It's conventional wisdom that software businesses need to break through multiple "ceilings" to continue to grow. Most feel there is a ceiling to break through when you get to $10 million in revenues, another at $25 million and so on. These ceilings coincide with both revenue growth and the number of employees you employ.
One of the reasons for these required breakthroughs is that as you grow, how you price, package and deliver your software products evolves. For example, you may start out selling your products only to a specific market segment. This segment is defined by common attributes, so you can package and price your software consistently for them. But, at some point you get enough penetration in that segment that you need to branch out and start selling to another market segment, which has different attributes and expectations. This inevitably leads to having to adjust your software packaging and pricing.
Moving from a simple to a more complex product set and going after new markets introduce substantial operational challenges that can get in the way of achieving your business goals. Too frequently companies fail to align the busy strategy and growth goals with operations.
Most companies go the homegrown (do it yourself) approach to operations in the early days. They may develop their own software licensing and have IT configure their existing ERP or CRM systems to do some basic tracking of software entitlements - in line with the relatively simple business model they have.
The question really becomes how do you evolve this operational infrastructure as the business grows and evolves? Doing it yourself can go awry very quickly and frequently you don’t know what you don’t know. The other major consideration is regarding resources. In the midst of trying to grow the business by delivering great value to customers and beating the competition, do you want your best and brightest focused on those activities or on improving your operational infrastructure needed to support that growth?
Operations may not seem core to the business, but having a scalable infrastructure for software licensing, software entitlement management, electronic software delivery and such is critical to surviving and thriving and have a direct impact on revenue recognition, amongst other essential business processes.
So, as you focus on growing your software business, don't forget the essential operational challenges that must be aligned to support that growth and ensure that you can meet your business objectives.