1 What percentage of companies will be undertaking a web application
development project (over the next year)?
Depends on market segment and on size or revenues. 100M+ almost
guarantees some work will be needed. 500M+ and they're doing quite a
bit. Not sure that thinking in overall percentages is valuable in a
business plan. Anyone who understands the industry in the least will
think you don't understand it yourself. The business is generally
regional. Perhaps even local. Instead, you should list target
companies in your area, and the market segments you will go after.
Having built three mid-size and successful consulting companies, I
have never found any data other than regional, to be valuable.
I tend to watch Compuworld, Information Week, and National Purchasing
Managers Index. NPMI is the best indicator of future revenue
potential.
BTW: business looks good thru 2006, but there will be a very serious
recession in 2007 that will last for at least 18 months. Make sure
you have the ability to downsize in q2 2007 without a lot of debt
service.
3 What is the average budget for these projects?
There is a good market for companies who can deliver in the < 100K
range, and 60K and lower is really a great market for small companies
in the first two to three years. There are few companies who can
handle 2M+ deals, and they are dangerous for a small company anyway.
Most PO's tend to be for 50-300K. Larger, and the sales cycle is also
larger.
Depends on the company and the risk as well. Large old line
bureaucracy and you can get large dollars, long sales cylces, but they
will prefer to hire orgs that work the same way. Realistically,
organizations hire organizations who operate by similar criteria. As a
small entrepreneurial company it is best to go for departmental or
midsized business where that innovation is rewarded. A small company
of ex-bureaucrats is better for departments and large organizations. I
usually don't work with governments because the people are of lesser
quality making achieving success harder, the outcome is often
political measured rather than by profit, the process is long and time
consuming, and the dollars are lower. On the other hand, once you're
an approved vendor it's a pretty clean revenue stream in perpetuity,
and you save a great deal on the cost of sales. You can pick
departmental enteprise in financial for example,and they are a good
but low priced business. You can pick ecommerce and if you can
actually win the work then make a good living.
Honestly though. Most companies end up being resource shops or going
to the product side, or the soft-product side.
Also depends on economy. Right now money is looser and in the west
market we are seeing 1M+ deals again. Most deals are in the 200-400K
range. During the down period, we were happy to get anything for 60K
that we could.
Also, this market is still under pressure. The fact is that overseas
labor does not really return linear savings, communication problems
are vast, and they work best by traditional waterfall methods, which
are very slow. But that doesn't mean that a lot of large companies
aren't use it. Most web work is marketing related, so it requires
faster turn times due to the differences in organizational planning.
IT is a very slow moving customer that is very cautious about money
these days. We do not see this as loosening any time soon. So
relationships and deep knowledge of the customer, which are hard for
overseas companies to obtain, are better guarantees of work, and being
able to do the work faster is a better influencer than is price.
4 Where do these companies look to select a vendor?
I think that you are looking at stats rather than relationships, which
is how product, not service, companies operate. The business functions
not like product sales, but by relationship sales. The business has a
low barrier to entry, so there are an unlimited number of small
companies (we buy them all the time). Pick something to be excellent
at other than just the technology and work with that. The General
labor/skills pitch will put downward pressure on your pricing.
7 What do other web application vendors do to find potential clients?
Most people say that they have great sales or have some vast method,
but unless you're one of the bigger brands, really, you find whatever
relationship you can, and get to know the company well and build trust
then sell and deliver to them 100% when you get your first
opportunity.
Long time ago, starting a new company, I walked into starbucks and the
IT Dir pulled out a stack of paper a foot high and said, "so what's
different about you than any of these companies".
You are not in a business where companies are a scarce commodity, and
while every company wants to think they are different, the truth is,
that fundamentally, there is no differnce in value propositin between
consulting companies other than the knowledge you possess of how to
execute inside of the companies, and the relationships in them. (See
work by boston consulting group, see Maister's book on consulting)
The trick is to find a large company that you can use to get enough
work to reduce your cost of sales so that you can use the remaining
capital to slowly, over a year or more, work relathionships with other
firms. It will also help if you choose a specialty to market it should
either be a technology that you turn over every two years, or a
vertical, so that you have specific knowledge.
5 What criteria do most companies use in selecting an IT vendor?
The number one issue is the believeability and likeablity of the
person that they are talking to. The second is the knowledge that you
have about their organizatoin. The third is the evidence that you
have that you can execute as shown by what you say, and other customer
refernces, the third is price and the fourth is how easy it is to find
an alternative.
I cannot overstate the importance of being likeable, believeable and
having knowledge of the company.
This is different from saying how they will find you. THey will find
you largely by asking around. Sometimes they will search on the net.
They will choose you because someone they're already using has made a
mistake recently. But realistically, they have people talking to them
daily, so you have to be interesting and likeable enough and talk to
them enough, so that when the opportunity happens, you are fresh in
their minds.
The fact is, that any customer that you find by mass market appeal,
will likely be one that is cheap, not used to using consultants, and
someone you need to educate and train. This may be fine for years
1-2, but afterward, these people are a drain on your potential. You
need to work with people who know what they're doing in order to make
a decent living, and to do that you need to know them, and have
something that they need, and be a pleasure to deal with.
Net of this is that you should look at your market list target
companies, and estimate what you can get out of them. The stats on
local companies are usually available, the public ones must file, so
that their informatin is readily available. Use local economic numbers
from the local news or business or state governemtn to estimate
increases in spending. This will more accurately represent what your
potential is, and a business plan should be for you more than for your
investors, if you have any.
Don't know how to private message you from here as I was just
exploring this stuff and wrote a bunch of notes to see if it was
helpful. But I'd be happy to help you if I knew how to reach you. I
view this as my "giving back" to the industry. |
