Not good. How to spot a GREAT ISV Business

So – trust-fund, pension or 401k. My money needs to grow! I want to own a software/IT business. Idea? Great! “How-to” is unclear, but read this and learn. The following points are how I asses a business model and evaluate the potential of the ISV. The steps are simple and gives you a clear indication either to open the wallet or stuff it away, and I have shared this model with BC’s and VC’s for help them understand the ISV’s in detail.

  1. Seeing is believing. The ISV focus on selling their solution and front customers every day. The ISV actively has employees only focused on sales & marketing!
  2. Top-Down approach. The ISV made the business by focusing on óne big customer, to pay for the whole development of the first software release. This will tell you that the ISV understands the value of capital, sales and a reference in terms of case. The ISV will not burn your money with a five year development plan for a product, never to be released.
  3. Cash is king. The ISV understand that it is a capital game. invoicing and billing customers is part of the company DNA. Ask around their procedures in billing!
  4. The ISV operates from industry and business knowledge with a specific area or part, solving a real business pain, with a clear impact on the business economy and value.
  5. The ISV has little or simply now competitors with a similar business model. The ISV can have a disruptive business model (same business value for at least 1/6th of the price)
  6. The ISV extends or operates on existing technology, and does not try to invent everything from stretch.
  7. The ISV has a potential of a partner channel, distribution channel or affiliate channel.
  8. The ISV can bring consultancy and/or additional revenue streams with their software.
  9. Software+Services or SaaS is part of the future or existing plans of the software. Either the solution is built from stretch to SaaS or the ISV have already assessed their opportunity within the Cloud Community.
  10. The ISV build the software on a proven technology stack. This will help the organization with external support and lower implementation of new-hires.

A lot of other factor plays a role. Your stomach for instance! But you have to have an acquisition model you will follow.

ISV’s will move away from Traditional Hosting Providers

Independent Software Vendors often launch Partner Programs and form partnerships for extend their channel and reach of revenue. Some of these revenue stream are traditional hosting providers (often referred as Technology Partners or Hosting Partners)  – providers of static non-dynamic / non-optimized hosting. Within the next 3-5 years, many ISV’s will be forced to break this relationship to persue new opportunities of self-control and service delivery.

With the launch of Windows Azure, Google Cloud and enterprise cloud solutions like CloudRig and vCloud, ISV’s are able to manage and control their own relationship of hosting – and managed those required resources. Many ISV’s still have legacy offerings and despite Microsoft’s push on Azure, many ISV’s will still not launch service on that platform. Hosting providers have to find new ways of adding value to the ISV’s, but my belief is a certain few cloud vendors will have knowhow to persue the opportunity to bundle the right services and products to prove a gardened relationship to the ISV’s.

The revenue channels and business model for SaaS formes nicely around Independent Software Vendors these days; their opportunity is enormous and only the right focus can help ISV’s pick the right cloud strategy. A resent survey I made with 130 ISV’s in Scandinavia 82% considered SaaS a great opportunity and 67% would invest in this opportunity within the next two years. 16% consider Azure as a platform, while 54% would rather have their legacy application prove their business case for Cloud Computing. Interesting number, but also interesting to follow these ISV’s.