Constellation Software (TSX:CSU) has numerous software products that it sells, services, supports and enhances. The company has at least one software product in each of Constellation Software’s vertical markets and often develops and supports multiple product lines in a particular vertical market.
In addition, and as a complement to the company’s acquired and internally developed software products, it licenses certain technologies used in Constellation Software’s software products from third parties, generally on a non-exclusive basis. The company’s products are typically designed to assist Constellation Software’s customers in automating as many aspects of business processes as is practical.
Mission critical software solutions
While Constellation Software’s strategy is to provide mission critical software solutions to all of the company’s customers, the particular software products that it develops can vary substantially across vertical markets. For example, in the public transit market one of the mission critical aspects of the business that it helps automate is the scheduling and routing of vehicles.
In the private club market, Constellation Software focuses on providing membership accounting and point of sale solutions. The company’s goal is to continue to focus efforts on software products specialized for specific vertical markets.
Robust distribution strategy
Further, Constellation Software uses direct sales forces in most of the company’s major markets as a primary distribution channel. The company believe that direct sales teams increase Constellation Software’s visibility and market penetration, encourage long-term customer contact and facilitate sales of additional products.
The company’s sales and marketing teams work primarily within dedicated sales groups for each of the vertical markets that it currently serves. Constellation Software’s sales and marketing strategy is to provide relevant business expertise directly to target customers by using sales representatives with strong industry specific knowledge.
Ongoing revenue growth
Part of the company’s ongoing revenue growth is achieved through selling complementary products and services to existing customers. Constellation Software also supports sales efforts with marketing that creates awareness of the company’s products through appearances at major trade shows, advertising in trade magazines, hosting users’ group meetings, and the creation of informative websites.
In addition, the company’s product development strategy combines innovation and the introduction of new technologies, with a commitment to the long-term support of customers’ current systems. Constellation Software’s research and development activities are focused on designing, developing, testing and integrating new add-on products which enhance the features and functionality of the company’s existing software solutions.
Licensing intellectual property
Furthermore, Constellation Software also offers streamlined upgrade and migration tools for the company’s customers. The company relies primarily on Constellation Software’s in-house capabilities to develop software solutions using industry standard software development tools. However, when it is not strategic to the company’s business and is more cost effective, Constellation Software licenses certain technology components from third party providers.
In accordance with industry practice, Constellation Software relies on a combination of contractual provisions and patent, copyright, trademark and trade secret laws to protect the company’s proprietary rights in Constellation Software’s products. These products could be very valuable when held for the long-term.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
The Motley Fool owns shares of and recommends Constellation Software. Fool contributor Nikhil Kumar has no position in any of the stocks mentioned.