Micro ISVs and Enterprise 2.0

Dear Mr. Lenihan,

Ireland is in a dire economic situation. The way out of this is realise that the days of large multinationals employing hundreds of thousands of unskilled Irish people to manufacture physical objects are over and that the future of this country is in the hands of small service businesses. With that in mind, please consider some of the following to make it easier to start and run such a company here.

• Stop treating company directors like criminals. I am an executive director of a small company. I pay income tax and PRSI every month. My company doesn't pay PRSI for me, but in return I get very few social benefits. Why do I not qualify for the PAYE tax credit? Why do I have to fill out the full Form 11 tax return, the simplified E version of which is 16 pages long (the full version is 22 pages)?
• Make it easier to be self employed. For small companies it is much more straightforward to hire contractors than full employees. Given that a contractor suffers the same tax treatment as a director, why is it impossible to hire a US-style independent contractor without Revenue deciding that the contractor is actually an employee? Service industry contractors have basically no qualifying expenses, so why do they need to keep accounts and fill out the aforementioned Form 11e?
• Encourage small companies to hire staff. I see you cancelled the back-to-work allowance. How about a new scheme to replace it? A young, low-turnover company should be exempt from paying employer's PRSI for the first two years of a third-level qualified employee's contract. I'd also suggest that for a period after a contract is signed the new employee's jobseeker's benefit is paid to the company. Surely working for the real economy is better than working for a travesty like FÁS?
• Fix the education system. There are no world-class universites in Ireland. If fixing this requires introducing fees and corresponding student loans, so be it.
• Fix the company formation incentives. Enterprise Ireland is broken. While the international promotion opportunities it offers are of some use, the only companies it is interested in are those with overly aggressive venture capital backed business plans. The city and county enterprise boards are designed for helping plumbers and hairdressers to start companies. The Seed Capital Scheme is interesting, but it is only of use to people who have had a liquidity event of some sort like a company sale or large redundancy. The three-year corporation tax exemption is nice, but how many service industry start-ups make taxable profits in their first three years?

Why work for a software start-up?

A bootstrapped start-up is a great place to work. However, not everyone can start their own – you need to have enough money in the bank to live on for about a year or you'll need to do consultancy work at the same time, and deal with the overhead of context-switching your brain between consultancy and your company.

The next best thing is to work for a start-up that you don't own. So why should you give up your job in a bank or IBM and work for a start-up you've never heard of?

• Your job in a big company isn't that secure – the world is in recession and big companies tend to see expensive developers as an easily reducible cost centre.
• Your job may well be more secure in a start-up – a well-run start-up has much lower costs and inertia than its large competitors. The recession will help to weed out the worst managed and most bloated competitors from the market.
• You can influence decisions to a much greater degree. You get to work closely (in many early-stage cases, across a cubicle partition) from management, making it easier to pitch ideas. Start-ups are also generally more amenable to trying out new tools and languages.
• Good start-ups tend to be run by people who read books about managing programmers and they want their programmers to read books about their craft.
• You'll almost certainly get the chance to buy some of the company. The payday from owning a measurable percentage of a company that gets acquired is spectacular, and will give you the finance to start your own and give the next generation of great programmers somewhere to work.

At last – a Twitter use case I get (nearly)

Twitter left me cold when it was launched. I didn't get the point of a blog that isn't a blog, and agreed with The Register that it was more "Web2.0rhea".

Bob Walsh and Patrick Foley talked at length about Twitter in the most recent episode of their podcast and suggested using the feed-able Twitter search tool to look for people with the problem your software solves, in much the same way as one would use Technorati to look for blog posts about it.

However, unless my understanding of how replying to a tweet works is wrong (i.e., only my own followers will see the reply unless the original tweeter subscribes to a search for @ his own user name), I'm still not sure how to exploit it. Any suggestions?

Respect

I’ve written before about how one of my goals is to create a software development company that respects its employees. A throwaway remark about why people put "references available upon request" in their CVs made me realise that as well as respecting its employees, a good company also respects its prospective ones.

When you interview someone, turn up on time. Introduce yourself, and describe what you do in the company and what relationship you will have with the interviewee if she accepts an offer. Even if it's obvious the candidate isn't a good fit, conduct a proper interview and be polite – make your case after she's left. If you find that you have a hard time justifying your verdicts, try politely excusing yourself in the first few seconds of the interview ("I just have to fill out the top of my notes page") and write down your first impression. Afterwards, if you haven't changed your mind, justify why not.

