Pithy Insights On The Business of Software

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Pithy Insights On The Business of Software

 

I've been invited to speak at the upcoming Business of Software conference in Boston (my home town!) on September 8, 2008.

As such, I've been thinking a bit about the business of software.  I do this regularly because my day job (and most of my night job) is running a software business in the area of internet marketing

more info:  Business of Software Conference

There are a ton of great speakers scheduled for the conference -- and then there's me.  Other folks that will be there include Joel Spolsky (who is sponsoring the conference), Seth Godin, Eric Sink, Steve Johnson, Richard Stallman, Paul Kenny, Jessica Livingston and Jason Fried.  It promises to be a great conference and I'll do what I can to not bring down the average quality too much.

If you're planning on making it to Boston for the conference, please reach out. 

Meanwhile, here are somewhat pithy thoughts on the business of software.

Pithy Insights on The Business Of Software

1.  Software businesses are not a low-cost play.  You're probably better off producing great software somewhat expensively than producing average software somewhat cheaply. 

2.  Great software is produced by great people.  Mediocre people don't ever accidentally produce great software that makes millions of dollars.

3.  Programmers have not been, and never will be, commodities.  If you think this way, I'd quit now.

4.  Pricing software is hard.  More people charge too little than charge too much.

5.  If you're charging really small price-points, consider going to a freemium model (some version for free, the upgrade is paid for).  The free version is a great way to get some distribution and customers.

6.  Just because people should buy your software doesn't mean they will. 

7.  One of the trickiest parts about a software business is figuring out the right level of services to sell.  If the answer seems blindingly clear, you're not thinking about it hard enough.

8.  It's getting harder and harder to make money on pure software innovation (i.e. lines of code and the product itself).  Increasingly, business innovation is what companies are using to drive differentiation and better margins.

9.  It's a great time for software startups.  Capital costs are very low (infrastructure, systems software are getting cheaper every day).  And, distribution is actually possible with some creative marketing on the internet.  Tiny companies have a shot at reaching big markets.

10.  There are still people that believe massive spec documents and months of planning will produce working software that users are going to be delighted with.  I feel sorry for these people.  Think agile, folks!

11.  Make sure you're deciding correctly between a horizontal offering and a vertical offering.  Horizontal offerings are tempting because of their potential scale -- but they're much harder to execute. 

12.  Programmers often like to build platforms, not applications.  But, building a business around a platform takes lots of good strategic thinking (and often a fair amount of capital and/or luck). 

That's all I have for now.  More on this particular topic in a later article.  I'm on vacation today, so didn't have enough time to really dig in.

Posted by Dharmesh Shah on Thu, Apr 17, 2008

COMMENTS

this is pretty good stuff, thanks for sharing!

posted on Thursday, April 17, 2008 at 4:36 PM by Peldi


Amen. You just convinced me to come to Boston for the conference.

posted on Thursday, April 17, 2008 at 7:11 PM by Jeff Bonnes


What is Richard Stallman doing on the speakers list? That guy hates people trying to make a living with software (you have to give it away for him to be happy).
I write software for sale and I also write some software which I provide for free, with the source code. Despite many emails thanking me for the free software, how useful it is, etc, etc and some asking me to make modifications to that free software, not once has anyone offered to pay for modifications or has been willing to pay when I have said I will make the mods you require for a (reasonable) fee. Quite, simply, open source == no income.
The software for sale business, I get people asking for mods, which sometimes we make and sometimes we don't, we get sales and often get unprompted requests to travel half way around the world and give tutorials etc, no expense spared, "we'll pay whatever you want".
So, based on that, I can't see what Richard Stallman has to offer this conference. The rest of the panel look like they wlll make excellent listening/viewing/reading. Truly, I'm astounded he is on that panel.

posted on Thursday, April 17, 2008 at 8:35 PM by Stephen Kellett


My thoughts on point 7 (the level of support you need to give) are laid down on my blog (http://sevensteps.blogspot.com/2008/04/spending-lot-of-time-on-your-support.html)
Only yesterday I started the campaign to find funds to come to Boston.... I think it will be a very usefull meeting.

posted on Thursday, April 17, 2008 at 11:41 PM by Bart Roozendaal


I agree with the comments about Stallman, but if nothing else, it will be interesting to see what he brings to the table with people who are trying to earn a living through their software.
Anyway, you make some very good points about the business of software. Most software startups are begun by techies (mine included) who have a good idea but can't figure out the details when it comes to marketing, selling, pricing, etc. their offerings. I struggle with this, and look forward to learning from the industry titans.

posted on Sunday, April 20, 2008 at 10:25 PM by Josh Asbury


Great insights. We do research and strategy around the platform model and it definitely has unique challenges. Thanks for bringing that up.

posted on Tuesday, April 22, 2008 at 1:52 PM by Deborah Block-Schwenk


I agree with the comments about Stallman, but if nothing else, it will be interesting to see what he brings to the table with people who are trying to earn a living through their software. 
 
Anyway, you make some very good points about the business of software

posted on Tuesday, July 21, 2009 at 3:57 PM by sohbet


If you're charging really small price-points, consider going to a freemium model (some version for free, the upgrade is paid for). The free version is a great way to get some distribution and customers. 
 

posted on Tuesday, July 21, 2009 at 3:59 PM by yonja


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