11
Jul

Streamlining Development Processes can Deliver More Revenue for ISVs

In an article titled Steve Ballmer’s hits and misses from Build 2013 keynote, Derrick Wlodarz, who wrote the article, notes “Rapid Release is the New Norm”, and judges this point to be the ” . . . single facet of Ballmer’s speech (which you can watch here) [which] was by far the biggest theme of his near 25 minutes on stage”. We agree with Mr. Wlodarz’s assessment.

As innocuous as it may seem, the timing of product release, together with a businesses ability to hasten the development cycle, can result in a substantial contribution to revenue. Consider this example. Let’s say it takes an ISV 3.5 years to release a new software platform. The retail price for the new platform is set at $125.00 per computer. With a universe of, say, 100 million computers adopting the platform in the first year of its release, the bottom line contribution from the new product is $12.5 Billion for the first year in new revenue — certainly not a shabby contribution at all.

But let’s say the product development cycle is cut down from 3.5 years to 1 year, while at the same time the retail price of the software is reduced to $45.00 per computer. In the first year, the same 100 million computers are outfitted with the new software, for a $4.5 Billion revenue contribution for the first year. The next year there is another release, which magnetizes the same 100 million adopter for another $4.5 Billion revenue contribution. As well, a second 100 million jump on the first of the new releases in the second year for another $4.5 billion revenue contribution, and so it goes. The end result of the 3.5 year product life cycle is, perhaps, an additional $12.5 Billion over and above the contribution of the old product — a full 100% increase in revenue contribution, and, therefore, a really big deal.

The old adage “time is the enemy” is no less true for software than for any other product line. If Steve Ballmer can achieve the heightened efficiencies he alluded to at this conference, we think it’s a very very big deal.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2013 All Rights Reserved