Embed Size (px)
Citation preview
FOUR LAWSOF SOFTWARE ECONOMICS
RICH MIRONOV@richmironov
Your development team will never be big enough
Fact #1
Development can never build as fast as we can dream
Magical Thinking
“CEO says it’s really important.”“We already promised it to a big prospect.”“How hard could it be? Probably only 10 lines of code.”“We’ve been talking about this for months.”“We’ve gone agile, which gives us infinite capacity...”“My neighbor’s kid could do this in an hour.”
#1Law of Ruthless Prioritization• AND requests but EXCLUSIVE OR decisions• We succeed by finishing a few critical things
Executive’s Job• Make hard trade-offs• Battle magical thinking and “specials”
4 Laws of Software Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth subscriber
Fact #2
All of the profits are in the nth copy or nth subscriber
Revenue Implications$1M/year$6M/yearClose to zero
• Your development team of 6 costs…• Implied revenue commitment…• Incremental cost per user?
• Goal is not to minimize costs but to maximize revenue
Software Tiers/Bundles
Opposing Models
11
Gro
ss P
rofit
Software re
venue (u
sers, tx
ns)
Professional Services (hours billed)
Art courtesy of Arne Olav Gurvin Fredriksen
There’s nothing more wasteful than brilliantly engineering a product that doesn’t sell.
#2Law of Build Once, Sell Many• Segmentation: strategic art of choosing customers who
want the same solution
Executive’s Job• Focus on segments, not deals
4 Laws of Software Economics1. Your development team will never be big
enough Law of Ruthless Prioritization
2. All of the profits are in the nth subscriber Law of Build Once, Sell Many
3. Software bits are not the product
Naked without• Deep customer understanding• Specific target audience• Working solutions• Positioning, messaging, awareness, sales
Fact #3:
Software Bits < Whole Product
Undifferentiated or poorly positioned
Marketing/sales/channel
failuresLate delivery
Poor quality
Wrong problem, wrong solution
Commercial Software Failure Modes*
*In my personal experience
Most of the success / failure of a product is determined before we pick our first developer or fill out our first story card
#3Law of Targeted Whole Products• Customers buy solutions (which may include software)• Mean-Time-To-Joy
Executive’s Job• Focus on problems worth solving for specific
segments• Customer story as important as working software
4 Laws of Software Economics1. Your development team will never be big
enough Law of Ruthless Prioritization
2. All of the profits are in the nth subscriber Law of Build Once, Sell Many
3. Software bits are not the productLaw of Targeted Whole Products
4. You can’t outsource your strategy
Fact #4: Input < Decisions
• Voice of the Customer• Surveys• Crowdsourced feature
ranking• Showcase customers• Industry analysts• Competitor data
sheets
• Smartest customers• Smartest developers• Executive Survey-of-
One• CEO’s mother-in-law• Inflight magazine
• Business value error bars >> engineering error bars
• Bottom-up prioritization ugly products
• Trade-offs among unlike items are heavily biased
Analytics < Strategy
Prioritizing Within BucketsPrioritization within Buckets
Features for current re-lease 50%
Quality (refactor, test automation) 15%
Engineering overhead; 10%
Big future bet, 5%
Sales one-offs, non-roadmap 20%
Typical Development Budget*
24*In my personal experience
“I skate to where the puck is going to be”
Strategy Requires StrategyStrategy requires judgment
4 Laws of Software Economics
1. Your development team will never be big enough
Law of Ruthless Prioritization
2. All of the profits are in the nth subscriber Law of Build Once, Sell Many
3. Software bits are not the productLaw of Targeted Whole Products
4. You can’t outsource your strategy Law of Judgment
Rich Mironov
Mironov ConsultingSan Francisco, [email protected]+1-650-315-7394
twitter.com/richmironovlinkedin.com/in/richmironov
