Tesco takes on might of Microsoft

Tesco is set to go head-to-head with the likes of Microsoft and Symantec later this month, when it starts selling its own-brand consumer office and antivirus PC software both in-store and online at less than £20 a go.

The new Tesco-branded software line is part of the supermarket giant's plans to grow its non-food business to the size of its groceries empire, and with bumper half-year profits of £1.1bn announced this week the company's dominance of the UK retail market looks set to continue, with more than £1 in every £8 spent in UK stores being at Tesco.

The software range will cover six products - an office suite, two security and antivirus packages, a personal finance tool, a CD/DVD-burning app and a photo editing tool. The products have been developed for Tesco by Formjet innovations, using technology licensed from Ability, Filestream, Panda Software and Software Dialog.

Tesco buyer Daniel Cook said the company's own-brand software is "bringing choice and value to a market that has offered little of either for too long".

The Tesco Office package functionality is massive with things like mail merger, macros, grammar check and thesaurus. It's a huge feature set. We kept out stuff people just don't need like voice recognition.

-- George O'Reilly, director, Formjet Innovations

Tesco is also pitching its £20 Office suite directly against Microsoft Office, which currently sells for about £300, and not the more basic Works package that comes bundled with most new Windows PCs.

George O'Reilly, director at Formjet's white-labelling division, told silicon.com office PC software doesn't need to be as expensive as Microsoft's version.

He said: "The Tesco office package functionality is massive with things like mail merger, macros, grammar check and thesaurus. It's a huge feature set. We kept out stuff people just don't need like voice recognition."

Customers will also be able to access technology and customer support via a new TescoSoftware.com website.

O'Reilly said that while the products will initially be sold individually off-the-shelf, Tesco is looking at bundling it with the computer hardware it also sells in the future.

Microsoft's response to the Tesco announcement was typically bullish. A spokeswoman told silicon.com: "Microsoft welcomes competition in all its markets, because it drives innovation and keeps prices competitive - both of which benefit our customers and our reseller channel."

A Symantec spokeswoman said the company welcomes "healthy competition" in the antivirus software market.

But what of Tesco's chances of success against the might of Redmond? David Mitchell, analyst at Ovum said that marketing and not price, quality or ease of use is the key reason why some software products gain dominance over others.

He said: "It is the power of the marketing machine in Microsoft that has brought it to its current position in the market. It is a testament to the confidence of the Tesco marketing organisation that they are entering this market in this way."

Mitchell acknowledged Tesco has a track record of breaking into markets that are supposedly staid and impenetrable but he warned its latest software venture could turn out to be a "damp squib" if the company fails to take into account the disruption in the software industry with trends such as software as a service.

He 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."