The Business of Software

I tried to answer this question myself by writing an analysis on the pros and cons of each market.

http://ubercoder.wordpress.com

Read on and post your comments.

Which market did you choose and why?
Which attribute was more important for you?

Uberocder.

I chose B2B for my one-man shop because I found previously that consumers expect everything and want to pay nothing, while businesses don't care what they pay (it's not their money), and they don't really care if you're slow to respond to support requests because they're just trudging through the day themselves.

This is exactly my point at my blog post.

The people that make the decisions in a corporation, they aren't paying from their pockets, so If it fits in the budget, they'll buy it.

Home users are use to get everything for free or copy from a friend.

Ubercoder

There's also B2G (Government).  This is the space I'm in and my only advice is stay away.  The sales cycle is brutal!

I vote for b2b myself, more money involved.

cypher, what do you mean by "brutal"?

I think by brutal he means you'll spend a year and a half demoing products and another year waiting to get paid.  But once you do get paid, government contracts can be very lucrative and long lasting.

Government eh??

Is this market way to overcrowded for an mISVer to enter?

Also, mISVers need cash flow and getting paid a year after is a killer.

I do both B2B and B2C

Here's the rough breakdown:
20% of my Revenues B2C
80% of my Revenues B2B

80% of my sales volume B2C
20% of my sales volume B2B

So, less sales but much higher revenue B2B

Support:

95% B2C
5% B2B

So, for me, B2C = tons of support for less revenue.

My vote is B2B if forced to pick one.  But in my case I'll continue to do both because I like to make as much money as I can.

So, I was totally wrong about technical support in my blog.
I thought B2B need more than B2C.

Thanks for the insight guys.

Quite often B2G deals require a bidding process with many factures being evaluated for selection.  So not only do you have long sales cycles, and delayed revenue, the whole RFP process can be brutal in of itself.

Waiting to get paid hasn't been a problem for me.  The sales cycle is a killer.  There's so much red tape and nonsense involved that what seems to be a simple sale ends up taking over a year.  So many different groups and people need to be satisfied that their little kingdoms will not be negatively affected, and once that is done you experience the nightmare of the procurement process.  It isn't just a matter of having the right functionality at the right price.  I've been trying different approaches to accelerate things, but it is still painful.  The software is already being used by a few different departments, so things are progressing.  I suspect it'll be at least another five years before I get to a point where all my revenue comes from product sales and maintenance contracts.

In the U.S. for B2G you can get on the General Schedule and not have to do RFP's and proposals. Once you're on the schedule any government agency can just call you up and order however many thousands of licenses they need. They also have credit cards for small orders (under $50K or so) so you get paid instantly.

The formal bidding and RFP's are for one-time projects that are generally in the millions, but those are pretty much guaranteed to go to SAIC and Booz-Allen and the like. General Schedule is the way for a small shop to make good money with B2G.

I'm in Canada, but would love to hear from anyone who knows how to fast track procurement.

Well I mean theres a gray area too.. take dreamweaver or word or a browser.. generalized app.

really the sales strategy and the “availability” aka the importance of your software, thats what you you had better give serious thought too before setting out... Also a support infrastructure if your b2b and your web service tanks in the middle of the night , trust me I have a few gray hairs from those nights. In all I suggest B2C for the simple fact that when you have to deal with the nuts they don't mean as much. Your support can be email once in a while , but they are all like, “I got a new computer and your app wont run on it, I get a fatal exception” and of course..... if its something you can fix easily. Otherwise its a bad block of memory you cant fix it for one box :) the cost of marketing is lower too for B2C if your web marketing savvy at all you can get some exposure. Download.com overture.com google and yahoo

For Canada, specifically Ontario the similar arrangement is a VOR or vendor of record. The government credit card limit is $5000 for low dollar purchases. I have not used it, but found out about it at a seminar on how to do business with the Ontario government. See  http://www.mgs.gov.on.ca

My ISV model is primarily B2B...however, now we are developing apps that are B2B then B2C. So what happens we sell our software to Businesses and businesses sell it to consumers...:) It works and does a whole lot of marketting work for us.

Eg. If you have a math problem solver app...We prefer most times to sell it to the teachers/school and the school will in turn sell it to the students. Parents take what their kids' principals say more trustworthy than two young software developers. :-}

Hope this helps someone.

My mom used to edit for McGraw-Hill.  5+ years ago they were killing for teaching software.  Think along he lines of a science lab.  All 3D.  You grab a scale, put something on it, weigh something else, etc.  Awesome market, you just need some teachers to create lesson plans and graphics developers to make it look good.  I'd do it myself, but we get on each others nerves.  :)