Tesco takes on software giants

• Tags:
• Security,
• Software

Richard Thurston ZDNet.co.uk

Published: 02 Oct 2006 13:25 BST

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Tesco is to start selling cut-price software, in a move that could spark a price war among the major vendors.

The supermarket chain is aiming to steal market share from the likes of Microsoft and Symantec. It will offer six products all costing under £20, cutting a substantial discount compared with rival products.

"We will be offering unbeatable prices, but with good quality as well," a Tesco spokesperson told ZDNet.

Tesco's software will include antivirus, firewall and office productivity products.

Symantec took a positive line, telling ZDNet UK that "we welcome healthy competition".

Microsoft was also supportive. "We welcome competition in all its markets, because it drives innovation and keeps prices competitive — both of which benefit our customers and our reseller channel," said a Microsoft spokesperson.

Tesco is entering a crowded marketplace, taking on not only the likes of the global software vendors, but also a whole host of low-cost or free alternatives such as OpenOffice.

Tesco will buy the products through a Sussex-based distributor called Formjet, which will provide its customer support services. Support will be Web only, with no telephone helplines.

The software is manufactured by a combination of Panda Software, Filestream, Ability and Software Dialog. All the products will be branded as Tesco software, and will be available through its Web site and in at least 100 stores later in October.

Some analysts questioned whether the supermarket chain would be successful, given that the software is made by relatively obscure IT companies.

David Mitchell, an analyst with Ovum, said: "Partnering with a category minnow demonstrates one of two things: either that Tesco is confident that its marketing engine is robust enough to develop their brand and the business behind it, or that it has not properly understood the dynamics of the market it is entering."

The antivirus product will be available for £10, an Internet security package will be priced at £20 and the office software is to be priced at £20.

For £10, shoppers will also be able to buy photo software, a personal finance tool and a burning tool.

Mitchell argued, though, that price is not a sure-fire winner for any IT software provider and that the level of interoperability with Windows will be critical to its success.

"If the Tesco product range does not provide file format compatibility with Microsoft Office, for example, then it will find user adoption to be a challenge," Mitchell said.

The announcement is not Tesco's first foray into technology: the supermarket chain already provides telecoms services plus a limited range of PC hardware.

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