Getting Real About Tech

getting real about tech

We work with a wide range of business, all with one thing in common – they each have a website. But this does not mean they all have the same website needs. Far from it.

It is easy to think that the website needs of a business would be reflective of its size. However, while there can be some correlation between business size and tech needs, this is not the case either.

A businesses tech needs come down to its business model, what functionality is required from the website, and the choice of technology used to run everything. Only after this has been established does scale become a relative factor.

If you are running a simple offline service, or bricks and mortar store, and expect little more than an online brochure, then your needs will be few. You can get away with a basic website with low-level maintenance.

As you add more complexity, tech costs increase. This may include dynamic forms, or more complex e-commerce or booking systems. For most of these requirements, you can either purchase pre-written code (such as a WordPress plugin), or use one of a wide range of SAAS (Software as a Service) companies.

These solutions typically charge monthly or annual fees, and, despite many business owners complaints, in most cases, they offer incredible value. Why?

Simply put, you are paying a fraction of the true cost. Because the development and maintenance costs are shared across multiple customers, the cost per user is much lower than if you were to try and achieve the same functionality in-house.

The challenge is, you still need someone who understands these services to set them up, and to run them. The real trouble starts though when you want to begin to customise functionality – i.e. make it do something beyond its out-of-the-box capability. Sometimes this is quite simple, sometimes totally impossible, usually somewhere in between.

Even big tech companies do this. None of them code every piece of software they need themselves. Instead, they focus on their product, and pay for other companies to provide the rest.

Why? Well, it comes back to the true cost.

Time for the slap-across-the-face-with-a-wet-fish moment…

According to training.co.nz, an IT Manager or a CTO (Chief Technology Officer) earns from $200,000-$300,000/annum. These roles are responsible for making the decisions about which technology to use, deciding how it will all work, and managing the developers. To be clear, they don’t write a single line of code themselves – they just make high-level decisions and manage the system architecture.

In NZ, many tech-based businesses are paying between $80,000 and $160,000/year for developers. Lower paid coders are fine for very simple projects, or when working with the supervision of a CTO or high-level dev, but are a false economy for average to complex projects without senior team members.

In one study it was found that, in terms of output, a top-level coder is equivalent to 4-5 average coders. The problem is, many managers tend to think in terms of hourly rates. This mindset works when hiring someone to work on a checkout (and even then, not exactly as attitude and speed will affect the value of that employee). With tech though, it is critical.

Get it wrong and you could lose the bulk of your revenue, or as with the majority of tech startups, fail completely. While there is a lot of hype about startups, the reality is that even in Silicon Valley, the FAILURE rate is 79%. That is even after experienced investors have vetted the project ideas, they have been given hundreds of thousands to millions of dollars, and have some of the best networks, mentors and of course coders on the planet.

We see many enthusiastic entrepreneurs with some great ideas for the next Uber (which was started by an experienced coder who could do the foundation himself, and then raised $1.25 million, and has since lost billions most years of operation, and is only held up by investors), or TradeMe (started in 1999 by a highly skilled coder with $200,000 of seed investment, and quickly built to a respectable sized team of coders that at today’s salaries would run to well over $1m per year). While these entrepreneurs have good ideas, the hard truth is, they lack the experience or funds to turn their dreams into reality.

Paul Graham (one of the leading Silicon Valley investors) stated that one of the leading causes of startup failures was not having a high enough level coder driving the project. In short – without the right tech team in place, having great ideas, awesome creatives, good networks, and even deep pockets are not enough to save a tech business from collapsing.

Just how important are coders? A little research reveals that for a tech business (and that is anyone wanting to build a web-based business that is much more than an off-the-shelf e-commerce store) you should expect to have a ratio of around 1:1:2 – 1:1:7. That is one product manager and one UX based designer for every two to seven full-time coders.

In almost twenty years of developing and working with online businesses, I have seen far more fail than succeed. The excuses have been many, but far too often it simply comes down to a lack of experience in creating a tech business, and trying to save money by hiring cheap developers (either here or abroad).

Starting a business is already a big enough gamble, don’t make it any riskier than it needs to be. If you are planning to try and break the tech mould, be properly prepared. Get experienced advice at every step of the way, and don’t think for a moment that a cheap coder out of college is any substitute for a more expensive one. If you can’t afford to do it properly, consider focusing on raising funds until you can.

(There may be a reason I can’t think of a single success story of someone with a great idea but no tech knowledge hiring a cheap coder from India and building a multimillion company – despite knowing many who have tried!)

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