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1. A Pattern to the Mistakes That Software Companies Tend to Make

   Kabila on September 19th, 2009

   Tags: informal business environment, mistake, Software companies

   Software makers, ones that may be as established as Sun Microsystems or as fresh as a small startup, can tend to frequent the same catalog of mistakes when it comes to running their businesses. Microsoft or Sun, owing to their size, will live to tell the tale; a startup may not. By all accounts software companies direct most of their budget to sales and marketing. And yet there is no real acknowledgment of how important it is to identify an audience, to acquire them and to retain them. Selling to software customers is not what it used to be. Corporate spending on information technology is no longer directed at large upfront purchases; what is favored instead is the ability to make smaller purchases spread over several years. Additionally, smaller vendors are seen today to be able to deliver a great deal of value and customer satisfaction; large software vendors no longer have it all over their little competitors. Why are these changes ignored?

   Makers of software are often deeply invested in the concept of the informal business environment. Loosely organized company structures can obviously lead to poor coordination and missed signals from the sales front. An informal hand at the helm can also place the company at risk of being run on one person’s whim or vision. Sun Microsystems was always committed to pushing its own line of poorly received custom hardware to go with its well-received software. This weighed the software side of the company down and caused internal tensions. Small companies sometimes also insist on the custom-made over the generic. Sun Microsystems’ market share in server software has suffered because it is tethered to the fortunes of its hardware platform. The important lesson to learn here is to have the advantages of vision-based leadership, but to make sure that it is tempered with hard-nosed business vision.

   Many software vendors large and small have tried to raise their stature or solidify their position in the market with acquisitions. Microsoft famously had its failed takeover of Yahoo recently, and Sun spent $1 billion on acquiring the database software company MySQL. Acquisitions are an important way to inject new blood into a software business; but it is possible to overestimate the benefits from such a move. The basic tendency here too is to base the company’s moves not on sound business principles but on the vision of a founder or stakeholder. It keeps coming back to this: creative types running a business on principles of creativity and personal vision over plain undeniable fact, can be one of the most common problems that can weigh a software business down.

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