How to Setup a Software House

Graduates coming out from Universities are usually very passionate to start a software house of their own. Once they step into the real world, pictures from the dream word start getting blurred and things start looking much more complex then what they envisioned in their dreams.

An initial thought of putting down few computers together in a nice office, giving a good name to this small setup and taking up the seat of CEO of this house, now looks like nothing more than an exercise of interior decoration. People standing outside on the road, will start rushing into this new facility to get their software ordered and we will start making big deals and will have dollars flowing all around is another aspiration that now looks like a big exaggeration.

So what?

What am I supposed to do?

You need projects to start work. Where to get from? Local market? International market? Or should you start developing a new product? How should you decide?

Project or Product?

Project:

A project is a customer specific order for developing software as per his/her specific needs. For a project to get started you need to have a customer paying for it and signing a deal with you.

Product:

Product is usually a new idea or a modification of existing product, targeting customers all around in some specific business domain and does not need any binding, deal or agreement before hand.

Should I go for Projects or should I innovate a product? That’s a challenging question and in fact draws a baseline of your business motive and is a strategic decision. How to decide? What are the factors to base my decision upon?

Here we go with some important considerations for a new entrepreneur:

Capital:

How much can you invest and for how long can you invest without worrying for ROI (Return on investment).

Let’s say I have 1 million and can invest for 2 years without running into financial crises. Will not need to withdraw single penny from my business, have other sources of income to sustain myself and so on. That looks like a relatively good condition for an innovation, but only if I can innovate something.

What should I innovate?

Should I go for a flying train? No, we are only talking about a software innovation. So what should I? Should I develop a product for NASA for tracking satellites? That would impose a big risk, what if NASA refuses to buy the product or is not interested at all. Should I go for an income tax calculator? I need too much of domain knowledge for that, would I be able to get the services of a Tax consultant to guide me on that? Tax laws are different in different countries so my solution would be country specific, most probably for Pakistani citizens. Are Pakistani citizens literate enough to go for computer based software solutions for tax calculation? Do we have any existing solutions in the market for tax calculation? Does FBR provide any such facility, if so then why would someone like to buy mine? Can I provide more user friendly and precise interface for that matter?

After doing all the needed R&D and putting down the answers for above why’s and what’s, let’s say results are positive. What next? Would it be feasible? What comes under feasibility? To calculate feasibility I will consider following ingredients:

Scope: What should precisely be the scope of this product? All kinds of taxes? Or some specific taxes like income tax, wealth tax etc.

Interfaces: What different interfaces should I provide?

• Simple desktop utility?
• Web based online calculator?
• A web service for any third party vendor?

Resources: What different resources would I need? How much of human resource utilization would it take to complete this product end to end? Then office infrastructure, electricity and power backups, Internet connections and towards the end I will need marketing resources to get the product out the door.

Cost: Cost would be determined based on the scope that I define the interfaces that I choose and accordingly resources that are needed.

Feasibility comes to a point where I can say “Yes” or “NO”. Does it fall within my budget and within the defined period of investment?

If finally I get a big “YES” I will go for it and setup a small facility, hire resources and start development of the product, will do my hard and will patiently wait for the outcome. My software house is up and running.

Now let’s talk about track 2, I don’t have much capital and I’m not willing to take risk associated with my innovation. I need earlier commitments from my clients before starting the development cycle. These conditions dictate me to go for Project oriented setup.

How to start such a setup?

There are two ways to do it; either I should have some references in the market from where I could get a project OR I should go for online options, where I could try bidding for online applications and utilities from sites like “rent-a-coder” etc.

If I could be hunting my own references in the local market, I need to be aware of pros and cons associated with this approach. Being a Pakistani national I know my local market is not very much software literate and/or computer literate so opportunities in the local market for a beginner would not be very encouraging.

Secondly the paying capacity of local market is not too good so I might not get rewarded for the effort which I will put in.

Third and more important issue, our local businessmen always considered “software automation” more of a luxury than a need so they don’t opt for it that easily but now situation is changing; people are getting acquainted with the “goods” of automation specifically the efficiency it brings in.

So keeping in mind these factors associated with the local market I will see if it meets what I need from it. If that’s sounds feasibly a fine start, I can try that out and meanwhile I would also keep building my profile for freelance sites to get myself into that business as well. Sites like “rentacoder.com” give us good opportunities to establish our self online. It might not usually be big order but usually going for a bunch of small orders will get you a good start if you are really putting your hard for it.

So summarizing the discussion whether you are going product oriented or project oriented, you need to plan well and estimate the risks associated with it. Otherwise going by the wind will not get you anywhere.