Small software firm finds global success, hit by double-whammy
By A. Asohan July 17, 2014
- Online payment platforms not friendly to Malaysian companies
- ECAD software that runs on Visio, limited by Microsoft licensing issues
A SMALL Malaysian firm specialising in computer-aided design (CAD) software for electrical engineers has a veritable ‘who’s who’ list of global clients, but its growth is being stymied by multinational licensing regimes and what can only be described as online payment prejudice.
Radica Software Sdn Bhd operates out of the ‘sleepy hollow’ city of Ipoh, about 200km north of Kuala Lumpur. It has only three full-time staff and three interns, yet its Electra software is used in organisations ranging from Malaysia’s own Petronas to Apple, Ford, Hewlett-Packard, the National Aeronautics and Space Administration (yup, that Nasa) and the Jet Propulsion Laboratory in the United States.
The company, founded in January 2005, recorded RM500,000 in revenue last year and is on track to hitting RM1 million (US$315,000) this year, according to its founder and chief executive officer Thomas Yip.
“99% of our customers are from outside of Malaysia, including markets such as Hong Kong, South Korea, Malta, Indonesia, the Philippines, Norway, Sweden and the United States,” he says, adding that Radica Software has sold about 1,000 licences.
“I am happy to report that we now have paying customers from 40 countries, as we have just sold to Japan,” says Yip in an email interview with Digital News Asia (DNA).
“It is extremely disappointing for me to report that we have fewer than 30 licences being used locally in Malaysia, but we think we only have ourselves to blame as we were so busy selling overseas that we neglected Malaysia.
“Our experience is that it is far easier to sell overseas than to sell locally,” he adds however, echoing the sentiments of other local technology startups.
Still, it is Radica Software’s success overseas that is now coming back to haunt it. Many popular e-payment platforms have stricter rules about accepting payments to or from Malaysia than they do with other countries.
“For a company that is selling to 40 countries throughout the world, our only viable option is to use PayPal,” says Yip.
“We have cases where we need to wait seven days, calling the banks every day to see if our customer from, say, Iraq has already deposited money into our account. When no other options are found, we do accept international cheques … which can take three months to clear,” he laments.
Radica Software has looked at a variety of other options, of course.
“When we wanted to list our product on Amazon.com to make it easier for people to purchase it, we could not do so because we could not use Amazon payments. Not being able to use Amazon payments means that we cannot sell on other platforms that use Amazon payments, for example Kickstarter.com.
“When we wanted to put our product on Newegg, we found that Malaysians are not allowed to, while Singaporeans can freely list their products to be sold there.
“When Google Checkout [the online payment processing service that the search giant discontinued last November – ED] was launched some years ago, processing fees were waived if you advertised on Google AdWords.
“But sadly, all this was not available to Malaysians, and we continue to pay high fees to 2Checkout.com and PayPal.
“We continue to look for ways to make it easier and faster for overseas customers to purchase from us – we may have to set up a company in Singapore just to make it easier for us to sell internationally,” he adds.
A nation’s aspirations
Radica Software’s woes seem all the more galling given that the company’s unheralded success aligns perfectly with Malaysia’s own aspirations in the technology space.
In July 2012, the Malaysian Government officially rolled out its Digital Malaysia programme, which seeks to transform the nation into a ‘digital economy.’ It announced eight projects, which have since been expanded, and appointed the Multimedia Development Corporation (MDeC) as the lead agency to oversee the national initiative.
Digital Malaysia has three strategic thrusts:
- To move Malaysia from being supply- to demand-focused, or to reallocate resources to more demand-focused activities;
- Shift behaviour from being consumption- to production-centric, or to change consumer mindset so prevalent in technology use so that Malaysian individuals and businesses produce as much as they consume from digital technologies; and
- Evolve from low knowledge-add to high knowledge-add, or increasing the development of local talent in key industries to become innovators and knowledge workers.
Radica Software’s business puts a tick on all three thrusts. Just as importantly, Digital Malaysia was formulated as a follow-up to the Multimedia Super Corridor (MSC Malaysia) project that was first announced in 1996, and which aims to create a viable and dynamic local ICT industry – again, a tick for Radica Software.
MDeC, the national ICT custodian, also manages MSC Malaysia.
It seems positively criminal that Radica Software’s business is being impacted by factors beyond its control, but what’s more worrying is that it is certainly not the only Malaysian company facing such challenges.
As a CAD software for electrical engineers, or ECAD software, Radica Software’s Electra allows engineers to create and manage technical drawings. Electra was built on top of Microsoft Corp’s Visio drawing tool, which comes as part of some editions of the US software giant’s Office suite.
Therein lies the company’s second big challenge: Licensing fees and the ease of access to Visio.
Radica Software provides a 30-day free trial for users to test its product. To do so, they also need to download a copy of the Visio free trial.
“To download a copy of the Visio trial, you have to first create a Microsoft account, wait for the confirmation email, then confirm the email by clicking on a link,” says Yip.
“After confirming your Microsoft account, you will be asked to fill in a very long questionnaire including the amount of money you make in a year. Only after this drawn-out process will you be finally allowed to download the Microsoft Visio trial.
“In our experience, many customers abandon this process,” he adds.
To add salt to this wound, Microsoft licences must be purchased at the country of usage for it to be legal.
“For example, our US customers must purchase a copy of Visio in their own country, therefore making the purchase of Electra a two-step process,” Yip says.
“This prevents us from bundling Visio with our product and making it easy for our customers to use it as a single purchase.
“Even if Microsoft were to allow us to bundle Visio with Electra, in Malaysia we can only resell the boxed package and not the download. This is despite the fact that there are many illegal copies and also legal downloads available on overseas sites,” he says.
Yip says that reselling downloads is not an option available in Malaysia currently, and there is no indication if and when Microsoft would make this available.
“We continue to look for ways to make it easier for us to bundle Microsoft Visio,” he adds.
Next Page: The accidental genesis of Electra and the birth of Radica