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- Company: RubiBlue
- Player: Chris Ogden
- Contact: 0861 484 899
- Visit: www.rubiblue.co.za
Developing new products and services is the lifeblood of all businesses. Investing in their development isn’t an optional extra – it’s central to business growth and profitability.
However, embarking on the development process is risky, which is why considerable planning and organisation are needed. Nowhere is this more important than in the software industry, where mistakes can be extremely costly.
Chris Ogden, MD of IT solutions company RubiBlue, says there are five questions to ask when developing new software and making sure the time is right for your business to start the development process.
1. Is there a market for the product?
As a software development house, we once made the mistake of getting carried away with a product that was useful internally, but that was not able to generate the income necessary for the business to justify its development.
We did not do enough research beforehand and the result was that we spent R2 million on developing a product for which there was no market. My advice is to speak to people who you think would want your product and spec it with them.
Be careful of believing that there is a market because you think it’s what people need. Your interpretation of market requirements must match the product that you develop.
2. Does your company have the internal cash flow required to develop the product, or will you have to find external funding?
We received 50% of our funding from the Industrial Development Corporation (IDC), after having to demonstrate that our idea was internationally innovative and that sales of the product would result in income coming into South Africa.
Ostensibly, that was great, but we had to fund the development ourselves and we received the rebate only after we had proved its financial viability. Had we not had sufficient cash flow to get us through this period, the business would have been severely constrained.
3. Does the product excite your development team?
Does the team have a real interest in the project and what can be accomplished? This is key. If the team finds it innovative, they will have a sense of ownership in the development and this will automatically make them more productive.
4. Is the budget for the project realistic?
Software development can be a bottomless pit. We have spent around R30 million on development in the last six years. Originally, I thought a budget of around R2 million would suffice. Now, I would say that whatever you budget for, multiply that by ten to give you a more realistic idea
5. How will the business earn money from the product?
In the technology space, annuity income is king. If you have a new business and you need money upfront, it may be better to charge a once-off fee, rather than a smaller annuity.
However, in the long term, ongoing revenue gives you the cash to continue to develop and support the solution, which is key in this industry. Annuity revenue also makes it that much easier to budget going forward.
