1. CSC444F'05Lecture 131 The Software Vendor Business Environment

2. CSC444F'05Lecture 132 The Software Vendor’s Business Make money from –Providing software and related services Software –Must satisfy a need or a want in a market that is Big enough Is willing to pay enough to pay the costs + re-invest + profit –Licensed (not sold) + maintenance Bulk discounts Negotiable prices –Follow-on revenues are key Maintenance, Upgrades, Consulting, New related products,... Software is quite “sticky” –Cost of acquisition –Need to ensure sold software is used »Not “shelfware”

3. CSC444F'05Lecture 133 Software Vendor Structure Shareholders –Owners of the company. –All profit and value increase accrue to them –They elect the Board –True for publicly traded or privately traded companies

4. CSC444F'05Lecture 134 Software Vendor Structure Board of Directors –Represent the shareholder’s interests –They appoint the officers of the company –Will advise the CEO –Responsible for company acting lawfully

5. CSC444F'05Lecture 135 Software Vendor Structure Chief Executive Officer –Appointed by the Board –In charge of running the company day-to-day By coordinating the activities of the Executive Team –Commits to financial targets (revenue growth / profitability)

6. CSC444F'05Lecture 136 Software Vendor Structure Executive Team –VP’s and “C-Level” officers hired and assembled by the CEO –In charge of running the company day-to-day –Meet regularly to coordinate activities and to set strategy –Functional responsibilities + corporate responsibilities

7. CSC444F'05Lecture 137 Marketing Product Management –Defining what products/services the company will sell at what price –Preparing collateral materials for partners and sales –Coordinate the release activities –Key area

8. CSC444F'05Lecture 138 Marketing Marcomm –Communicating with the external world –Advertising, press releases, - generate “buzz” –Experts not at product (see prod mgmt) but at knowing how to reach people with a message –Lead generation to feed sales pipeline

9. CSC444F'05Lecture 139 Marketing BusDev –Developing new business opportunities –New channels to market –New geographies –New partnerships

10. CSC444F'05Lecture 1310

11. CSC444F'05Lecture 1311 Sales Responsible for achieving the revenue number. Sales models: –High-level direct sales Identify decision makers with budget, chase them down, negotiate terms, close –Dialing-for-dollars Dial out to big lists assembled by marketing –Channel sales Sell indirectly via other organizations Paid via base + commission –May not be profit based –Therefore need strong sales management

12. CSC444F'05Lecture 1312 Sales Process Sales “pipeline” or “funnel”, E.G., –Leads –Qualified opportunities –Short-listed –In negotiations –Close Sales management maintains pipeline –Attaches estimated close date, sale value, and probability of close to predict future revenues –Keeps the pipeline filled Uses a CRM system

13. CSC444F'05Lecture 1313

14. CSC444F'05Lecture 1314 Client Services Pre-sales support –Technical help for the sales group –Implementation project planning pre-sales Onboarding / Implementation –Ensuring a customer starts using the software Account Management –Ensuring customers are happy –Mining to see if they need additional software/services Customer Support –Help desk

15. CSC444F'05Lecture 1315

16. CSC444F'05Lecture 1316 Finance & Admin The mechanics of establishing and reporting against budgets Spending controls –Purchase requisitions. Purchase orders, signing limits,... Taxes Financing –Leasing arrangements –Cash management –Investments Funding –IPO’s –Private investments –Investor relations Administration –Human resources –Office management –Internal IT

17. CSC444F'05Lecture 1317

18. CSC444F'05Lecture 1318 Software Development Profit center: –“I will spend more and make more and come out ahead” Highly measurable results Sales, marketing, consulting Cost center: –“I will spend more and produce more and better software” How do you measure this? –What is “more” –What is “better” –How much is reasonable to spend? Software Development is a cost center Need to argue the case for budget in a different way

19. CSC444F'05Lecture 1319 Management of the Software Organization Downwards –Managing the software organization itself Outwards –Managing the relationships and interactions with other departments Upwards –Communicating and relating upwards in the organization Externally –Relating to customers, partners, and suppliers Need to be good at all 4, not just the first. Need to understand the business you are in, not just the technical part, or you will fail.

