The Business of Software: What Every Manager, Programmer, and Entrepreneur Must Know to Thrive and Survive in Good Times and Bad

The Business of Software is an excellent read and growth tool for seasoned practitioners. Organized in three major sections it explores: (1) Product vs. services vs. hybrid software organizations' strengths and weaknesses, and how they can change over time (think about your company...!). (2) Software development strategies and outcomes. At first glance, this section seems less relevant - until you find yourself defending why your latest release is waaaaay late... There are some excellent ideas here that can apply to the creation and roll-out of "core" demos. (3) Entrepreneurship - successes, failures, and ongoing question marks - the author explores what key factors contribute to the end result. The case studies at the end of this section can serve as virtual mirrors onto one's own organization. This is good and useful reading, particularly for those who seek to move upwards in their organizations or are contemplating joining a new or emerging company.

In many ways this is the book I had been trying to find for years. There are many good books on starting up companies, and high-tech companies in particular but not much good literature specifically about the software industry as a whole. This books focuses on software as a business and how the industry really works. I am managing a start-up software business and the information in this book is invaluable as it really changed my thinking about what the company is, how it operates, and what it takes to become a success. If you come from a technical background, and starting or thinking of starting a business, then this book is a must-read.

This review is also available on my blog: DLS Thoughts. I just finished reading "The Business of Software" from Michael Cusumano. Overall a well written book on the fundamentals of the software industry. The book focuses essentially on the analysis of the business model for a software company. There isn't really anything striking new in Cusumano's analysis of software companies' business model, but the author does a good job in outlining the choices offered to software companies and how their business model will have to mature as companies and technologies mature. Essentially, there are 3 choices for a software company: * A pure product play (Some would argue that with the advance of open source and the broad adoption that it has been getting lately, that pure plays are getting much more difficult). * A mix of products and services. * A pure service play. I found very interesting Cusumano's analysis of a typical enterprise software company revenue over the course of a five year business lifecycle. For every 1 dollar of product license fees, $2.15 dollars can be derived from services and maintenance. That's more than 70% of the cumulated company revenue. In many cases, services on sold products end up being a life insurance against bad economic times. This brings some prospective to the Professional Open Source buzz. After all, a typical software company already ends up generating 70% of revenues from maintenance and services over a 5 year lifecycle. When put in this context, the changes of business model though important, appear less radical that one may have initially perceived. For those doubtful of the viability of the open source business model, I think we get some empirical data making the case for it right there. Cusumano goes on with his analysis and show how as companies mature, they tend to move towards more of a services model and provides excellent data to illustrate his argument. As we look at the growth of companies like IBM and Oracle, more and more of their revenues are coming from services. This clearly justifies their strategy behind open source where they can capitalize on their strength in services while maximizing the use of their R & D resources. Finally, I particularly enjoyed Cusumamo's analysis of the factors that make software startup companies successful, with great examples to illustrate his point. Cusumano basically identifies 8 key criteria for assessing software start ups: 1. The quality of the management team. 2. Whether the market is attractive and has strong potential. 3. How compelling is the offering? 4. How much interest is the offering getting from customers? 5. Is the company credible? 6. What is the business model? 7. How flexible is the management team? 8. What is the payoff potential? A great list that applies to most business activity.

---> To swing for the fence, entrepreneurs must avoid the shark-infested red water and sail into the deep blue sea. <br /> <br />If you're even thinking of creating a software startup, I highly recommend you read The Business of Software as soon as possible. Doing so will save you much pain and suffering from senseless mistakes. When there is such a large body of existing knowledge, there is no cause for trial and error mentality. There's plenty of other opportunities for trailblazing. Read this book as a bare minimum before starting your venture. <br /> <br />Cusumano, offers an in depth study of what it takes to succeed in software. Of particular value are critical questions to contemplate: <br /> <br />1) Do you want to be mainly a Products company, or a Services company? <br />2) Do you want to sell to Individuals, or Enterprises | Mass market, or Niche market? <br />3) How horizontal (broad) or vertical (specialized)is your product or service? <br />4) Can you generate a recurring revenue stream that will endure both good and bad times? <br />5) Will you target mainstream customers, or do you have a plan to avoid the chasm? <br />6) Do you plan on being a Leader, Follower, or Complementor? <br />7) What kind of character do you want your company to have? <br /> <br />Cusumano also offers eight Critical Success Factors that are necessary for Software Start-ups to succeed as a business and raise investor money: <br /> <br />1) Strong Management Team <br />2) An Attractive Market <br />3) A Compelling New Product, Service, or Hybrid Solution <br />4) Strong evidence of Customer Interest <br />5) A Plan to Overcome the "Credibility Gap" <br />6) A Business Model Showing Early Growth and Profit Potential <br />7) Flexibility in Strategy and Product Offerings <br />8) The Potential for Large Payoff to Investors <br /> <br />Don't reinvent the wheel. Read this book as soon as possible, preferably "before" you create that software venture you so boldly dreamed. <br /> <br />Michael Davis, Byvation

Even after the dot-com boom and bust, software remains the business world's glamour industry. In this insightful study, professor and industry expert Michael A. Cusumano skips the glitz and goes straight for the nuts and bolts. The result is a clear rendering of exactly what makes one software firm hit it big while dozens of others go broke. Despite a slight, occasional tendency to sound academic, Cusumano really explains why a well-run software company can be a gold mine. He carefully covers the best practices in the software development industry in depth and offers plenty of real-world case histories to add juice to what could have been a dry recitation. He even explains why you have to hold on so long when you call a mass-market software firm's toll-free number. We recommend this detailed book to software pros seeking insight into their industry, as well as to investors and to those who like inside stories about entrepreneurial adventures.