Gift of gob

Friday 1st June 2001

Tucked away in industrial Albany sits a small listed dental software firm quietly taking on the world. And it's not making a bad fist of it.

Software of Excellence is the market leader in its niche in the UK and New Zealand, is well established in Australia, has just signed a deal in Singapore opening doors to Asia, and is poised for a serious crack at the US. Opportunities abound. Already more than 85% of its product is exported.

The key to its success is a good product. As simple as that, analysts say. The eight-year-old company has worked closely with the dental profession to do more than simply take their administration online. The company's software goes beyond that, to helping dentists build their relationship with patients and pioneering new computer applications in dentistry, such as PC-based digital x-rays and dental imaging.

It used some of the $5 million raised in last year's IPO to double its size in the UK by purchasing the UK software assets of Nasdaq-listed Henry Schein. It is this market, which already accounts for 80% of its business, where things are really hotting up. Last year UK Prime Minister Tony Blair announced an extra £100 million spending on dentistry, making it more accessible to people who don't get their teeth looked at because of the expense.

Software of Excellence benefits in several ways.

Private dentists opening new National Health Service practices are using government incentives to buy new equipment, including computer systems. Also springing up are innovative schemes where IT spending is a priority.

In Cornwall the local health authority has set up 22 public dental practices linked by a central computer system, a scheme now being copied by other health authorities. Direct Access Centres have been set up, where people can drop in to see a state-paid dentist. And hospital-based community dentists, long starved of funds, are using the government money pouring in to upgrade their practices. All these schemes need a way of measuring any improvements to show public money has been well spent.

"That's where our role comes in," says Software of Excellence's UK managing director Errol Kent.

Another feather in its cap is the National Health Service's fraud detection unit, which uses SOE's software to help validate all dentists' claims. It's not a big money spinner but it sure gives the company local kudos.

Software of Excellence has a two-pronged attack offshore; its Enterprise division sells semi-customised solutions to large providers, such as dental schools and public health organisations, and the Professional division sells to private dental practices.

But a third market is emerging in the UK: the branded corporate dentist. Ownership of UK dental practices is restricted to registered dentists, with the exception of about 17 companies set up before the law came into effect in the 1920s. Boots the Chemist popularised the corporate trend in 1999, getting around the law by paying big dollars to buy one of these original exempt companies.

Software of Excellence claims to have the edge on its competitors in this new market because its product is more easily applied to larger and multiple sites. So far 50 Boots sites are signed up with Software of Excellence, with 40 more expected in the next year. Boots' contract with SOE is for 200 sites in total.

The latest of the four corporate dental chains to sign up, Dencare, bought out one of the original companies exempt from the law and has acquired a number of existing practices since. It is to upgrade or convert to SOE's Exact software at 17 of its 30-odd sites this year. Another chain, James Hull, acquired five practices already using SOE's software last year, and has now converted all 30 of its sites to the software, with plans to expand to 50 in the next 12 months. The fourth chain, Ora, has six practices with plans to go to 25 this year.

Boots gave all dentists a wake-up call - they have to deliver patient service as well as just fixing teeth, says Kent. "That's good for the UK and good for us as well."

Its UK success and high-profile customers has given SOE more grunt globally, particularly after its recent $700,000 deal with the National University Hospital of Singapore. Since listing last December it has also won software contracts with the New Zealand Defence Forces and HealthPartners in Minnesota, a group of health care organisations with 650,000 patients.

You'd think all this would please the punters. But Software of Excellence's share price has traded under its $1 issue price this year - suffering, it would seem, from the fallout in the tech sector worldwide. Because of its size ($8.6 million revenue forecast for its 2001 result), it receives scant attention from local market analysts and the media.

Its next challenge is the giant US market. Just compare the size: the US has 150,000 dental practices, compared with just 1000 in New Zealand; 60 dental schools versus just one.

Software of Excellence is still finalising how best to attack the already mature US market. Early feedback from the Americans has been "Why are you so small?"

Fiona Rotherham
fiona@unlimited.net.nz

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