Davor Majetić: Vista will spark innovation among Croatian software manufacturers

With gadgets, small programs that users place on their screens, launched thanks to Vista, a real business will be initiated, something like ringtones for mobile phones, profitable for providers and affordable for users.

Interviewed by: Sandra Babić
[email protected]
Photo: Dražen Lapić

Microsoft’s ‘baby’ was awaited for a full six years, so it is no surprise that the launch of Windows Vista and Microsoft Office 2007 is considered one of the events that will mark the current year. According to research by the analytical firm IDC, about five thousand employees in the domestic IT sector will work in a Vista environment this year, and Microsoft’s partners will achieve up to 13 times higher revenue from the value of sold licenses. The optimism that has prevailed in the IT community has overshadowed previous forecasts that the domestic market is moving slowly or slower than the regional one. We discussed the general state of the industry, the prospects of domestic IT professionals, and the work of Microsoft Croatia with the head of the local office of the corporation. Davor Majetić has been in the director’s position since 2002, responsible for the overall business of the company in the domestic market.

• Almost a month has passed since the launch of Vista and Office. Do you have any sales data?
– We do not yet have exact data, although I am sure that many users who tested the beta versions of the new products after the trial period acquired the new operating system and software. On the other hand, we have contracts with most of our business users that allow them to download the new version for free from the internet after its release, which we do not have insight into. However, it has not even been a month since the release of Vista and Office, so it is still early to talk about results.

• How long does the transition period last for large users?
– Business users can literally switch to the new versions of the system overnight. However, testing how compatible existing hardware or applications that companies work with are with the new versions takes a long time. Additionally, companies should allocate extra time for employee training on how to use the system, which is often overlooked.

• IDC conducted research showing that for every dollar Microsoft earns, its partners earn 13 times more. What does this refer to?
– Those 13 dollars refer to revenue from hardware sales, then to solutions produced on Vista, and to revenue from maintenance services. Generally, revenue from Vista sales is only one-thirteenth of the total revenue generated by IT companies. This data presents a business opportunity, especially for hardware manufacturers and suppliers, to offer better and higher quality ‘machines’ in the market.

• You motivate manufacturers to offer strong computers, but also encourage customers to buy Vista together with the computer because, as you said, it is a cheaper option…
– Products are certainly more expensive when purchased separately, especially considering that, unlike acquiring the operating system together with the computer, the user does not have support. On the other hand, installation on a ‘bare’ computer is extremely complex since hardware components must be ‘tuned’ according to the version of the product. This thesis is confirmed by some analyses showing that a large number of computers are returned or customers are forced to spend significant amounts for repairs due to incorrect software installation. I cannot tell you how much the price difference is between computers with Vista or without it, but buying Vista separately from the computer is certainly the most expensive option.

• Microsoft offers a variety of contract forms with users. What contracts do you most often conclude with large users?
– With large business users, we most often conclude three-year contracts in which users purchase the platform, not the version. For that amount, they receive Microsoft software with all access licenses that users install according to their needs. During that period, users can own the license or sign a kind of rental agreement. The other option is to purchase the version that the user pays for immediately.

• What do you recommend? Buy the platform and versions to be at peace or do you consider the upgrade option according to needs to be more favorable?
– We definitely recommend the first option to all users. Recently, we conducted a campaign to show that such usage costs as much as a cup of coffee a day. Additionally, the business system in this way covers all current versions of the software, which guarantees them greater flexibility and easier cost tracking since usage is paid once a year.

• Who in the company do you explain this to?
– Previously, we discussed offers with IT department heads in companies. However, today things have finally started to change, and we address our offers to the top of the company or to people responsible for finance or business planning. We even change our vocabulary. When talking to IT professionals, we use IT language about things that are completely clear to us, while with entrepreneurs, we discuss IT in a business context. It is time for people to realize that IT is not an end in itself.

• Can it be said that IT has come closer to domestic entrepreneurs?
– In November, an ICT Forum was held in Zagreb with the idea of bringing information technologies closer to the business sector. However, I was astonished that the hall was half-empty. Either we were not clear enough, or the guests did not understand us well when we announced that we would talk about IT as a business function. I expected that there would be a demand for more seats in the hall because if I were an entrepreneur from another industry, I would always be interested in how IT can help me achieve profit.

