SupportSoft: Working with Dell, and betting its future on PC problems

October 12, 2007, 3:47 PM UTC

Most of the trouble people have with home PCs is software-related – and it often has to do with viruses and spyware that takes over people’s computers when they unwittingly download it. That’s why Josh Pickus believes he can use some of a virus-writer’s smartest tactics to fight back.

Pickus is CEO of SupportSoft (SPRT), a Silicon Valley company with an interesting approach to fighting Windows (MSFT) PC problems. SupportSoft doesn’t send a technician to your door like Best Buy’s (BBY) Geek Squad, or talk you through a fix using phone-based support. Instead, when you install its diagnostic software on a PC, SupportSoft troubleshooters can temporarily take control of the computer over the Internet to fix problems while you watch.

Fixing computer glitches is a market that probably won’t evaporate anytime soon. According to research firm Parks Associates, consumer spending on tech support will top $400 million this year, and it could approach $1 billion in 2011. That bodes well for companies like Best Buy, OfficeMax (OMX), Staples (SPLS), Circuit City Stores (CC) and CompUSA, which have gotten into that business. And Pickus is hoping SupportSoft will get some of the action, too.

The company could use it. Lately SupportSoft has struggled. The company went public at the peak of the dot-com boom in early 2000, licensing its technology to high-speed Internet service providers to help reduce their customer support costs. But SupportSoft’s product tended to be difficult to use, and the company didn’t work hard enough to improve it and distribute it more broadly; business dried up and the stock wilted during the dot-com bust. A once-profitable business that the market valued at more than $1 billion during its heyday is now losing money and trading at less than $5 per share, for a market cap under $250 million.

But that’s why Pickus is there. He joined last April, bringing his experience from Niku, another dot-com-bust company he helped turn around as CEO.

Over lunch in San Francisco, Pickus explained his plan for fixing SupportSoft.

First he will have to bring the company’s legacy business back to profitability, a painful process that will involve cutting talented workers. But since he doesn’t expect much growth from the core business of licensing the company’s software to service providers, it’s the only prudent thing to do. Much of the cutting should be finished by early next year.

Next he’ll have to grow the business he believes is the key to the company’s future: direct customer support. Rather than just license software to bigger service providers, Pickus believes he can get customers to install SupportSoft themselves to get their computer problems solved. Typically a customer with, say, a slow computer would be able to load the software and agree to pay less than $100 to have a technician fix the problem over the Internet. The customer pays only if the problem is solved. SupportSoft has already begun offering the service through its Support.com site, and Pickus said the company is handling “thousands” of fixes per quarter.

Pickus has a couple of clear challenges ahead, though.

Most important, he needs to get SupportSoft’s software installed on as many computers as possible to increase the company’s base of potential customers. The fastest way to do that would be to strike a deal with a PC maker to place a SupportSoft icon on a computer’s desktop; while Pickus is looking for such deals, it doesn’t have them yet. He said the company does have a deal with a major retailer that will result in SupportSoft’s service being marketed in thousands of stores next year – but we’ll have to see how that arrangement pans out. The company also has a deal with Dell (DELL) that will bring its software to some Dell PCs this holiday season, but that’s a licensing deal that by itself won’t dramatically help SupportSoft’s bottom line. What the company really needs is more direct relationships with customers.

Pickus will also have to be sure that the company’s technicians can competently handle a growing volume of calls, if he succeeds in steering more business toward the company. Because while it’s true that there’s money to be made from doing tech support well, it’s also true that few things sully a company’s reputation like doing it poorly.

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