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Archive for month: August, 2013

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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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New Product Launches: Are Today’s Tech Companies Exposed to Higher Risk?

Technology firms face a wide range of organizational risks. Managing unforeseen risks is a part of the industry.

Although having the right insurance is crucial to any business, it’s only one part of the puzzle. In order for technology companies to succeed, they must get the risks associated with new product launches right. Risk management takes a comprehensive look at risks, not just the insurance element, and formalizes a strategy and process to manage the exposures. It comes down to the economics of doing smart business.

Assumptions in product development are flawed. As each product is unique, a unique plan of development and launch must accompany it for success. A development and launch plan must be able to adapt to the ever-changing market. As “Big Data” grows and new developments in technology arise, members of the technology industry must take note of any risks that could keep their organization from meeting their future objectives.

Taking the proper measures during product development will enable a technology company to rise and manage the upside of risk. It is a fact that in today’s market, nine out of ten products will fail. Having a proper plan in place that is adaptable by the developers and board can help ensure success.

Here are a few tips that can help make your new product launches a success:

• Estimate the product’s holding cost and the transaction cost of batches produced. By optimizing the balance between these costs, a technology company can avoid the increased costs that come with producing work in batches that are too large. Maintaining the proper balance will boost efficiency and decrease the possibility of defects within the product. This can also help you manage your property and liability exposures.

• Losing opportunities due to sticking to a singular development plan can increase risk of product launch failure. Staying within your company’s comfort zone is not conducive to proper product launch and development. Because each product is intrinsically different, you should expect that its development would be different as well. A company needs to stay competitive by pushing the envelope within the bounds of a well-structured risk management plan. Of course, you should balance this with any increase of risks from product failures. 

• Rushing a product’s development or launch can be debilitating to a business. Controlling the rate at which a product is developed solely based on company productivity sets up a product and a company for failure. While it’s true that meeting deadlines is of paramount importance, releasing a rushed and diluted project will increases the product’s defect rate and liabilities to the company.

Risk assessment is a systematic process of evaluating the potential risks associated with a new product, activity or undertaking. It is important to determine the exposure and costs. Careful planning will enable a company to place priority on each type of risk involved before a new product launch.

Lastly, having a corporate insurance program in place that covers all elements of your new product launch is important. Insurance coverages important to new product launches could include: business interruption, warranty programs, adjustments in your general liability program and technology errors and omissions.

The members of TechAssure Association can put together a program that protects your investment and ensures that your new product launch is a success. Please contact us for more information.

 

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Pointers for Technology Firms that are Establishing a Board of Directors

As your company grows, the time may come when you are in need of guidance and direction from a team of experts. Consider the areas of your business where you lack expertise and need some direction or input to continue your company’s growth. Establishing a board of directors may be the solution to maintaining growth and establishing sound direction.

The board of directors, serving as a company’s governing body, is responsible for the overall management of the business. They set policies, establish long-range goals and approve operating budgets, as well as evaluate and hire key managerial staff. Though they are not required to know everything about your specific business, they are required to act responsibly as they carry out their duties.

Establishing a board of directors for a technology firm can be difficult. At times, a less mature technology firm could take many different directions. However, there are some important points to consider when putting together a board.

• Provide a job description for each potential member of the board. It is vital that prospective board members have a clear understanding of what is expected of them and what their responsibilities will be. Without a job description clearly laying out was is expected, the board is sure to be unproductive.

• Be patient when establishing a board of directors. Proceeding carefully gives you the opportunity to learn more about the individuals you are considering, and decide if their motivation to join the board is compatible with your company’s agenda.

• Look beyond your inner circle. It is crucial to recruit the best talent available when creating a board. While you may know people with the skills you require, they may not have the right expertise or experience.

Establishing a board of directors can be beneficial to your technology firm in many ways. Besides bringing expertise and know-how, a board of directors can provide instant credibility to an organization. Having an independent body overseeing auditing procedures and eliminating potential management abuse and fraud can be very attractive to potential investors.

Once your board is in place, your company is properly positioned to go to the next level. However, it’s important to recognize that with a new business structure comes new risks. The members of TechAssure Association can help you manage your management liability exposures. They have the knowledge, tools and expertise to help you respond to a wide range of risks that face your board members. Please give us a call for more information.

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5 Ways BYOD Policies Can Increase Data Breach Vulnerability

If you are responsible for managing risks in your organization, you know that any unforeseen incident can endanger the assets and earning capacity of a business. While it’s clearly important to have a solid insurance program in place, having a comprehensive risk control plan in place is equally important.

As the concept of Bring Your Device (BYOD) enjoys growing popularity amongst businesses, many employees are celebrating their newfound freedom of accessing data on the go beyond the confines of the cubicle. By using the BYOD concept, companies are enjoying reduced costs in the form of decreased expensive hardware configurations and are seeing the benefits of having a growing mobile workforce. However, what these firms did not anticipate was the growing possibility of data security breaches.

Hackers can breach company networks using linked applications, such as a company’s email account to access, extract and erase sensitive data. By accessing social media and personal email accounts, hackers easily obtain the information they need to wreak havoc.

In addition to securing a solid corporate insurance program for your organization, there are five things your company can do to overcome these security risks with BYOD. Jeff Stark, CPA, describes the following measures to help prevent a data security nightmare.