• Where should we start then?
– Medium and small companies are worse off in this regard than large ones. Medium-sized companies often have a person in the IT department, while small ones usually do not have an IT department, but rather a company that maintains their applications and supplies them with a range of other products, so this relationship often boils down to buying and selling. Unfortunately, judging by market indicators, the average IT company has eight employees, so it cannot be expected that they will sell any concrete solutions, let alone understand business or connect the user’s business strategy with what they have to offer. Therefore, it is clear why the share of small and medium enterprises in total IT spending is low, which explains why domestic IT companies are developing slowly.

• How many companies in the IT market are connected with Microsoft?
– More than 1,500 companies operate in the market, and certainly 80 percent at least partially operate with Microsoft or purchase from our distributors. However, we are more interested in companies that possess certain knowledge, which are our certified partners, and we want to ensure that they have the knowledge to sell products, but also to provide additional installation or maintenance services.

• Microsoft and its community are growing at an average rate of 30 percent, while market growth is significantly lower. How do you explain such a discrepancy?
– The first business reason is that software and software solutions sales had a far smaller share in sales during the initial phase of market informatization than they do today. The largest part of growth today is in services based on Microsoft. A number of companies sell our solutions that are based on our platform.

• How to do business in an environment where companies are both your partners and competitors?
– In this regard, we strive to be practical. More precisely, global IT companies, such as Cisco, IBM, SAP, or HP, are competitors in one segment, while in others, we cooperate due to user interests. Recently, a collaboration was established with Novell and Suse, which are based on Linux, which will enable interoperability of our technologies.

• Speculations have arisen regarding this collaboration, suggesting that the impetus for the partnership was the announcement by a large number of U.S. states that they would switch to open-source technologies…
– Our motivation is to enable the user to assess for themselves when they will use the product that suits them best. With the collaboration with Linux, we wanted to correct the perception that using one operating system eliminates the use of another. Due to such collaboration, the user will not be forced to delete something that is already integrated into their system due to the acquisition of a competitor’s product. The ultimate goal is to create an environment where different technologies can connect like Lego blocks into one system.

• You exceeded the set goals in the Technology Park in Varaždin within 12 months. What are your plans for the operation of that center this year?
– Although we were optimistic during the launch of that project, we did not know how the market would react. Today, I am surprised by the fact that there is such interest in training regularly attended by domestic entrepreneurs. Our projects this year will be aimed at small and medium-sized enterprises, not just those from the IT sector.

• As announced, thanks to the Technology Park, 50 new products should be launched in the market within 30 months. How many have been launched so far?
– So far, 35 new products have been launched. The release of Vista will also stimulate innovation in the domestic market, so we expect that many software manufacturers will develop products thanks to the new version of the operating system. This is evidenced by the wave of so-called gadgets, small programs that users place on their screens, which were launched precisely thanks to Vista. Such items will initiate a real business, like ringtones for mobile phones, profitable for those who offer them and affordable for users who buy them.

• What is the relationship between Microsoft Croatia and the corporation?
– Local Microsoft belongs to the Central and Eastern Europe region, which gathers truly specific countries that are, especially due to their historical heritage, largely comparable. For example, we lag behind Slovenia by 3 to 4 years, and given the similarity of these two markets, we can predict the movement of the IT industry in Croatia.

• What do the ‘bosses’ expect from the domestic market?
– Microsoft expects that Croatia will increase the share of small and medium enterprises in total spending. Namely, the Croatian IT industry is ‘worth’ 900 million dollars, while Slovakia, with a similar population, is ‘worth’ 1.2 billion. This difference arose because in Slovakia, among other things, small and medium enterprises invest much more in IT.

• What are your revenues?
– The policy of the entire corporation is to present data on business at a global level to the public. Local Microsoft can only disclose data related to the company’s operations and its community, which in this case amounts to over one hundred million dollars. Our revenues are mainly measured in licenses, while a slightly smaller share of revenue comes from the services we provide to users. However, it should be emphasized that Microsoft Croatia does not sell anything, at least not directly, but our office is responsible for organizing sales and marketing as well as for education and market development. We actually cover our costs with the commission that the corporation pays us based on the turnover generated by our partners.