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Arnold Leung, CEO of Appnovation Technologies Inc., is photographed in the company’s offices in Vancouver, Sept. 5, 2012. (RAFAL GERSZAK FOR THE GLOBE AND MAIL)
Arnold Leung, CEO of Appnovation Technologies Inc., is photographed in the company’s offices in Vancouver, Sept. 5, 2012. (RAFAL GERSZAK FOR THE GLOBE AND MAIL)

THE CHALLENGE

How to move from selling a service to selling a product Add to ...

Each week, we seek out expert advice to help a small or medium-sized company overcome a key issue.

Arnold Leung wasted no time starting a business. The founder and chief executive officer of Appnovation Technologies Inc. launched his company in 2007, right after earning a commerce degree from the University of British Columbia.

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At first, Vancouver-based Appnovation took on a wide range of website development projects for clients, but Mr. Leung realized it needed a focus. So he zeroed in on content management systems that allow users to control a website.

 Appnovation started to build applications with Drupal, an open-source content management platform popular among large organizations. It then moved into other service areas, such as mobile apps and back-end office tools, all of which it developed with open-source software.

Those decisions paid off. Today, Appnovation has about 55 employees, and Mr. Leung says 2012 revenue will be about $4.5-million, almost triple last year’s $1.6-million.

 The company’s dozens of clients range from the U.S. Department of Defense to sports apparel maker Reebok International Ltd. to the Canadian Cancer Society.

Appnovation is also establishing itself outside the country. Last year, it opened an Atlanta office, and, this month, it will add a London location.

Next, Appnovation wants to expand beyond services by launching its own software product. To that end, it’s developed a solution called Canopy that integrates two commonly used open-source content management platforms – Drupal for websites and Alfresco for back-end functions.

“We realized that a lot of organizations, especially government and health-care customers, started to have a need for an integrated system,” Mr. Leung says. “So we started to build a solution around it, instead of just building everything from scratch, one project at a time.”

Several Appnovation clients have used the first iteration of Canopy as part of their service agreement, but the company plans to release a supported open-source version by the end of the year, Mr. Leung says.

Although government and health care are prime targets, Mr. Leung says the market for Canopy is virtually unlimited if open-source software keeps growing in popularity. He plans to move toward a subscription sales model that offers support and training. Mr. Leung also thinks Alfresco Software Inc. and Acquia – the company behind Drupal – can be valuable marketing partners.

The big challenge is how to turn Appnovation into a business that not only provides one-off services but also sells a product aimed at a vast market.

 “It’s a little bit different model, a different mindset,” Mr. Leung says. “We need to identify the best path forward to make this happen.”

The Challenge: Given its service background, how can Appnovation sell and support a standalone software product?

THE EXPERTS WEIGH IN

Sunil Mistry, partner, KPMG Enterprise, Toronto

My advice would be stick to the client base you already have and you know, and do it in a staged approach where you finish the development, take it out to the client base you know and see if the uptake is what you believe it would be....And then if you hit a home run and all of the existing clients that you have are signing up, then you need to likely start doing that larger ramping up of people and infrastructure and marketing spend.

Elaine Mah, director, Intel Canada, Toronto

They have to look across their roster of customers that are already using the solution they would like to commoditize. Understanding at what level customizations begin to get into niche spaces that become unique to each of those customers, is there a way to draw a curve or a graph that captures maybe 80 percent of the functionality that is common to everybody? Now you’ve been able to define the parameters of exactly what you’re solving and how your product addresses those issues.

Stuart Crawford, chief marketing strategist, St. Catharines, Ont.-based Ulistic Inc.

When they’re launching their software product, there’s a couple of different avenues that they can approach. One is going direct to the decision-makers themselves….The second model is a distribution channel where the product is resold or distributed through consulting or service companies that specialize in that market.

A lot of organizations have a blend of both….That would be my recommendation: Look at a way to effectively leverage a direct sales model with the right key people going after those opportunities, and also build a channel of consultants and resellers who can add [Appnovation’s] solution onto what they already do.

I don’t think there’s a mindset switch at all here. At the end of the day, service wins if you’re selling a part for a car or servicing the car. It’s still all about service, and the company that out-services their competitors will ultimately win.

THREE THINGS THE COMPANY CAN DO NOW

Concentrate on its existing client base

The opportunities may be boundless, but starting with clients and sectors you already know will test your product’s value proposition.

Use direct and third-party sales

Use consulting or service companies that specialize in the market. Make servicing the new product a priority Winning customers is one thing, but keeping them requires excellent service.

Think inside the box

If you’re selling a packaged solution, ensure it meets most customer needs.

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An earlier online version of this story incorrectly stated that the company planned to release a commercial version.  This online version has been corrected.

 

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