5 challenges of running a software development company

tNowadays, without the proper software, it’s close to impossible to run a successful business. You can either buy a piece of software, subscribe to it or, in case it’s something to drive your business, you can have someone build it from scratch. This is where a software development company steps in. A team of highly skilled developers accompanied by a great project manager can do wonders for your business – providing you with a killer product that translates your value proposition. It’s also a great alternative to hiring in-house developers. In simple terms: an external company goes through the intricate process of vetting the right people, training them and applying their experience to make sure you focus on the essentials.

man in the officeThat’s one of the reasons why the software industry has been in constant growth pretty much since the end of the post-dotcom bubble. With easier access to learning different coding languages and start of It outsourcing, the global supply of skilled developers has been rising. Additionally, thanks to the advancements in day-to-day technology (e.g. faster internet, smartphones, video calls) companies have become less reluctant to working with offshore software development companies.

Sounds good, right?…

Not really, to make justice to this topic, today we’ll also delve into the biggest challenges when it comes to running a software company:

1. When clients leave you – it has a ripple effect

Let’s be fair, no business likes losing their clients. But professional services businesses share a common trait – they make money on billable hours on a certain project. So, if a client (meaning: project) is ended, sometimes even prior to the agreed parting date, your workers can become technically unemployed. This hugely impacts your month-to-month revenue.

2. Balancing different technologies vs. being a specialist

Choosing the right technology to offer as part of your services is a strategic move. Some companies pride themselves as specialists within a certain tech stack: Python, Ruby on Rails, etc. Others strive for being an all-around tech hub with a wide array of technologies to offer. This may be a difficult challenge to overcome, especially that developers in different technologies might be indifferent demand.

woman in the office3. Difficulties with measuring profit margins

Well, the more projects a company runs, to more it may complicate determining the total bottom line. Being able to determine what are the actual turnovers vs. initial estimates is key to assess which projects were profitable and which not. Don’t even get me started on using this information to gauge relationships with different clients.

So how usually project managers and POs assess their project’s profit margins?

Post factum – after the work is done and the invoices are paid (hopefully). Does it sound like tens of hours worth of mundane tasks?

Is there a way to make it simpler? Actually, there is! Just introduce some automatic time tracking to your project tasks or subtasks and skip manually filling out timesheets.

4. Risks of people leaving

It actually ties in with the previous point on the huge demand for good tech workers. If your tech team showcases the slightest signs of frustration and burnout, be sure to step in quickly! Are you willing to take the risk of suddenly needing to find 2-3 similarly talented developers in a given tech to finish your project? I don’t think so. Of course, all companies hurt their talented people leaving, but the impact is especially strong amongst software development companies where the tech people are the crucial assets.

Even worse, what if something happens on their way to work? I’m sure you’ve heard the term called: “The bus factor”, which in simple terms means: How much your project can be in jeopardy when a developer gets hit by a bus.

man working on the computer5. Will software development companies become redundant?

No, and yes. As always, depending on the context. While high-tech companies with huge enterprise demand may stand the test of time, companies working with startups might be in danger, since VC funds are less likely to hand out funding rounds to startups outsourcing any part of their IP and know-how.

Let’s wrap it up

It ain’t no walk in a park when it comes to providing providing custom software development services. However, if you harness the obstacles and be aware of the risks that you might be facing, you can definitely tip the scale to your favor. Oh, and learning from your past mistakes also won’t hurt 🙂 What are your thoughts on this? Let us know in the comments!

5 challenges of running a software development company

10 thoughts on “5 challenges of running a software development company

  1. Great post!
    As I’m starting up my company I need to make sure we do this properly. It helped me a lot.
    Thanks for sharing.

    1. Hey David, thanks a lot for your comment, so glad you liked it! I’ve collected a few years worth of experiences in the software development industry and decided to share my overall thoughts. If you have any additional questions, I’ll be happy to share more insights.
      Thanks again and best of luck with 540!

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  4. Great post!
    As I’m starting up my company I need to make sure we do this properly. It helped me a lot.
    Thanks for sharing.

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