Available now in all good newsagents.

It’s not often that retail giant Tesco is given underdog status. But technology analysts are sure to claim it’s bitten off more than it can chew by announcing a range of software that could compete with Microsoft Office. The supermarket chain will release various products – from an office suite to an antivirus tool – at the end of October. Titles are likely to be £20 or less each.

“With more people working from home and schools encouraging the use of IT, the demand for home computing equipment is bigger than ever. Customers can 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 Tesco buyer Daniel Cook.

Is the impossible possible?

A number of companies have tried, and failed, to provide mass-market competition to Microsoft Office. But Tesco has two key advantages – resources and shelf space.

OpenOffice.org has succeeded in attracting some people away from Microsoft, but it’s only achieved small-scale success through word of mouth and with limited financial backing.

Tesco is a multinational giant, which announced more than £1bn profit in the first six months of this year. It can count on millions of people walking through its doors each week. It’s got more muscle than most when it comes to entering a new market.

White label distributor Formjet will supply and support the software, through its subsidiary Formjet Innovations. Formjet holds the UK rights to distribute Panda Software’s antivirus tools and Ability’s word processor and office applications, among others. It founded the Innovations subsidiary to sell versions of the software under other companies’ brands.

For Tesco, Formjet has branded the software’s packaging, code and online help with the supermarket chain’s name, Formjet spokesman Graham O’Reilly said.

Customer service

In a market where technical support is increasingly outsourced to offshore destinations, Formjet has set up its support team in Crawley. “It’s become quite a feature, these days, to say it’s UK-based support,” said O’Reilly. The company keeps support costs down by handling everything by email.

Customers “get an automated reply with the top 10 answers based on the subject line of their email,” according to O’Reilly. Typically, that’s enough to deal with around half the questions the company receives and staff deal with the other half, he said.

The antivirus and security software packs will include one year’s email support and software updates. After that, customers can renew their subscription online or buy another pack at the supermarket. Formjet will impose no time limit on email support for the other applications.

Even at such a low price, it’s doubtful that Tesco will gain much market share. One analyst pointed to Microsoft’s continued dominance of the office software market, despite the availability of competing applications for much lower prices, or even for free.

“Many low-cost or free packages exist in each category, yet products that are many times the price of the cheapest option continue to dominate,” David Mitchell of Ovum said.

If it is to win customers, Tesco must ensure its applications are compatible with Microsoft’s suite, he said. That’s not to say Tesco will pick up a large market share in the short term, but, as they say, every little helps.

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