When you've decided to make an offer, bear in mind that it's human nature to talk. Don't call in references without making an offer first, and don't call old friends that may have worked with the candidate before unless you have permission or are absolutely certain that your contact will be discreet. Finally, when it comes to the offer, don't forget that you chose this person because you believe she will make you lots of money – starting off by trimming pennies off their package is not respectful.

By the way, I'm not sure I agree with Seth that a CV should be just references, but I think that if you can't name a champion you trust enough to recommend you without broadcasting your job hunt, it may have been a poor life choice to have stayed in that position.

Market research

Neil Davidson encourages a poster on Joel Spolsky's Business of Software forum to run with an idea despite feedback telling him it's a bad one.

I agree.

On Hothouse we are continuously pummelled with the message to do more and more market research. I think that excessive market research is simply a way to put off or avoid starting a company. Not only that, but for small software companies, it's just not important:

• Software the small company way is cheap to develop. The total cost is up to a year of no income and a small start up overhead of about €10,000 or so. If you can't afford that you can bootstrap the company using consultancy.
• "Product" software is difficult to describe if it doesn't exist. By product software I mean "not bespoke". Focus groups or surveys that try to find out if people will pay for a non-existent product are worse than useless – they cost time and money for no gain. It's far better to build a (superficially) working prototype so you can show it off; however, think about what you'll do if you get negative feedback. Will you stop development? I didn't think so. Don't expect any direction-changing suggestions either – the good suggestions come from people who use a product every day and you can't use a prototype.

So once you decide to start a software company, what should you do? Oddly, considering what I've just written, the first thing to do is market research:

• Know your competition. Don't bother with Gartner and friends – if you think your competition is one of the huge companies they profile you're wrong. Your competition is the other small companies doing similar things to you. If you can't find any, then there is a chance there isn't a market for your product.
• Identify your customer. This is mega-important. Your customer is the person who pays you – it is often not the actual user of your software. This is where you start to decide what market niche you want to fall into.
• Find several people who might buy your product and talk to them about it in depth - regularly. If the only person you know who might buy your product is you, search really hard amongst friends and former colleagues to find someone else. You're looking for people who recognise the problem your software solves and like talking about it. You're not looking for people with large budgets (but don't try to bribe people with promises of free licences either).
  By now you've probably completely changed direction. Don't worry about that – it's what you want.

Next, you need to do some more homework:

• Design your marketing strategy. Your marketing strategy includes the versions you'll sell, the price, how you'll tell your market about your product, how you'll take and fulfil orders and how you'll manage customers. If you want to you can call the result your marketing plan.

Finally, you get to the fun stuff:

• Design your product. You need a functional spec. I highly recommend building a prototype too the user interface first; certainly, the spec needs to have drawings of the UI. It's a complete description of the software you intend developing. For a reasonably sized small-company project (i.e., a year or less development time), the spec will take about a month. During this time, keep walking the people who might buy your product through it (but be careful not to end up designing a bespoke piece of software).

The next step is to write your software. Unfortunately, after that comes telling your market about it, but I'll leave that for another day.

The (software) workplace of the future

As part of the Hothouse programme I am assigned a business mentor to ask business-y questions of. He suggested that I describe the type of company I’d like to create as an antidote to the generally terrible conditions software developers all over the world work in. So, in the style of 1950s home of the future exhibition, I present the software company of the future:

The single most important change from the norm is the company’s headquarters. Since the 1950s companies have been increasingly disrespectful of their employees, but the software company of the future will reverse this unpleasant trend. Its headquarters are centrally located and spacious enough to give every creative employee a private office with a window. Even interns work in two- or three-person windowed offices. There are plenty of collaborative rooms (the word “meeting” is rarely used by employees of the company) that don’t need to be booked in advance. The office kitchen is the most important collaborative space – it is kept well-stocked with the basics, and is cleaned daily by an external firm (software developers in the future are still messy). The fuel that powers software development is coffee, so there is a commercial coffee machine and a supply of good quality beans.

Although this kind of office space is expensive, it is much cheaper than continually replacing unmotivated employees.

The company maintains an extensive library and anyone can order books for it. There are multiple copies of each book to reduce the amount of time spent searching the office for a book. One of the most important books in the library is the classic Peopleware, required reading for every new hire. As well as a physical library, the company has a feed aggregator that every employee can add to, and a shared wiki and collaborative bookmarking tool.

No matter what the industry people do their best work with the best tools, so the software company of the future invests in them. Every employee has up-to-date computer hardware and software at his desk, with whatever combination of keyboards, mice and screens he or she chooses. Best-of-breed backup, version control and continuous integration are in place and used by everybody. To further reduce the amount of time wasted when hardware fails the company has a support contract for all of its hardware that replaces anything broken within hours.