20. CSC444F'05Lecture 1320 Proposals If money is needed for an initiative, you must ask for it in a productive manner. –Not just state a need, expecting money to flow, and then having an “I told you so attitude” if not forthcoming. Managers with budget control would be irresponsible if they allocated money on ill thought out initiatives Will require a written proposal. It’s a management role to translate vague needs into concrete budget. –E.g., staff might say “we really need to do distributed builds to cut down compile times” – cannot go to a budget request with that alone –Manager should be aware of the chances of getting something like that done (by being plugged into the current fiscal situation of the company) –Manager must coordinate turning this into a concrete proposal –Manager must sell the proposal

21. CSC444F'05Lecture 1321 Contents of a Proposal Expected benefits –How this project will achieve them Monetary costs –Capital (hardware / software) –Consulting –Initial and ongoing –Timing of cash expenditures Staff time –Initial and ongoing –Who Timelines –Milestones Alternatives considered –Other approaches –Which systems considered / costs / functionality

22. CSC444F'05Lecture 1322 Closing on a Proposal Manager will want to discuss how to trim costs from the proposal Need to be flexible –E.g., trading off a production-grade server for a workstation Will probably need to go back to vendors to have another discussion on trimming costs Should not spring proposals on senior management out of the blue. –Ideally, will first have a ballpark figure for the project as a bogey in the budget. –If not, must build support for the concept gradually Get support from other execs as well May not be possible...

23. CSC444F'05Lecture 1323 Corporate Financials Corporations usually have cash available at all times, but may not be willing to spend it. Important financial measures are: –Revenues Yearly, year-on-year Quarterly, compare same quarter across years Monthly –Profit Revenues less cost As a percentage of revenues Yearly is most important Profitable businesses are typically valued at a multiple of revenues Demonstrate consistent performance –Year-over-year –Quarter-over quarter –Month-to-month

24. CSC444F'05Lecture 1324 Budgets Before the start of each fiscal year, the executive will go through a budget exercise: –Sales will forecast revenues –Each department will forecast costs –Each department’s cost budget will be backed by a written business plan –CEO will balance the budget –Departments will do a round 2 of the business plans –CFO will finalize detailed budgets

25. CSC444F'05Lecture 1325 Capital v.s. Operating Capital expenditures –Not salaries or consulting –Hardware, big ticket software Can pay for it with cash up-front, but full value does not show up as a cost immediately. –Get benefit over a 3 year period –Will depreciate the assets –(Because can sell them at any time) Can finance these purchases –E.g., leases –Therefore do not need cash if corporation is in good financial shape E.g., growing quickly E.g., $12,000 server –Goes into the cost budget as Year 1: $4000 Year 2: $4000 Year 3: $4000 Year 4: fully depreciated

26. CSC444F'05Lecture 1326 Cost Versus Baseline Hire an employee at a $48,000 salary –If hire on July 1, 2005 Will be a cost of $24,000 in 2005 Increasing the baseline budget by $48,000 for 2006 Consultants are more flexible in this regard –If not on a committed project with sunk costs

27. CSC444F'05Lecture 1327 Software Development Annual Business Plan Introduction –Mission, products under maintenance, new products being worked on –Accomplishments in the past year –Self-assessment of process maturity –Areas for further improvement Baseline Budget –The baseline spending if no new initiatives undertaken Will already be higher than last year’s budget owing to new hires arriving mid-year –Baseline staffing ratios –How/where the baseline is being spent Organizational Structure New initiatives summary –Broken out by area of focus New initiatives detail E.g. bp98bp98

28. CSC444F'05Lecture 1328 Summary 1.Source Code Control 2.Defect / Feature Tracking 3.Reproducible Builds 4.Automated Regression Testing 5.Release Planning 6.Feature Specifications 7.Architectural Control 8.Effort Tracking 9.Process Control 10.Business Planning Do all these things, and you’re doing well.

29. CSC444F'05Lecture 1329 Thank You! Now go forth and produce software!