Identification of weaknesses and risk assessments. Sensitive data can’t be protected if it is not identified. As a result, Stark recommends that you begin by educating users on which data is confidential. It’s also important to follow up with assessments of your firm’s physical and network security. The rule of thumb is that if there is easy remote access to data storage sites from mobile devices, then effective network security is not sufficient. One measure is to ensure a password policy consisting of minimum character lengths, special characters, and changes to the password on a regular basis. Remember to have your IT department insist that employees not write down their frequently changing passwords and leave them in plain site in their workspace.

Establish levels of access. General users should not be granted access to the same areas that administrators and other higher end IT personnel have. Stark recommends that these “super-users” access a separate rights account or role for network management.

Use firewalls and encryption. Firewalls prevent unauthorized access to begin with and are a basic requirement. Network encryption adds a second layer of protection to prevent the wrong parties from accessing sensitive data.

Use offsite backup systems. Catastrophic data losses occur when in-house equipment fails or is breached. Whether it is cloud-based and/or physically located offsite, data is more adequately protected from many types of disasters as well as physical security breaches and damages.

Periodic auditing. Just because you have established data security measures, it doesn’t mean that you can now rest and let your guard down. You must carry out periodic risk assessments because of ongoing changes and upgrades in software and hardware which may change access capabilities. Stark recommends that you conduct audits at least once a year or whenever you make major change to the network.

While the BYOD concept has saved costs and facilitated a mobile workforce, it has also created a whole new set of security issues that you must address. As your organization assesses risks and establishes a solid insurance program, consider taking steps to prevent catastrophic data losses through breaches that can occur easily without a BYOD policy.

The members of TechAssure Association assist companies with insurance and risk management solutions that are unique to the technology sector. For more information on cyberliability insurance and other services, please give us a call.

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Considering a IPO? Don’t Wait to Adjust Your Directors and Officers Coverage

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As with any business decision, the decision to offer an Initial Public Offering is an important one that should be carefully considered. When done correctly, an IPO can boost to the company and propel it to even greater heights.

The benefits of an IPO are broad:

  • Fresh liquidity
  • Cash infusion
  • Growth in trust for the company

The fresh liquidity and cash infusion go hand in hand. By offering shares of ownership in the company, investors come in to provide cash to help grow operations. In return, they receive a piece of the company and its future profits, and that activity can lead to greater trust from the public. Giving the public a stake in the company means that they also now have a vested interest in the growth of the operation. That is always a benefit.

There are two types of companies that are in the best position to consider an IPO in today’s market. These are companies that are either larger (approximately $500 million in sales per year) or are growing fast. Companies of these types are most likely to grab enough attention from early investors to make an IPO worthwhile.

Our advice is not to wait until filing an IPO to think about your Directors and Officers Liability program. Generally, a D&O liability contract provides security and certainty to directors and officers by providing certain coverages to protect their risks. It is important to know that purchasing some Directors and Officers coverage as a private firm can position you to build a solid D&O program as you transition from being a private company to becoming a public firm. The coverages under a D&O policy are not universal, but establishing a relationship with the insurance underwriters before an IPO can help you develop an innovative program with clearer policy wording and leverage to receive the most favorable premium.

If your firm is seeking more guidance on planning and preparing an IPO, please contact us today. A TechAssure Association member will begin working with you to transition your insurance and risk management program as you move to public company status.

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Technology Errors and Omissions: Not All Insurance Programs Cover the Unique Exposure of a Tech Company

Every growing and established firm conducts business with some amount of risk. It is risk that brings the most reward to a company but it can also bring great pitfalls upon a company because of unforeseen incidents. Technology companies are unique in how they operate and it is important to recognize that not just any insurance program or policy can fulfill the coverage needs of technology-based businesses.

Understanding the hidden risks of running a technology firm is important when deciding exactly what insurance coverages you may need. For the purpose of this article, we focus on two types of coverages essential to technology firms: General Liability and Errors and Omissions.

Technology Errors and Omissions can be expanded to include coverage extensions that address risks from network security, privacy, damage to intangible property and breach of security.

A standard General Liability policy issued to an organization protects it against liability claims for bodily injury and property damage arising out of premises, operations, products, completed operations and advertising and personal injury liability. A General Liability policy for a technology firm may have additional coverage restrictions and exclusions, making Technology Errors and Omissions coverage a vital tool for protecting the assets of a technology firm.

It is key that these two coverage components “sing in harmony.” While a General Liability policy has typical exclusions that tie to claims arising from errors and omissions, network security, privacy and breach of security, the language in the policy wording can be important. On the other hand, while an Errors and Omissions policy has exclusions that tie to other casualty policies, the language in the policy wording is also important. It is important to review these two coverage components together.

It is also important to remember that a Technology Errors and Omissions policy does not always extend to your subcontractors and may not be considered valid on a worldwide scale. Every insurance contract is different. The key to building a successful insurance and risk management program is to review where your company will in 12 to 24 months and then design an insurance and risk management program that will change with your needs.

Unintended exposure to Errors and Omissions claims can cause a company disastrous loss if their insurance coverage is insufficient. A member from TechAssure Association can help your company get the right coverage. By analyzing your company’s unique business needs, a TechAssure Association member can customize an insurance program to protect your company and your investments. Please contact us for more information.