Maintaining the library, sourcing hardware and keeping the coffee machine stocked is hard work, so the company has an office administrator with the knowledge and budget to make everything run smoothly.

Of course, work isn’t all fun, and the employees of the software company of the future are significantly more productive than today. One reason is that every new product or version the company produces has a functional spec – a document that describes what the software does without dwelling on how – that is prepared by the spec lead but is the work of everybody. The spec isn’t dogma, but whenever an implementation problem leads to a change in functionality, the spec lead keeps the document up to date. The functional spec makes it much easier to estimate how long tasks take, and late nights are extremely rare.

The company’s business model helps reduce or eliminate the number of changes to the spec during development. Instead of selling expensive enterprise licences and customised versions for big customers, the company sells software as a service with an open API that allows users to mash up custom solutions.

Customer feedback is encouraged in many ways. There is a company weblog where employees can post about interesting ways customers have used the products, problems they’ve solved in their day to day work, or anything else that interests them. The support database is publicly searchable, and customers are encouraged to use the support forum so others can join in. Monitoring the forums provides the best insight into how customers use the software and what new features they most want.

The company needs great people to thrive, and its interviewing process ensures that only the very best are hired. Anyone who interviews candidates is given training in how to do it, and no one is hired at any level without first passing a practical test of their ability.

At the end of the month, everyone gets paid. The software company of the future has dispensed with most non-cash compensation schemes, only keeping them if they are difficult or expensive to privately source, in favour of a simple and high salary scale. Since all-nighters are discouraged, there are no performance-related bonuses; a profit-sharing scheme rewards everybody equally. Although the company is set up for profit and not to sell, every employee with more than a few years of service owns equity in it and will be well rewarded if the company is bought or floated in future.

So, is your company already in the future or is it stuck in the past?

[link] How to create products customers love

Jack Vinson summarises a webinar (unfortunately not archived yet) by the author of Inspired: How To Create Products Customers Love.

 All ten of the points are bang-on. "You simply won't get great products by asking customers what they want" is something that I've tried to explain to directors for years - the users of a piece of software generally didn't think of solving their problem in the way the software does before using it.

"Realize that function (requirements) and form (design) are completely intertwined" sounds like the whining of an engineer that always brings problems and never solutions, but it isn't (always). A great software designer is always also a great information architect, even if he or she doesn't know it.

Stay productive

A few things that are working at the moment or have in the past:

• Start the day with some work. Reading email or blogs isn’t work. If you start the day by doing something that has a cash value, then no matter what happens later it’s impossible that the day is a complete write-off.
• Do your most important work when you’re most productive. This sounds obvious, doesn’t it? However, if you don’t think about it, you will inevitably end up struggling to do a task that requires heavy concentration when you feel sluggish. Instead, do something that you can manage in your sleep – balance your books, maybe, or check your support forums. Learn your body’s rhythm and spend all of your most productive doing whatever pays you the most per hour.
• Open the blinds. We’re animals. Highly complex, self-conscious animals, but animals nonetheless. If your work environment is dark, your body will assume it’s deepest winter and make you lethargic to save energy. If your work environment is dark because it’s an office building built after corporations lost all respect for their workers then read Peopleware and try to make your working environment like the best ones they describe. This may involve changing jobs.
  If you live in Northern Europe where it’s been raining all August, buy the brightest lightbulbs you can find.
• Clean up. If you’re wearing a stained t-shirt and have a week’s stubble on your face you’ve already allowed yourself to be sloppy. A little bit of grooming has a surprisingly large effect on your self-respect.
• Measure. You can’t improve what you can’t measure, so time how long the things you consider unnecessary actually take. In a previous job I found that escalated support and helping the test engineer took significantly less than an hour a day, but felt like much more because they were annoying. The most time-consuming daily task was assisting the company’s pre-sales engineers, which could take up to three hours out of a working day.

Is having a lie-in good for productivity?

Based on today's sample of one, yes.

I got a lot done. I'll be putting up some of it later today or tomorrow - basically, after two hours of searching I couldn't find a good internationalised library to format data sizes in bytes, kilobytes, etc, so I wrote one. I think it's useful enough to put in the public domain.

Have a break...

...longer than you need to have a kit-kat, but not too long. It will do you good.

It’s 11:30, and I’ve just started work after a lie-in and the first shave in six days. The Joel and Jeff show is on in the background. If I’d started work at 9 as usual, I doubt I’d have got anything done, but I would be tired.

I’ll post again this evening with a report on how productive today was.