Our consulting company, AbilityMatrix, specializes in helping innovative solutions get to the right market. We typically work with startups, ISVs, and quite often well established project-based software development companies (aka "body-shops") willing to move at least partially into product-based operation.
One of the secret sauces in our work is thinking a lot about our clients' clients, and about what drives their related decisions, what constraints they may face. Business and personal empathy in action.
Imagining the future and especially what's in other people's heads is, of course, a rather risky activity… Sometimes we find a good track, sometimes less so. Yet, it always helps us to come up with hypotheses for today that can be tested tomorrow and supports us in deriving the next steps in business—both for ourselves and our clients.
These are our thoughts about the software developer firms' current status and upcoming trends & challenges in the face of CoVid.
The worldwide CoVid pandemic forced all of us into a profoundly different way of life. Even in our private lives, but the most unprecedented and shaking aspect is in business. Apart from the direct, health-related impact, or probably far beyond it, the economy in general AND the natural way of doing business is in a complete and sudden rewrite, even as you read this.
A good analogy might be the monkey testing as software developers know it. The current situation in real life is like a large scale (random) dumb monkey test. External factors are taking away random, unexpected parts of our ecosystem, for an indefinite period.
After the first shockwave, where the absolute emergency needs had to be addressed, two new challenges emerged that are likely to remain with us for an extended period.
1. Planning for demand uncertainty.
Some industries are already in recession, while others are starting to feel the ripple effect now. In addition, the epidemic is also not yet contained. In such an environment, it is very difficult (or rather, pointless) to believe demand is following the usual year-on-year market development trends. No need to assume the worst, but uncertainty stays with us about the revenue numbers and related risks for a while.
2. Remote operation, probably for months.
Coping with crises and expecting the unexpected is nothing new if you are old enough. Managing strategic changes without the ability to gather at least the core team together at the same physical location… Well, this is a new phenomenon for most companies. We believe that focusing on operational continuity will not be enough. ISVs must move fast to rethink governance and find ways to pursue even strategic initiatives in a remote environment.
3. The business impact varies by industry.
It's also a new phenomenon that industries, moreover, actual businesses are and will be impacted very differently. The fallout is not evenly distributed even within segments that seemed as a monolith a year ago.
You can already experience the short term shocks. Still, for entrepreneurs and top-level managers, the responsibility also lies in what to do next, how to find the best steps beyond the short term horizon.
There is no "standard strategy" for everyone in the software development business. Your particular strategic options depend on just a few internal and market factors - you can not copy others anymore.
Software development companies enjoyed a sort of "Tornado-era" in the past decades, experiencing the vacuum of demand, which just needed to be served. That may now change in some industries.
There are a few key drivers you can identify right now, which give you a general direction for the strategy.
Runway. Perhaps no need to discuss in depth that available liquidity & capital have a very high impact on what your immediate steps can be. The remaining runway may leave you with no real choices. If you see a short runway, your only option might be to take off as soon as possible: generate leads with extraordinary speed, assuming you are on the right market with the right product.
Market position. Even if the economy in general, or even if the industry you serve looks bad, some players will have better chances of surviving. You can have a dominant position in a more-or-less established market. Or you can enter a market since everyone else is bleeding to death. Your business can be diversified and safe - or just one-product-only. Perhaps your client depends on you. Or you can count on a government bailout: either money or policy change. Your investors may consider your business as strategically important. As you see, some of these are market-originated; others depend on established relationships - but all define your possibilities.
Industry outlook. This is the most critical driver for strategic decisions in the current situation. This aspect alone can make or break your business, almost independently from the previous two. We dedicated a detailed table just for this aspect only.
First of all, we need to distinguish between short term and longer-term expectations. For most businesses, right now, short-term looks bad (or outright terrible) while the longer term is still uncertain, but offers some sort of consolidation or hope. The challenge is to identify correctly whether your clients' industry outlook is good enough for your time horizon, or you should move away from that industry and enter a new market? Additionally, is it time to radically scale (up or down) sales effort?
We listed below a couple of industries, rough strategy indications, and next step considerations. The point here is to provide you with inspiration about the perspectives even if you face the worst period of your management career. Business does not have to stop.
User manual for the table
Everything is relative to your time horizon! A 6-9 months recovery in the target industry with a three months runway is an alert to pivot.
As you may guess, AbilityMatrix is exactly focusing on some of these areas: we have gained several years of experience in international go-to-market strategies and execution, starting from finding product-market-fit to generating international leads in a highly agile and often remote-only environment. Click here for more information about our approach!
