BUSINESS BITS

Software development
Rhea S. Hermoso-Prudente

The country is setting its sights on becoming competitive in information and communications technology, with no less than the Arroyo government throwing its full support and resources behind this sector as a way of spurring economic growth.

A good example of this is the four-to eight-year tax holiday the Board if Investments has granted to software development companies that would allow them to plow the savings back into the business. “Software development is a priority sector with the BOI,” says Paul Tajon, BOI investments specialist.

Software development is among the country’s fastest growing industries. The Philippine Software Industry Association (PSIA) reported that this sector raked in $1 billion in gross annual revenues from 2001 to 2005. These are 600 software companies in the country, 30 percent of which are servicing offshore accounts, the group says.

Calen Legaspi, chief executive officer of Orange & Bronze Software Labs and co-founder and president of the Association of Filipino Java Developers (PinoyJUG), says software developers have a huge market in large local corporations, the government, and offshore projects, mainly from the United States.

Joel Garcia, owner of Seer Technologies, Inc. says the local market is largely underserved because players are scrambling for outsourcing and offshore projects. “Local companies still need enterprise [solutions],” he says, noting that enterprise owners are now becoming technology savvy and more and more are deciding to automate their operations.

The most difficult challenge for one getting into software development is finding top-rated programmers. “Really good programmers are born, not made,” says Legaspi. “These uber-geeks are extremely rare. You can probably get away with talent that’s second-tier (refers to standard IT solutions) or third-tier for more routine programs like simple Web applications, but for more complex applications like large enterprise applications or server-side applications for the mobile industry, you’ll need at least one or two uber-geeks on your team.”

Aside from having to find a needle in a haystack, you will also have to compete with large companies willing to pay a premium for good programmers. The capital you may need to start will vary, depending on your strategy. Garcia, fro example, invested a substantial amount not only in powerful machines, but also on a 56 square-meter office in Makati. “You have to make people believe that you are going to be stable,” he explains.

This imaging strategy makes sense because Garcia was running for business from bigger companies. Legaspi and his partner, on the other hand worked from their homes, using laptops they already owned. Their capital of about P200,000 was spent on basic living and transportation expenses while they were still not making any profit.

Once you’re up and running – assuming you’ve already secured the required pre-operation permits from the Bureau of Internal Revenue, the Securities and Exchange Commission, the Department of Trade and Industry, and your local government – you will also have to watch out for “data protection, security and piracy,” says Tajon. “Aside from capital, these are some of the barriers to running a successful] software business.”

Determining your strength is crucial to success. “You have to know your advantage,” says Garcia. “You have to be able to differentiate yourself form the other companies.” He also counsels those interested in this business to create a company culture that can readily adapt to change and to innovate, since software is forever changing. “Hire the best talents available.”

Finding your niche is also important. You may have the best product, but if you have no market for it, you have no reason to be in business. This poses another challenge because most software developers are not marketing people. The remedy for it would be to find a partner with a strong marketing background. Marketing is crucial because it helps you land big projects that would significantly shorten your investments recovery period.

Seer Technologies rides on the sales teams of their hardware partners. Both Legaspi and Garcia agree that word-of-mouth is an effective way to get new business. “Competent software development firms are in such high demand that if you are able to succeed in a few initial projects, word of that success will spread rapidly,” says Legaspi.

Nevertheless, despite all technological advancements, everything still boils down to human relationships. If your technology touches people’s lives for the better,” says Garcia, “then you know you’re on the right track.”