Great blog post by Allan Kelly on The Prolonged Death Spiral Business Model highlighting the sort of software companies you probably don’t want to work for,
What I never realised was that a prolonged death spiral could actually be a viable business model itself.
Quadratron was dying, it eked out its last few years collecting maintenance royalties from legacy customers – one customer in particular. In fact it was dying when I joined, they lured me in with a plan to spend a lot of the remaining cash on a new product. But things were worse than that.
Like so many companies Quadratron found that once you have survived the first few years, once you conquered the risk of developing a product and have an installed user base you can continue milking that base for a long time. Provided you don’t do anything silly like trying to develop a new product that is! Quadratron had been very successful, it had a lot of customers to milk.
He goes on to explain how these companies are run by “financial engineers” people know a lot about debt structures and taxation but nothing about software businesses. They’re not interested in investing or capturing new markets, but maintaining cash flow.
These companies are a success by some criteria: the people running them and the people who buy them stand to make lots of money. Financially they look good – except the debt. And customer continue to use the products they want to use. They exist, they employ people. By some criteria they are a success, we should not forget this.
They can be miserable places to work in because real engineering is not a consideration. And pity the poor customers who are being led up the garden path about future products.
It’s a longish piece, but it’s well worth the read.