Episode 23: Intellectual property and innovative software

Synopsis

Summit TV speaks to XProcure chief executive Deon Lewis about their innovative pharmaceutical procurement software that incorporates business to business advertising functionality.

Transcript

Summit TV speaks to XProcure chief executive Deon Lewis about their innovative pharmaceutical procurement software that incorporates business to business advertising functionality.

Stephan Lamprecht: Welcome to the Intellectual Property show on Summit TV. Healthcare is a key sector of the South African economy that’s currently under enormous stress from a cost and service delivery point of view - especially with government breathing down the necks of operators. With me is XProcure chief executive Deon Lewis to talk about how they are assisting in the growth and competitiveness of our healthcare sector. Deon, what’s happening in healthcare in South Africa - how are things different from in the past?

Deon Lewis: The first aspect that needs to be looked at is the healthcare industry is heavily regulated in comparison with other industries in South Africa, and that makes it obviously very difficult to operate within that industry. Also, it creates a lot of opportunities. We’ve tried to capitalize on those as much as possible especially in the last few years…

Stephan Lamprecht: Is it both on the public side and the private side, or mostly on the private side?

Deon Lewis: Both.

Stephan Lamprecht: What exactly does XProcure do?

Deon Lewis: XProcure is a procurement software application that’s used in pharmacy - so pharmacies use our software to procure their stock from wholesalers and distributors into the pharmacy. That’s clients like Dischem, Clicks, the big corporates and many independent pharmacies - we about 53% market share in South Africa.

Stephan Lamprecht: From your company’s point of view is it very competitive against other operators in the same niche as yourselves?

Deon Lewis: There are other operators - in fact there was a company that was doing exactly what we do before we actually started our business in 2001 - so yes there is some competition…

Stephan Lamprecht: I would imagine that in a competitive space the fact that it’s a very cost driven environment - your systems are integral to the efficiency as well as cost savings for your clients - how exactly does it work?

Deon Lewis: Absolutely. As one of the key factors in terms of innovating our product we’ve tried to obviously entrench the software as much as possible into the pharmacy - not only does it handle all the specific requirements of the pharmacy procurement process, but we also integrate the software into the pharmacy’s existing stock and point of sale and dispensing systems to make it easier for them to operate…

Stephan Lamprecht: That interfaces back to the suppliers where everything starts…

Deon Lewis: Absolutely. The software allows the pharmacist to create an order - and to compare pricing between different wholesalers, place the order electronically through our software with the wholesaler or distributor. We will then pass an answer back electronically to the pharmacy from the wholesaler on whether the stock will be procured…

Stephan Lamprecht: The system itself - do I download the software, is it made available over the internet? How do I access your software?

Deon Lewis: No. It’s a Delphi client application that’s installed on a computer in the dispensary that we maintain. Obviously there’s reasons for that - bandwidth in South Africa is not what it’s supposed to be - but the software has been developed to port it onto a web platform as soon as there is enough bandwidth available in the pharmacy to operate it.

Stephan Lamprecht: Talking about software there’s a lot of discussions about piracy - people stealing source code and so on - how do you deal with that?

Deon Lewis: You have to have strict measures and standard operating procedures in place to protect that. That’s not only in terms of back ups and off-site storage - but also to book the software out and work on it the software developer has to go through a process of accessing that software, working on it, and then basically booking it back into a library. So you get software applications that also allow you to manage that process - that’s very important.

Stephan Lamprecht: Where would you say is the biggest risk from an IP point of view? Is it in terms of protecting your intellectual capital against your employees - or is it the threat of customers maybe taking your software and replicating it or duplicating it?

Deon Lewis: The threat is obviously from the competitors in our space - however it’s important to have all the measures in place. You have to constantly innovate to stay ahead of the pack - you have to make sure that the software although it can be copied can’t be taken apart and analysed. There’s different ways and means of doing that. With software it’s far more difficult than any other product if that answers the question…

Stephan Lamprecht: So you’re quite advanced in that respect. One strategy is you’ve developed the software - now it’s out in the open and people can try it and see how it works - the other strategy is you’re staying ahead of the pack with innovation making sure that people have to follow and safeguarding your thinking…

Deon Lewis: Absolutely. With software it’s easy to copy functionality - you walk into a pharmacy, you look at a competitive product, you understand the functionality - and you go develop that. That’s very easy to copy therefore you have to innovate - you have to stay ahead of the pack.

Stephan Lamprecht: Any specific lessons that you’ve learnt in the years that you’ve been doing this from an IP point of view?

Deon Lewis: I think the most important one - I’m going back to that - it’s innovation. It’s very important to thoroughly understand your client - to listen to your client. We’ve built functionality into our product that allows us to get constant feedback from our clients that we analyze on a weekly basis - we use that information to strategize innovation in the product and then we release new versions of the software. That’s one component - I think that’s the very important lesson we’ve learnt.

Stephan Lamprecht: Within the context of your brand XProcure how do you see yourselves going into the future? If I’m in the pharmaceutical business do I go and look for XProcure because I saw it somewhere else? How strong is branding?

Stephan Lamprecht: Very strong. We’re in the fortunate position now where the software has matured. In the initial phase of our business life cycle we had to go out and find the business. Although we still do that we have a lot of referral business now - we have a lot of clients that come to us through access on the internet, through our website, through various other elements, through word of mouth, through public relations, through our success stories. There’s different ways and means. What we are doing going forward - just to answer the other question - is obviously we won’t stay only in the pharmaceutical industry. This product has been developed to take into other industries. We have earmarked other industries that we will be looking at…

Stephan Lamprecht: You spoke about the healthcare sector being on the one side very regulated - on the other a lot of competition that opens up new opportunities - where do you see the opportunities going forward in the current situation?

Deon Lewis: If you look at what we do and what the software does in the pharmacy that’s only a small element of really where XProcure derives its revenue from - the biggest component of our revenue contribution is from advertising. What we’ve done is we’ve developed the product that we could take advantage of industry regulation changes - where the pharmaceutical drug manufacturer is not allowed to advertise to the end user, but to the pharmacist. So we use the software at the point when the pharmacist is making a buying decision what to buy - and where to buy - to advertise competitive products to them on our system in an electronic format.

Stephan Lamprecht: To create a procurement platform with advertising…

Deon Lewis: Correct. That’s just one example.