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Reaping the fruits of corporate budget cuts

The crisis has forced many companies to tighten their budgets, but this in turn has provided a market opportunity for software developers with products that enhance cost efficiency – one that they are taking advantage of.

BPM, SOA, SaaS – the vocabulary of software developers is full of technical terms like these. Right now, the latest craze that everyone is looking for is CE software. CE, or cost-efficient, is the primary requirement in every new software that companies seek to procure. Fortunately, developers are flexible enough to adjust to specific requests and they are often the ones to come up with CE solutions, to the satisfaction of their clients and employers.

NEXON Kft, an HR management software and service provider, has already spotted some market niches and started pre-emptive developments. “Companies’ priorities have changed with the crisis. Firms appreciate the human resource more than before, so there is much untapped potential in HR,” said Zsolt Kudich, application and project director. The company already has a variety of software for employee-focused firms.

Innovative products

Self-service HR software for employees, the popularity of which has grown much in the past year, is one example. Employees are provided with a password-protected account and can manage their HR-related tasks: they can select items from the cafeteria system, fill in the attendance sheet or sign up for trainings. This means less administrative burden for HR personnel and reduced costs for management.

System optimization, which in clients’ terms translates into cost optimization, is high on the agenda of Qualysoft, an IT services provider. “Utilities are required by law to update their data management or documentation. They will soon need to switch to smart grid and smart metering so we will be actively targeting them in the future,” marketing director Andrea Jáger told the Budapest Business Journal. Many of the firm’s clients run offices that demand lots of paper. “The paperless office has long been a dream of many companies yet few are doing something about it,” she noted. Qualysoft is, however, by offering software that replaces or greatly reduces the paper load.

Infinica, a document generation and template design software developed by the company, works well where plenty of paper needed, such as banks or insurance companies, and is even customized to industry sectors. Its design template allows users to modify any data required with just two clicks. Changes can be made by the users themselves without having to contact IT departments and wait for delayed implementations. Besides paper, maintenance costs can be reduced. “Infinica has sold well in Hungary and Austria and, thanks to funds we won, we were able to develop many modules to it,” Jáger said.

Collateral effects

The drive to cut costs has become apparent in software-related services as well. Savings efforts account for the slow but steady expansion of cloud computing, a method many firms have been wary of due to security concerns. Cloud computing, an umbrella term for location-independent computing, is about putting more material out in the cloud (the internet) and less on PCs and servers that businesses run for themselves. The outsourcing of the maintenance of servers and applications, plus the benefit of accessing data from anywhere with an internet connection seems to have overridden initial concerns.

For NEXON, Software as a Service (SaaS), an example for cloud computing, has been the biggest novelty of 2010. It required quite an investment to fit their whole system to the cloud, yet it in the long-term it will definitely pay off. Although out of the company’s three main distribution channels – classic licensing, outsourcing and SaaS – the latter has the lowest share, it is growing constantly at the expense of licensing. Which is reasonable enough, since it requires no extra payment for hardware and no delay in the system setup.

“Anything that saves costs is popular these days,” said Jáger, who highlighted the importance of consulting in offering CE solutions. “There are copious examples for wasteful solutions on the market, such as buying large boxed software that just partly fits your business,” she said. Gauging clients’ real needs and customizing the system to meet these is a better way to save money, Jáger noted.

Riding the wave

Many developers have been able to profit from budget cuts at businesses, leaving them in good shape despite the recession. Qualysoft hasn’t lost a single client and managed to boost profits, while NEXON achieved single-digit growth as well. Other software developers managed to stay afloat with the help of state or EU-commissioned projects. Software firm Gamax, for example, has designed and implemented ship database software as a result of an EU directive to make European shipping data compatible. New regulations coming into effect have also forced companies to upgrade their software regardless of their financial situation.

However, not everyone is lucky to have a state contract to rely on. Terc Kft, a company that develops software exclusively for the construction industry, has been hit hard. It closed the year with a HUF 40 million drop in turnover. “When a business lays off 43 of its 45 employees, the last thing on its mind is IT development,” said managing director Miklós Molnár. Still, Terc is continuing with its scheduled semi-annual upgrade and has a fairly optimistic outlook. “Our capital reserves allow us to carry on developing. We cannot predict when the building industry will recover, but hope we will have more to do in the second half of 2011,” Molnár said.

The segment with the greatest potential is that of mobile applications, Zsolt Ambrus, secretary general of IVSZ, the Hungarian Association of ICT Companies, said recently. “The business use of such applications is currently limited, but once CEOs overcome their prejudices, a huge boom will take place,” noted Terc’s Molnár.

In terms of mobile applications, NNG Kft has already experienced massive growth. The company's navigation software developed for mobile devices have seen an increase in sales of about 30%–50% quarterly, in which the expansion of iPhones (iPhone4) has had a significant role. The firm's flagship navigation solution, iGO primo, is about to carry plenty of new features optimized for mobile devices, which, together with more flexible software-related services, gives NNG a positive outlook for 2011.