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Growth of the Software Industry Presents Challenges and Opportunities

With virtualization and cloud technologies gaining traction, and the largest tech firms in the world taking massive market share, some people may be under the impression that the software industry is shrinking. However, this is far from the truth – the proliferation of new devices, new markets, and new ways in which to increase productivity with software have created greater opportunities for developers and entrepreneurs. With new opportunities, however, has come a set of challenges that software companies must overcome.

Challenges and Opportunities

For any consumer-facing software business to be successful, it must maintain a global focus. The greatest revenue comes from the ability to “grow big, then monetize.” The ease of deployment of modern applications – through both the web and mobile devices – makes reaching an audience relatively effortless. However, software organizations must prepare for the fact that their applications can achieve penetration in any market. Localization, user experience, and global outreach become critical elements for success.

For the more specialized B2B software organizations, global reach is still critical. Such organizations must prepare to do business with virtually any type of client and must account for the fact that the greatest growth markets are found in developing economies.

The technical infrastructures needed to support global markets are much more involved that those that software companies have dealt with in the past. Applications must work equally well across many configurations of PCs, across literally thousands of models of mobile devices, and across countless ISPs and mobile carrier networks. This often involves global distribution of redundant data centers, expensive and specialized scaling technologies, and integration of cloud services. While these offer greater opportunity for expansion, they also mean that there will be more potential points of failure.

However, inadvertent system failure is only one challenge for software firms. Expansion means greater visibility and exposure to malicious entities such as malware and hackers. However, companies have even more risks to account for than downtime and data compromise from sources such as these. This is because of international privacy and compliance standards, which are highly variable. Some markets are extremely strict when it comes to protecting user privacy; others have state-mandated firewalls, and other have little protection when it comes to intellectual property or security standards.

What Concerns the Software Firm’s CFO the Most?

The finance executive for a software firm focuses on both insurable and non-insurable risks. These may include risks that help with the company’s performance and keep it competitive in such areas as attracting and retaining talent, protecting valuable trade secrets and positioning the company to meet opportunities in growth and reputation management.

The finance office is also interested in all aspects of risks that pertain to legal, liability and compliance areas. Chief among these risks are product failure, compliance with regulatory issues and protection of their directors and officers from third parties. Other risks to manage include protection of the company’s intellectual property and physical property, business interruptions, security of customers’ private data and risks from network security and data breaches.

However, the finance office of a software firm will also work to balance cash flow cycles and make sure that funding for new projects remains front and center.

The financial performance is linked to how well the software firm manages its wide range of risks. The pace of technology moves rapidly and the speed of litigation and regulatory matters has increased accordingly, making risk management in the software industry more important than ever.

Working with a TechAssure Association member can provide you with the risk management tools to help your software organization navigate the risks and realize the rewards. Give us a call today to learn more.

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