Here is the letter I will be posting to Tesserent tomorrow (yes,...

Here is the letter I will be posting to Tesserent tomorrow (yes, I know there are few typos! AND sorry about the formatting - looked ok when I printed it - copy and pasting from MS word to hot copper hasn't worked 100%)



28 May 2017

Mr Keith Glennan & Ms Karen Negus
Tesserent Australia Pty Ltd
Level 5, 990 Whitehorse Road
BOX HILL VIC 3128





Dear Mr Glennan & Ms Negus,
RE: Tesserent Pty Ltd
I am a minority shareholder in Tesserent.
I refer to previous correspondence and trust you appreciate that I follow Tesserent closely.
As a shareholder of Tesserent, the following issues are on my mind regarding the small to medium business strategy now being adopted by Tesserent (in addition to your other strategies):-

1. Even though Cyber Security is a hot area, I imagine winning new business is still relatively difficult, for a variety of reasons. This seems to be justified by the modest sales growth reported in the 4C January 2017.  It may also be justified by Kurt Hansen’s apparent departure (not entirely sure on this and I do not seek any confirmation either way) although Ms. Negus no doubt deserves any promotion received.

Hence, there is likely to be a tendency to look at acquisitions - such as Family Zone – in order to win a significant batch of new customers, which would otherwise have taken years to win organically.  The point being that acquisitions are probably the most efficient way of gaining new customers in the Cyber Security industry, and therefore boosting revenue.  No matter how brilliant the sales executives are, winning new business is presumably relatively difficult;

1. Winning small to medium business customers is likely to be even more difficult. Cash flow is often tight for small businesses and they might not know much about Cyber Security.  If Tesserent approached me, and I was operating say a small law firm with a few employees, my first question would be (a) how much does it cost per month? and (b) I have Norton and/or Eset anti-virus installed – isn’t that enough?

What does Tesserent do that Norton anti-virus can’t do?  Norton is likely to be cheaper than Tesserent security, so small businesses may take some convincing of the need to upgrade.  It might sound like a simple / almost insulting question for someone of Mr Glennan’s exeperince in IT, but why would a business need Tesserent if it had Norton installed?  What does Tesserent do that Norton doesn’t?;  

1. Further to winning small business customers, I imagine that unless you have been directly affected by a Cyber Security incident, you would be even more reluctant to invest in outsourced Cyber Security. Ie, “thank you for your call Ms Negus – I have operated my small law firm for 5 years, with Norton installed, and never had any incidents with cyber security, never any complaints from customers and no issues with any regulator – why should I invest in one of Tesserent’s products?”

1. Cyber Security products are essentially defensive in nature (like insurance over your car – you are buying peace of mind) and it may be difficult to see the value in them for some businesses. Ie When Tesserent does its job well – hopefully nothing happens in terms of Cyber Security breaches / issues – that is because Tessrerent’s products are working well. Nevertheless it may be difficult for some small business to see the value in Tesserent, if they are paying for one of Tesserent’s products (“Why I am paying $x dollars per month to Tesserent?  Nothing has happened to my business in terms of cyber security issues.  Why do I need Tesserent?)

1. Before you buy a car, you often take it for a test drive. If I was a small business, and Ms. Negus called me wanting to sell some of Tesserent’s products, I might say “Can I have a test drive of the products?”.

Is this something that Tesserent would consider doing, in order to try and win new business?  Ie, offer a 1 month free trial of one of its products?  Alternatively, could Tesserent develop a Web Page offering something like a free Cyber Security check so a small business could see where they are at risk? (and then purchase one of Tesserent’s products to eliminate / reduce that risk) (this second idea is a bit left field and may not be practical).  

I just think it will be difficult to win small business customers without offering them the products for free, at least for a short period of time, so they can see the benefits of the products.  The constant media reporting of Cyber Security incidents is probably not enough to separate most small businesses in particular from their hard earned cash.

As you can probably tell, I don’t know a lot about IT / cyber security.  Although I imagine many small businesses wouldn’t know much about Cyber Security or IT either.  However, here is some food for thought from an obsessed minority shareholder which may or may not assist with your strategies going forward.

I still wait with eager anticipation of an announcement of a channel partnership with Telstra, via Ms. Negus’ connections at Telstra! (tongue in cheek).  That sort of partnership would increase Tesserent’s potential customer base exponentially.  

I also hope you enjoy Warren Buffett’s book.  I don’t believe he would consider investing in a company like Tesserent – yet – it is not yet profitable or even cash flow positive – although he would no doubt like the stable increasing revenue and ethical first class management.

Keep up the good work.

Yours sincerely,