My 2 cents on I.T. start ups

Today a friend from China sent me an email asking me what they should do when they leave graduate school. He is a very smart guy doing postgraguate in Computer Science (I believe) in one of the top universities in China. There is a few of them all from this graduate school got together and thinking about establishing an I.T. start up after graduating… here is his orginal email for those of you who read simplified Chinese.


我们做软件外包马上就要一年了,www.gudfen.com 临近毕业,开始为
出路着急。
我们团队都是学校里的计算机相关专业的研究生,准备在上海创业。
上海的创业环境还不错,学校和政府都会有支持,但是实际上最重要的
还是我们以后做什么?
比如,我们曾经想过做托管进销存系统,做行业搜索平台,做P2P在音视
频方面的应用解决方案,那最简单的也想过了,就是做管理软件,比如
CRM/SCM/ERP/OA等,也想过做互联网创业,比如做分类信息网站,类似的就
是美国的craigslist.org;或者一些广告交换、管理平台。
现在对我们来说是决定做什么的时候,也很欢迎各种想法,特别是国外
的一些新想法,所以希望你给点建议。
gudfen

and this was my response, thought I’d share with you guys.

First, I think when it comes to I.T. entrepreneurship, what you do doesn’t really matter, you are not necessarily going to succeed in what you do first time around (or even first few times). It’s about getting some experience with running a company, the experience with marketing, sales, dealing with clients and internal management etc, i.e.: it is, by far, more than just a few geeks get together and start bouncing off ideas. So it doesn’t matter what you do, just do it, but don’t get put off if you don’t get what you wanted the first couple of times. Once you get a hang of it, and able to place a foothold in the market, then orient the company towards what the market demands the most which leads on the second point

Second, so what do you do once you’ve had a few years of experience in running companies and your company starts to sustain itself? I.T. is a multi facet industry. It encompasses a vast number of fields. But in general it’s broken down into two categories, Software and Services. You can be an ISV (Independent Software Vendor) where you develop your own product and sell it. It can be as specific as Early Childhood Teachers training application or as broad as just plain old CRM. Sure you could do with SaaS like www.salesforce.com, www.xero.com etc, but finding and staying in the competitive market is more important than what technology you use behind the scene. But this is a very tough market to enter and the reasons are simple; it is very competitive and the existing players have decades of experience in doing what they do, it also requires a significant amount of upfront investment (capital and resources). Unless you can find a very fine niche that no one else has found or exploited, else I wouldn’t go head on with these big players. Services, this is a relatively easier market to get into. Businesses can’t exist without enterprise systems and you can leave enterprise system productions to these big vendors. Businesses need a third party in there to utilise and tailor these systems to realise their business values and meet their need and ever changing business processes. Yes, you guessed it, it’s the implementation partners. You can build your company’s core competency around implementing major ESs like S.A.P., Oracle etc or you could start small and target small to medium size businesses and therefore focus on something like Microsoft Dynamics suite of products, or plain old CMSs like EpiServer, SharePoint etc. It also has a quicker ROI. One of the downsides of this is, your return is directly proportional to your input. i.e.; you are in services, you charge by the hours, which means for you to grow your earnings you’ll have to grow your company size. But once you get to that stage, you should probably be thinking of going back to software, remember you’ll have the capital and resources to invest in it… Building software doesn’t mean you’ll have to compete with what is already out there, you can complement them, build on top of or around them. Examples of this would be like, C360 MailMerge which integrate Microsoft Dynamics CRM with MS Office tools which people pay lots of $$$ for. Or K2 BlackPearl, a tool that built on top of Microsoft SharePoint and for SP. Corporate clients pay shit loads of $$$ for these third party tools that work with their existing systems. This would be the ultimate goal, limited input and potentially unlimited return :D

Third, if you are thinking of becoming the next google, YouTube, Facebook, LinkedIn, FriendSter or the local iconic start up www.trademe.co.nz Think twice!!! There are literally billions of I.T. start ups out there just like you, I’m sure you can work out the odds of you becoming one. But hey that’s not to say don’t dream big, but just keep you feet on the ground :D Any thoughts?

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3 responses to this post.

  1. Posted by gudfen on August 8, 2007 at 4:10 pm

    thx,our team welcomes guys like u

    Reply

  2. very good post, you know a lot of stuff and have a pretty good understanding of IT industry, you are doing really well mate.

    Reply

  3. Posted by moi... on April 17, 2008 at 3:04 pm

    They can be the next google/youtube/friendster… They just need Venture Capitalist Money…

    If the big boys can sustain you for the first 3-5 years before you start making your money, you’ll be all set… (assuming it’s an idea the masses pick up on and love)

    Reply

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